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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934.
or the transition period from _________________ to _________________
Commission File Number: 333-19081
GBC BANCORP, INC.
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(Name of small business issuer in its charter)
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GEORGIA 58-2265327
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(State Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
165 Nash Street
Lawrenceville, Georgia 30246
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(Address of Principal Executive Offices) (Zip Code)
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(770) 995-0000
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None*
*The Issuer filed a Registration Statement on Form SB-2 (Registration
No. 333-19081) effective pursuant to the Securities Act of 1933, as amended, on
April 16, 1997. Accordingly, the Issuer files this report pursuant to Section
15(d) of the Securities Exchange Act of 1934, as amended, and Rule 15d-1 of the
regulations thereunder.
Check whether the Issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
The Issuer's revenues for the year ended December 31, 1999 were
$4,791,983.
Aggregate market value of the voting and nonvoting common equity held
by persons other than directors and executive officers of the Registrant
computed by reference to the price at which the common stock was sold, or the
average bid and asked price of such common stock, as of a specific date within
the past 60 days: 8,509,938 based on the average bid and asked price as of
March 28, 2000.
There were 951,580 shares of the Registrant's common stock outstanding
as of March 30, 2000.
Transitional Small Business Disclosure Format (check one): Yes [ ]
No [X]
DOCUMENTS INCORPORATED BY REFERENCE
None.
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TABLE OF CONTENTS
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PART I...........................................................................................................1
Item 1. Description of Business...............................................................................1
Item 2. Description of Property..............................................................................14
Item 3. Legal Proceedings....................................................................................14
Item 4. Submission of Matters to a Vote of Security Holders..................................................14
PART II.........................................................................................................14
Item 5. Market for Common Equity and Related Stockholder Matters.............................................15
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations................15
Item 7. Financial Statements.................................................................................35
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................64
PART III........................................................................................................64
Item 9. Directors and Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act....................................................................64
Item 10.Executive Compensation...............................................................................67
Item 11.Security Ownership of Certain Beneficial Owners and Management.......................................70
Item 12.Certain Relationships and Related Transactions.......................................................72
Item 13.Exhibits and Reports on Form 8-K.....................................................................74
Signatures...................................................................................................77
EXHIBIT INDEX...................................................................................................78
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE COMPANY
We were organized on August 21, 1996 as a Georgia corporation for the
purpose of acquiring all of the common stock of Gwinnett Banking Company, a
Georgia corporation which opened for business on October 31, 1997 (the "Bank").
We are a bank holding company within the meaning of the Bank Holding Company
Act of 1956, as amended (the "BHC Act"), and the Georgia Bank Holding Company
Act (the "Georgia BHC Act").
We were organized to facilitate the Bank's ability to serve its
customers' requirements for financial services. The holding company structure
provides flexibility for expansion of our 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. We have no present plans to acquire any operating
subsidiaries other than the Bank. It is expected, however, that we may make
additional acquisitions in the future if such acquisitions are deemed to be in
the best interest of our shareholders. Such acquisitions, if any, will be
subject to certain regulatory approvals and requirements.
THE BANK
The Bank is a full service commercial bank located at 165 Nash Street,
Lawrenceville, Gwinnett County, Georgia. The Bank's primary service area is
Gwinnett County, Georgia; however, the Bank also serves the adjacent counties,
or parts thereof, of Cobb, DeKalb and Fulton. The principal business of the
Bank is 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 demand, time, savings, and other deposits (including negotiable orders of
withdrawal or NOW accounts), amortization and prepayments of loans and
borrowings. The principal sources of income for the Bank are interest and fees
collected on loans, interest and dividends collected on other investments and
service charges. The principal expenses of the Bank are 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.
COMPETITION
We believe that Gwinnett County has a very active and competitive
banking market. The largest financial institutions serving Gwinnett County are
Bank of America, Wachovia Bank, N.A., SunTrust Bank, Atlanta, First Union
National Bank, and SouthTrust Bank, N.A. The largest Gwinnett County based
banks are The Brand Banking Company, Lawrenceville; Peoples Bank & Trust,
Buford; and First Capital Bank, Norcross. Based on the Federal Deposit
Insurance Corporation (the "FDIC") Summary of Deposits as of June 30, 1998,
there are 26 commercial banks, two thrift institutions and three credit unions
that operate 139 offices in
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Gwinnett County. There are approximately 16 financial institutions that have
offices in the immediate vicinity of the main office of the Bank.
EMPLOYEES
The Bank has 23 full-time employees. We do not have any employees who
are not also employees of the Bank.
SUPERVISION AND REGULATION
General
We are a bank holding company registered with the Board of Governors
of the Federal Reserve System (the "Federal Reserve") and the Georgia
Department of Banking and Finance (the "Georgia Department") under the BHC Act
and the Georgia BHC Act, respectively. As such, we are subject to the
supervision, examination and reporting requirements of the BHC Act and the
regulations of the Federal Reserve, and the Georgia BHC Act and the regulations
of the Georgia Department.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before:
- it may acquire direct or indirect ownership or control of any
voting shares of any bank if, after such acquisition, the
bank holding company will directly or indirectly own or
control more than 5% of the voting shares of the bank;
- it or any of its subsidiaries, other than a bank, may acquire
all or substantially all of the assets of any bank; or
- it may merge or consolidate with any other bank holding
company.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any part of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly, or
that in any other manner would be in restraint of trade, unless the
anticompetitive effects of the proposed transaction are clearly outweighed by
the public interest in meeting the convenience and needs of the communities to
be served. The Federal Reserve is also required to consider the financial and
managerial resources and future prospects of the bank holding companies and
banks involved and the convenience and needs of the communities to be served.
Consideration of financial resources generally focuses on capital adequacy, and
consideration of convenience and needs issues generally focuses on the parties'
performance under the Community Reinvestment Act of 1977.
The BHC Act, as amended by the interstate banking provisions of the
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Banking Act"), which
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became effective on September 29, 1995, repealed the prior statutory
restrictions on interstate acquisitions of banks by bank holding companies, and
any other bank holding company located in Georgia, may now acquire a bank
located in any other state, and any bank holding company located outside of
Georgia may lawfully acquire any Georgia-based bank, regardless of state law to
the contrary, in either case subject to certain deposit-percentage, aging
requirements, and other restrictions. The Interstate Banking Act also generally
provides that, as of June 1, 1997, national and state-chartered banks may now
branch interstate through acquisitions of banks in other states.
In response to the Interstate Banking Act, the Georgia General
Assembly adopted the Georgia Interstate Banking Act which became effective on
July 1, 1995. The Georgia Interstate Banking Act provides that
- interstate acquisitions by institutions located in Georgia
will be permitted in states which also allow national
interstate acquisitions, and
- interstate acquisitions of institutions located in Georgia
will be permitted by institutions located in states which
allow national interstate acquisitions.
Additionally, on January 26, 1996, the Georgia General Assembly
adopted the Georgia Interstate Branching Act which permits Georgia-based banks
and bank holding companies owning or acquiring banks outside of Georgia and all
non-Georgia banks and bank holding companies owning or acquiring banks in
Georgia the right to merge any lawfully acquired bank into an interstate branch
network. The Georgia Interstate Branching Act also allows banks to establish de
novo branches on a limited basis beginning July 1, 1996. Beginning July 1,
1998, the number of de novo branches which may be established is no longer
limited.
Except as amended by the Gramm-Leach-Bliley Act of 1999 discussed
below, the BHC Act generally prohibits a bank holding company from engaging in
activities other than banking or managing or controlling banks or other
permissible subsidiaries and from acquiring or retaining direct or indirect
control of any company engaged in any activities other than those activities
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the Federal Reserve
must consider whether the performance of such an activity reasonably can be
expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. For example,
factoring accounts receivable, acquiring or servicing loans, leasing personal
property, conducting discount securities brokerage activities, performing
certain data processing services, acting as agent or broker in selling credit
life insurance and certain other types of insurance in connection with credit
transactions, and performing certain insurance underwriting activities all have
been determined by the Federal Reserve to be permissible activities of bank
holding companies. The BHC Act does not place territorial limitations on
permissible non-banking activities of bank holding companies. Despite prior
approval, the Federal Reserve has the power to order a bank holding company or
its subsidiaries
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to terminate any activity or to terminate its ownership or control of any
subsidiary when it has reasonable cause to believe that continuation of such
activity or such ownership or control constitutes a serious risk to the
financial safety, soundness, or stability of any bank subsidiary of that bank
holding company.
The Bank is a member of the FDIC, and as such, its deposits are
insured by the FDIC to the maximum extent provided by law. The Bank is also
subject to numerous state and federal statutes and regulations that affect its
business, activities, and operations, and it is supervised and examined by one
or more state or federal bank regulatory agencies.
The Bank is subject to regulation, supervision, and examination by the
FDIC and the Georgia Department. The FDIC and the Georgia Department regularly
examine the operations of the Bank and are given authority to approve or
disapprove mergers, consolidations, the establishment of branches, and similar
corporate actions. The FDIC and the Georgia Department also have the power to
prevent the continuance or development of unsafe or unsound banking practices
or other violations of law.
Certain Conditions
In connection with their approvals of our formation and the formation
of the Bank, the Georgia Department, the FDIC and the Federal Reserve
conditioned their approvals on the compliance with certain restrictions and
requirements relating to our operations and activities and those of the Bank
(collectively, the "Conditions"), including, without limitation,
- a requirement for the Bank to maintain minimum capital of
$9,000,000, of which not less than $3,000,000 must be
allocated to common capital, not less than $5,100,000 must be
allocated to paid in surplus and not less than $900,000 must
be allocated as an expense fund to cover pre-opening expenses
and potential losses in the Bank's first year of operation;
- a requirement for the Bank to maintain a Capital-to-Asset
Ratio, as defined by the Georgia Department, at not less than
8% during the first three years of operation, and further
following this initial three-year period, for the Bank to
maintain a Capital-to-Asset Ratio at levels which are
consistent with the published policies of the Georgia
Department;
- a restriction on the payment of dividends to us by the Bank,
and on the payment to officers or employees of the Bank of
any incentive bonuses until such time as all start-up losses
of the Bank are recovered and the Bank has earned a
cumulative profit (on both a Bank-only and consolidated
basis) and, further, a requirement for the Bank to obtain the
approval of the Georgia Department and the Federal Reserve
prior to the payment of dividends to us;
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- a restriction on the payment by the Bank of any fees to
Directors or committee members of the Bank until the Bank has
earned a cumulative profit (on both a Bank-only and
consolidated basis);
- a restriction on changes in the position of President, Chief
Lending Officer or Chief Operations Officer of the Bank
during the first two years of operation of the Bank without
obtaining the prior approval of the Georgia Department and
the FDIC;
- a restriction on adding any persons to our Board of Directors
or the board of Directors of the Bank during the first two
years after commencing business without obtaining the prior
approval of the Georgia Department;
- a restriction on the creation of any plan for the issuance of
stock options to key employees and/or officers without
obtaining the prior approval of the Georgia Department, which
shall include any arrangements for the issuance of stock
options included in employment contracts; and
- a restriction on us from incurring debt without obtaining the
prior approval of the Federal Reserve.
Pursuant to the applicable regulatory approvals, all conditions imposed on the
organizers and Directors of the Bank are imposed on our organizers and
Directors as the holding company for the Bank. Our Board of Directors and the
Board of Directors of the Bank have, in each instance, committed to abide by
each of the Conditions imposed through formal Board action.
Gramm-Leach-Bliley Act of 1999
President Clinton signed the Gramm-Leach-Bliley Act of 1999, which
reforms financial services regulation, into law on November 12, 1999. This new
law covers various topics such as insurance, unitary thrifts, privacy
protection provisions for customers of financial institutions, the Federal Home
Loan Bank system's modernization, automatic teller machine reform, the
Community Reinvestment Act and certain changes related to the securities
industry. This new law also eliminates legal barriers to affiliations among
banks and securities firms, insurance companies, and other financial services
companies.
The Gramm-Leach-Bliley Act amends the Bank Holding Company Act to
clarify that a bank holding company may hold shares of any company that the
Federal Reserve determined, as of the day before the date of enactment of the
Gramm-Leach-Bliley Act, to be engaged in activities that were sufficiently
closely related to banking. This act also amends the Bank Holding Company Act
to establish a new type of bank holding company - the "financial holding
company." Pursuant to the Gramm-Leach-Bliley Act, financial holding companies
have the authority to engage in financial activities in which other bank
holding companies may not engage. Financial holding companies may also
affiliate with companies that are engaged in financial activities. These
financial activities include activities that are:
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- financial in nature;
- incidental to an activity that's financial in nature; or
- complimentary to a financial activity and does not pose a
substantial risk to the safety and soundness of depository
institutions or the financial system in general.
The Federal Reserve and the Secretary of the Treasury may determine which
activities meet these standards. However, the Gramm-Leach-Bliley Act lists
certain activities as being financial in nature. For example, some of these
activities are:
- lending, exchanging, transferring, investing for others, or
safeguarding money or securities;
- insuring, guaranteeing, or indemnifying against loss, harm,
damage, illness, disability, or death, or providing and
issuing annuities, and acting as principal, agent, or broker
for these purposes in any state;
- providing financial, investment or economic advice;
- issuing or selling interests in pools of assets that a bank
could hold directly;
- underwriting, dealing in or making markets in securities;
- engaging in any activity that the Federal Reserve determined
by an order or regulation that's in effect on the date of
enactment of the Gramm-Leach-Bliley Act to be related closely
to banking; and
- engaging within the United States in any activity that a bank
holding company could engage in outside of the United States,
if the Federal Reserve found before the Gramm-Leach-Bliley
Act that the activity was usual in connection with banking or
other financial operations internationally.
The Gramm-Leach-Bliley Act also directs the Federal Reserve to adopt a
regulation or order defining certain additional activities as financial in
nature, to the extent that they are consistent with that act. These include:
- lending, exchanging, transferring, investing for others or
safeguarding financial assets other than money or securities;
- providing any device or other instrumentality for
transferring financial assets; and
- arranging, effecting or facilitating financial transactions
for third parties.
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Not all bank holding companies may become financial holding companies.
A bank holding company must meet three requirements before becoming a financial
holding company:
- all of the bank holding company's depository institution
subsidiaries must be well capitalized;
- all of the bank holding company's depository institution
subsidiaries must be well managed; and
- the bank holding company must file with the Federal Reserve a
declaration of its election to become a financial holding
company, including a certification that its depository
institution subsidiaries meet the prior two criteria.
With only a few exceptions, in order to exercise the powers granted to them
under the Gramm-Leach-Bliley Act, a financial holding company or insured
depository institution also must meet the Community Reinvestment Act's
requirements. If any insured depository institution, insured depository
institution affiliate, or insured depository institution subsidiary of a
financial holding company did not receive a Community Reinvestment Act rating
of at least "satisfactory record of meeting community credit needs" at its most
recent Community Reinvestment Act examination, the regulatory agencies are to
present the insured depository institution or financial holding company from
exercising the new powers, either directly or through a subsidiary.
A company that is not a bank holding company not a foreign bank, which
becomes a financial holding company, may be able to continue to engage in
nonfinancial activities and the company may be able to keep its ownership
interests in other companies that are engaged in nonfinancial activities. The
ability to continue the nonfinancial activities or keep ownership interests in
other companies that are engaged in nonfinancial activities lasts for ten years
after the Gramm-Leach-Bliley Act's enactment and may be extended for an
additional five-year term if granted by the Federal Reserve pursuant to an
application. In order to continue in the nonfinancial activities:
- the holding company must have been engaged in the
nonfinancial activity or held the shares in the other
companies engaged in nonfinancial activities on September 30,
2000;
- the holding company must be predominantly engaged in
financial activities; and
- the company engaged in the nonfinancial activity must
continue to engage in the same nonfinancial activities it did
on September 30, 1999 and engage in other authorized
activities under the Gramm-Leach-Bliley Act.
A holding company is predominantly engaged in financial activities
where at least 85% of the consolidated annual gross revenues of the holding
company and its subsidiaries, other than depository institutions, come from
financial activities.
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Payment of Dividends
We are a legal entity separate and distinct from our banking
subsidiary. Our principal source of cash flow, including cash flow to pay
dividends to our shareholders, is dividends from the Bank. There are statutory
and regulatory limitations on the payment of dividends by the Bank, as well as
by us to our shareholders.
If, in the opinion of the federal banking regulators, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such authority
may require, after notice and hearing, that such institution cease and desist
from such practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a depository
institution may not pay any dividend if payment would cause it to become
undercapitalized or if it already is undercapitalized. See "--Prompt Corrective
Action." Moreover, the federal agencies have issued policy statements that
provide that bank holding companies and insured banks should generally only pay
dividends out of current operating earnings.
Our ability to pay dividends may also be affected or limited by other
factors, such as the requirement to maintain adequate capital above regulatory
guidelines.
Capital Adequacy
We are required to comply with the capital adequacy standards
established by the Federal Reserve, and the FDIC in the case of the Bank. There
are two basic measures of capital adequacy for bank holding companies that have
been promulgated by the Federal Reserve: a risk-based measure and a leverage
measure. All applicable capital standards must be satisfied for a bank holding
company to be considered in compliance.
The risk-based capital standards are designed to make regulatory
capital requirements more sensitive to differences in risk profiles among banks
and bank holding companies, to account for off-balance sheet exposure, and to
minimize disincentives for holding liquid, low-risk assets. Assets and
off-balance-sheet items are assigned to broad risk categories, each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance sheet items.
The minimum guideline for the ratio (the "Total Risk-Based Capital
Ratio") of total capital ("Total Capital") to risk-weighted assets (including
certain off-balance-sheet items, such as standby letters of credit) is 8%. At
least half of Total Capital must be comprised of common stock, undivided
profits, minority interests in the equity accounts of consolidated subsidiaries
and noncumulative perpetual preferred stock, less goodwill and certain other
intangible assets ("Tier 1 Capital"). The remainder may consist of subordinated
debt, other preferred stock, and a limited amount of loan loss reserves ("Tier
2 Capital"). At December 31, 1999, our consolidated
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Total Risk-Based Capital Ratio and its Tier 1 Risk-Based Capital Ratio (i.e.,
the ratio of Tier 1 Capital to risk-weighted assets) were 19.28% and 18.03%,
respectively.
In addition, the Federal Reserve has established minimum leverage
ratio guidelines for bank holding companies. These guidelines provide for a
minimum ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3% for bank holding companies
that meet certain specified criteria, including those having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3%, plus an additional cushion of 100 to
200 basis points. Our Leverage Ratio at December 31, 1999 was 14.98%. The
guidelines also provide that bank holding companies experiencing internal
growth or making acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the Federal Reserve has
indicated that it will consider a "tangible Tier 1 Capital Leverage Ratio"
(deducting all intangibles) and other indicia of capital strength in evaluating
proposals for expansion or new activities.
The Bank is subject to risk-based and leverage capital requirements
adopted by the FDIC, which are substantially similar to those adopted by the
Federal Reserve for bank holding companies. The Bank was in compliance with
applicable minimum capital requirements as of December 31, 1999. We have not
been advised by any federal banking agency of any specific minimum capital
ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety
of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As described
below, substantial additional restrictions can be imposed upon FDIC-insured
depository institutions that fail to meet applicable capital requirements. See
"--Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve and the FDIC have, pursuant to
FDICIA, recently adopted final regulations requiring regulators to consider
interest rate risk (when the interest rate sensitivity of an institution's
assets does not match the sensitivity of its liabilities or its off-balance
sheet position) in the evaluation of a bank's capital adequacy. The bank
regulatory agencies have recently established a methodology for evaluating
interest rate risk which sets forth guidelines for banks with excessive
interest rate risk exposure to hold additional amounts of capital against such
exposures.
Support of Subsidiary Institution
Under Federal Reserve policy, we are expected to act as a source of
financial strength for, and to commit resources to support, the Bank. This
support may be required at times when, absent such Federal Reserve policy, we
may not be inclined to provide such support. In addition, any capital loans by
a bank holding company to its banking subsidiary are subordinate in right of
payment to deposits and to certain other indebtedness of such bank. In the
event of a bank holding company's bankruptcy, any commitment by a bank holding
company to a federal bank
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regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Prompt Corrective Action
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to
a narrow exception, FDICIA requires the banking regulator to appoint a receiver
or conservator for an institution that is critically undercapitalized. The
federal banking agencies have specified by regulation the relevant capital
level for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Risk-Based Capital Ratio of 10%
or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a
Leverage Ratio of 5.0% or greater and (ii) is not subject to any written
agreement, order, capital directive, or prompt corrective action directive
issued by the appropriate federal banking agency is deemed to be well
capitalized. An institution with a Total Risk-Based Capital Ratio of 8.0% or
greater, a Tier 1 Risk-Based Capital Ratio of 4.0% or greater, and a Leverage
Ratio of 4.0% or greater is considered to be adequately capitalized. An
institution with a Total Risk-Based Capital Ratio of less than 8.0%, a Tier 1
Risk-Based Capital Ratio of less than 4.0%, or a Leverage Ratio of less than
4.0% is considered to be undercapitalized. An institution with a Total
Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio
of less than 3.0%, or a Leverage Ratio of less than 3.0% is considered to be
significantly undercapitalized, and an institution with a tangible equity
capital to assets ratio equal to or less than 2.0% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus intangible assets
with certain exceptions. A depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution will meet its capital restoration plan, subject to
certain limitations. The obligation of a controlling bank holding company under
FDICIA to fund a capital restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an
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accepted capital restoration plan or with the approval of the applicable
agency. In addition, the appropriate federal banking regulator is given
authority with respect to any undercapitalized depository institution to take
any of the actions it is required to or may take with respect to a
significantly undercapitalized institution as described below if it determines
"that those actions are necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
non-bank affiliates; (v) restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region"; (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any director
or senior executive officer who held office for more than 180 days immediately
before the institution became undercapitalized, provided that in requiring
dismissal of a director or senior executive officer, the regulator must comply
with certain procedural requirements, including the opportunity for an appeal
in which the director or officer will have the burden of proving his or her
value to the institution; (x) employ "qualified" senior executive officers;
(xi) cease accepting deposits from correspondent depository institutions; (xii)
divest certain nondepository affiliates which pose a danger to the institution;
or (xiii) be divested by a parent holding company. In addition, without the
prior approval of the appropriate federal banking regulator, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer, without
regulatory approval.
At December 31, 1999, the Bank had the requisite capital levels to
qualify as "well capitalized."
FDIC Insurance Assessments
Pursuant to FDICIA, the FDIC adopted a risk-based assessment system
for insured depository institutions that takes into account the risks
attributable to different categories and concentrations of assets and
liabilities. The risk-based assessment system, which originally went into
effect on January 1, 1994, assigns an institution to one of three capital
categories: (i) well capitalized; (ii) adequately capitalized; and (iii)
undercapitalized. These three categories are substantially similar to the
prompt corrective action categories described above, with the
"undercapitalized" category including institutions that are undercapitalized,
significantly undercapitalized, and critically undercapitalized for prompt
corrective action purposes. An institution is also assigned by the FDIC to one
of three supervisory subgroups within each capital group. The supervisory
subgroup to which an institution is assigned is based on a supervisory
evaluation provided to the FDIC by the institution's primary federal regulator
and information which the FDIC determines to be relevant to the institution's
financial condition and the risk
-11-
<PAGE> 14
posed to the deposit insurance funds (which may include, if applicable,
information provided by the institution's state supervisor). An institution's
insurance assessment rate is then determined based on the capital category and
supervisory category to which it is assigned. Under the final risk-based
assessment system, there are nine assessment risk classifications (i.e.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied. Assessment rates for members of both the Bank
Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF") for
the first half of 1995, as they had been during 1994, ranged from 23 basis
points (0.23% of deposits) for an institution in the highest category (i.e.,
"well capitalized" and "healthy") to 31 basis points (0.31% of deposits) for an
institution in the lowest category (i.e., "undercapitalized" and "substantial
supervisory concern"). These rates were established for both funds to achieve a
designated ratio of reserves to insured deposits (i.e., 1.25%) within a
specified period of time.
Once the designated ratio for the BIF was reached in May 1995, the
FDIC reduced the assessment rate applicable to BIF deposits in two stages, so
that, beginning in 1996, the deposit insurance premiums for 92% of all BIF
members in the highest capital and supervisory categories were set at $2,000
per year, regardless of deposit size. The FDIC elected to retain the existing
assessment rate range of 23 to 31 basis points for SAIF members for the
foreseeable future given the undercapitalized nature of that insurance fund.
Recognizing that the disparity between the SAIF and BIF premium rates
have adverse consequences for the SAIF insured institutions and other banks
with SAIF assessed deposits, including reduced earnings and an impaired ability
to raise funds in capital markets and to attract deposits, in July 1995, the
FDIC, the Treasury Department, and the Office of Thrift Supervision released
statements outlining a proposed plan to recapitalize the SAIF, the principal
feature of which was a special one-time assessment on depository institutions
holding SAIF-insured deposits, which was intended to recapitalize the SAIF at a
reserve ratio of 1.25%. This proposal contemplated elimination of the disparity
between the assessment rates on BIF and SAIF deposits following
recapitalization of the SAIF.
A variation of this proposal designated the Deposit Insurance Funds
Act of 1996 ("DIFA") was enacted by Congress as part of the omnibus budget
legislation and signed into law on September 30, 1996. As directed by DIFA, the
FDIC implemented a special one-time assessment of approximately 65.7 basis
points (0.657%) on a depository institution's SAIF-insured deposits held as of
March 31, 1995 (or approximately 52.6 basis points on SAIF deposits acquired by
banks in certain qualifying transactions). In addition, the FDIC has
implemented a revision in the SAIF assessment rate schedule which effected, as
of October 1, 1996 (i) a widening in the assessment rate spread among
institutions in the different capital and risk assessment categories, (ii) an
overall reduction of the assessment rate range assessable on SAIF deposits of
from 0 to 27 basis points, and (iii) a special interim assessment rate range
for the last quarter of 1996 of from 18 to 27 basis points on institutions
subject to Financing Corporation ("FICO") assessments. Effective January 1,
1997, assessments to help pay off the $780 million in annual interest payments
on the $8 billion FICO bonds issued in the late 1980's as part of the
government rescue of the thrift industry were imposed on both BIF- and
SAIF-insured deposits in annual amounts presently estimated at 1.29 basis
points and 6.44 basis points, respectively.
-12-
<PAGE> 15
Beginning in January, 2000, BIF- and SAIF-insured institutions share the FICO
interest costs at equal rates currently estimated at 2.43 basis points.
Under the FDIA, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe and unsound
practices, is in an unsafe or unsound condition to continue operations, or has
violated any applicable law, regulation, rule, order, or condition imposed by
the FDIC.
Safety and Soundness Standards
The FDIA, as amended by the FDICIA and the Riegle Community
Development and Regulatory Improvement Act of 1994, requires the federal bank
regulatory agencies to prescribe standards, by regulations or guidelines,
relating to internal controls, information systems and internal audit systems,
loan documentation, credit underwriting, interest rate risk exposure, asset
growth, asset quality, earnings, stock valuation and compensation, fees and
benefits, and such other operational and managerial standards as the agencies
deem appropriate. The federal bank regulatory agencies have adopted, effective
August 9, 1995, a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA, as amended. The guidelines establish general standards
relating to internal controls and information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth,
asset quality, earnings and compensation, fees and benefits. In general, the
guidelines require, among other things, appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines. The
guidelines prohibit excessive compensation as an unsafe and unsound practice
and describe compensation as excessive when the amounts paid are unreasonable
or disproportionate to the services performed by an executive officer,
employee, director, or principal shareholder. In addition, the agencies adopted
regulations that authorize, but do not require, an agency to order an
institution that has been given notice by an agency that it is not satisfying
any of such safety and soundness standards to submit a compliance plan. If,
after being so notified, an institution fails to submit an acceptable
compliance plan or fails in any material respect to implement an acceptable
compliance plan, the agency must issue an order directing action to correct the
deficiency and may issue an order directing other actions of the types to which
an undercapitalized institution is subject under the "prompt corrective action"
provisions of FDICIA. See "--Prompt Corrective Action." If an institution fails
to comply with such an order, the agency may seek to enforce such order in
judicial proceedings and to impose civil money penalties.
Community Reinvestment Act
The Community Reinvestment Act of 1977 ("CRA") requires the federal
bank regulatory agencies to encourage financial institutions to meet the credit
needs of low- and moderate-income borrowers in their local communities. In May
1995, the federal bank regulatory agencies published final amended regulations
promulgated pursuant to the CRA. The final regulations eliminate the 12
assessment factors under the former regulation and replace them with
performance tests. Institutions are no longer required to prepare CRA
Statements or extensively document director participation, marketing efforts or
the ascertainment of community credit
-13-
<PAGE> 16
needs. Under the final rule, an institution's size and business strategy
determines the type of examination that it will receive. Large, retail-oriented
institutions will be examined using a performance-based lending, investment and
service test. Small institutions will be examined using a streamlined approach.
All institutions have the option of being evaluated under a strategic plan
formulated with community input and pre-approved by the bank regulatory agency.
CRA regulations provide for certain disclosure obligations. In
accordance with the CRA, each institution must post a CRA notice advising the
public of the right to comment to the institution and its regulator on the
institution's CRA performance and to review the institution's CRA public file.
Each lending institution must maintain for public inspection a public file that
includes a listing of branch locations and services, a summary of lending
activity, a map of its communities, and any written comments from the public on
its performance in meeting community credit needs. Public disclosure of written
CRA evaluations of financial institutions made by regulatory agencies is
required by the CRA. This promotes enforcement of CRA requirements by providing
the public with the status of a particular institution's community reinvestment
record.
ITEM 2. DESCRIPTION OF PROPERTY
The Bank leases its offices located at 165 Nash Street, Lawrenceville,
Gwinnett County, Georgia.
We do not invest in real estate, interests in real estate, real estate
mortgages, or securities of or interests in persons primarily engaged in real
estate activities.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 19, 1999, we held our annual shareholders' meeting at which
the shareholders approved a proposal to elect the following directors to serve
until the next annual meeting: James B. Ballard, Jerry M. Boles, W. H. Britt,
Richard F. Combs, William G. Hayes, Larry D. Key, Douglas A. Langley, Norris J.
Nash, Joseph J. Powell and William S. Stanton. This proposal was approved with
641,409 shares or 67.5% voting for the proposal, and no shares withholding
authority or voting against any of the nominees.
The shareholders also approved a proposal to approve the adoption of
the 1998 Stock Option Plan. This proposal was approved with 596,671 shares or
62.8% voting for the proposal, and 39,038 shares or 6.0% voting against the
proposal.
-14-
<PAGE> 17
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is currently no market for shares of our common stock and it is
not likely that an active trading market will develop for the shares in the
future. There are no present plans for our common stock to be traded on any
stock exchange or over-the-counter market. As of December 31, 1999, there were
174 private trades of shares of our common stock.
As of December 31, 1999, we had approximately 400 holders of our
common stock.
We have not paid any dividends to date. Under the Georgia Business
Corporation Code, we may from time to time make distributions, including the
payment of dividends, to its shareholders in money, indebtedness or other
property (except its own shares) unless, after giving effect to such
distribution, we would not be able to pay its debts as they become due in the
usual course of business or our total assets would be less than the sum of its
total liabilities plus the amount that would be needed, if we were to be
dissolved at the time of distribution, to satisfy the preferential rights upon
dissolution of shareholders whose preferential rights are superior to those
receiving the distribution. We may also distribute our shares pro rata and
without consideration to our shareholders or to the shareholders of one or more
classes or series, which constitutes a share dividend.
Subject to the Conditions, we, as the sole holder of common stock of
the Bank, are entitled to such dividends as may be declared from time to time
by the Board of Directors out of funds legally available therefor. Dividends
paid may not exceed 50% of net profits after taxes for the previous fiscal year
without prior approval of the Department of Banking. The Bank may not pay
cumulative dividends on its common stock.
In the absence of other activities conducted by us, our ability to pay
dividends will depend upon the earnings of the Bank and fulfillment of the
Conditions. However, we cannot assure the future payment of dividends, either
in cash or in stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the financial condition of GBC
Bancorp, Inc. (GBC) and its bank subsidiary, Gwinnett Banking Company at
December 31, 1999 and 1998 and the results of operations for the years then
ended. The purpose of this discussion is to focus on information about GBC's
financial condition and results of operations which are not otherwise apparent
from the audited consolidated financial statements. Reference should be made to
those statements and the selected financial data presented elsewhere in this
report for an understanding of the following discussion and analysis.
FORWARD-LOOKING STATEMENTS
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<PAGE> 18
GBC may from time to time make written or oral forward-looking
statements, including statements contained in GBC's filings with the Securities
and Exchange Commission and its reports to stockholders. Statements made in the
Annual Report, other than those concerning historical information, should be
considered forward-looking and subject to various risks and uncertainties. Such
forward-looking statements are made based upon management's belief as well as
assumptions made by, and information currently available to, management
pursuant to "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. GBC's actual results may differ materially from the results
anticipated in forward-looking statements due to a variety of factors,
including governmental monetary and fiscal policies, deposit levels, loan
demand, loan collateral values, securities portfolio values, interest rate risk
management; the effects of competition in the banking business from other
commercial banks, thrifts, mortgage banking firms, consumer finance companies,
credit unions, securities brokerage firms, insurance companies, money market
funds and other financial institutions operating in GBC's market area and
elsewhere, including institutions operating through the Internet, changes in
governmental regulation relating to the banking industry, including regulations
relating to branching and acquisitions, failure of assumptions underlying the
establishment of reserves for loan losses, including the value of collateral
underlying delinquent loans and other factors. GBC cautions that such factors
are not exclusive. GBC does not undertake to update any forward-looking
statement that may be made from time to time by, or on behalf of, GBC.
OVERVIEW
GBC's 1999 results were highlighted by reporting of net income of
$445,000 in its second full year of operations and recouping 31% of operating
losses incurred in 1997 and 1998. GBC had significant loan and deposit growth
not uncommon for a de novo bank. This growth provided a base for GBC's first
year of profitability.
FINANCIAL CONDITION AT DECEMBER 31, 1999 AND 1998
Following is a summary of GBC's balance sheets for the years indicated:
<TABLE>
<CAPTION>
December 31,
---------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and due from banks..................................................... $ 3,193 $ 1,600
Federal funds sold.......................................................... 6,650 2,740
Securities.................................................................. 6,837 4,009
Loans, net.................................................................. 43,612 24,067
Premises and equipment...................................................... 491 612
Other assets................................................................ 1,549 297
-------- --------
$ 62,332 $ 33,325
======== ========
Total deposits.............................................................. $ 53,784 $ 25,008
Other liabilities........................................................... 304 263
Stockholders' equity........................................................ 8,244 8,054
$ 62,332 $ 33,325
======== ========
</TABLE>
-16-
<PAGE> 19
FINANCIAL CONDITION AT DECEMBER 31, 1999 AND 1998
As of December 31, 1999, GBC had total assets of $62.3 million, almost
doubling its asset size as of December 31, 1998. Total interest-earning assets
were $57.1 million at December 31, 1999 or 91.60% of total assets as compared
to 92.47% at December 31, 1998. GBC's primary interest-earning assets at
December 31, 1999 were loans, which made up 76.38% of total interest-earning
assets as compared to 78.10% at December 31, 1998. GBC's loan to deposit ratio
was 81.09% at December 31, 1999 as compared to 97.73% at December 31, 1998.
Deposit growth of $28.8 million has been used primarily to fund loan growth of
$19.5 million.
GBC's investment portfolio, consisting of U.S. Agency securities,
amounted to $6.8 million at December 31, 1999. Unrealized losses on securities
amounted to $259,000 at December 31, 1999. Management has not specifically
identified any securities for sale in future periods which, if so designated,
would require a charge to operations if the market value would not be
reasonably expected to recover prior to the time of sale.
GBC has 70% of its loan portfolio collateralized by real estate
located in GBC's primary market area of Gwinnett County and surrounding
counties. GBC's real estate construction portfolio consists of loans
collateralized by loans to build one- to four-family residential properties.
GBC generally requires that loans collateralized by real estate not exceed
80%-85% of the collateral value.
GBC's remaining 30% of its loan portfolio consists of commercial,
consumer, and other loans. GBC requires collateral commensurate with the
repayment ability and creditworthiness of the borrower.
The specific economic and credit risks associated with GBC's loan
portfolio, especially the real estate portfolio, include, but are not limited
to, a general downturn in the economy which could affect unemployment rates in
GBC's market area, general real estate market deterioration, interest rate
fluctuations, deteriorated or non-existing collateral, title defects,
inaccurate appraisals, financial deterioration of borrowers, fraud, and any
violation of banking protection laws. Construction lending can also present
other specific risks to the lender such as whether the builders can obtain
financing for the construction, whether the builders can sell the home to a
buyer, and whether the buyer can obtain permanent financing. Currently, real
estate values and employment trends in GBC's market area are stable with no
indications of a significant downturn in the general economy.
GBC attempts to reduce these economic and credit risks not only by
adherence to loan to value guidelines, but also by investigating the
creditworthiness of the borrower and monitoring the borrower's financial
position. Also, GBC establishes and periodically reviews its lending policies
and procedures as well as having independent loan review. State banking
regulations limit exposure by prohibiting secured loan relationships that
exceed 25% of the Bank's statutory capital and unsecured loan relationships
that exceed 15% of the Bank's statutory capital.
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<PAGE> 20
LIQUIDITY AND CAPITAL RESOURCES
The purpose of liquidity management is to ensure that there are
sufficient cash flows to satisfy demands for credit, deposit withdrawals, and
other needs of GBC. Traditional sources of liquidity include asset maturities
and growth in core deposits. A company may achieve its desired liquidity
objectives from the management of assets and liabilities and through funds
provided by operations. Funds invested in short-term marketable instruments and
the continuous maturing of other earning assets are sources of liquidity from
the asset perspective. The liability base provides sources of liquidity through
deposit growth, the maturity structure of liabilities, and accessibility to
market sources of funds.
Scheduled loan payments are a relatively stable source of funds, but
loan payoffs and deposit flows fluctuate significantly, being influenced by
interest rates and general economic conditions and competition. GBC attempts to
price its deposits to meet its asset/liability objectives consistent with local
market conditions.
The liquidity and capital resources of the Bank are monitored on a
periodic basis by State and Federal regulatory authorities. As determined under
guidelines established by those regulatory authorities and internal policy, the
Bank's liquidity was considered satisfactory.
At December 31, 1999, GBC had loan commitments outstanding of $22.4
million. Because these commitments generally have fixed expiration dates and
many will expire without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. If needed, the Bank has the
ability on a short-term basis to borrow and purchase Federal funds from other
financial institutions. At December 31, 1999, the Bank has arrangements with
three commercial banks for additional short-term advances of $4,500,000.
At December 31, 1999, GBC's and the Bank's capital ratios were
considered adequate based on regulatory minimum capital requirements. GBC's
stockholders' equity increased due to net income in 1999 of $445,000 and the
exercise of stock options of $13,500. GBC's stockholders' equity decreased due
to unrealized losses on securities available-for-sale of $270,000. For
regulatory purposes, the net unrealized losses on securities available-for-sale
are excluded in the computation of the capital ratios.
In the future, the primary source of funds available to GBC will be
the payment of dividends by its subsidiary Bank. Banking regulations limit the
amount of the dividends that may be paid without prior approval of the Bank's
regulatory agency. Currently, no dividends can be paid by the Bank to GBC
without regulatory approval.
The minimum capital requirements to be considered well capitalized
under prompt corrective action provisions and the actual capital ratios for GBC
and the Bank as of December 31, 1999 are as follows:
-18-
<PAGE> 21
<TABLE>
<CAPTION>
Actual
--------------------------------------
Regulatory
GBC Bank Requirements
------ ------ ------------
<S> <C> <C> <C>
Leverage capital ratio...................................... 14.98% 14.43% 5.00%
Risk-based capital ratios:
Core capital........................................... 18.03 17.37 6.00
Total capital.......................................... 19.28 18.63 10.00
</TABLE>
At December 31, 1999, GBC had no material commitments for capital expenditures.
These ratios should decline as asset growth continues, but will still
remain in excess of the regulatory minimum requirements. Anticipated future
earnings will assist in keeping these ratios at satisfactory levels.
Management believes that its liquidity and capital resources are
adequate and will meet its foreseeable short and long-term needs. Management
anticipates that it will have sufficient funds available to meet current loan
commitments and to fund or refinance, on a timely basis, its other material
commitments and liabilities.
Management is not aware of any known trends, events or uncertainties
that will have or that are reasonably likely to have a material effect on its
liquidity, capital resources or operations. Management is also not aware of any
current recommendations by the regulatory authorities which, if they were
implemented, would have such an effect.
Effects of Inflation
The impact of inflation on banks differs from its impact on
non-financial institutions. Banks, as financial intermediaries, have assets
which are primarily monetary in nature and which tend to fluctuate in concert
with inflation. A bank can reduce the impact of inflation if it can manage its
rate sensitivity gap. This gap represents the difference between rate sensitive
assets and rate sensitive liabilities. GBC, through its asset-liability
committee, attempts to structure the assets and liabilities and manage the rate
sensitivity gap, thereby seeking to minimize the potential effects of
inflation. For information on the management of GBC's interest rate sensitive
assets and liabilities, see the "Asset/Liability Management" section.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Following is a summary of GBC's operations for the years indicated.
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------------
1999 1998
------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Interest income............................................................. $4,615 $2,484
Interest expense............................................................ 1,504 636
Net interest income......................................................... 3,111 1,848
</TABLE>
-19-
<PAGE> 22
<TABLE>
<S> <C> <C>
Provision for loan losses................................................... 309 344
Other income................................................................ 177 86
Other expenses.............................................................. 2,534 2,098
Pretax income (loss)........................................................ 445 (508)
Income taxes................................................................ -- --
Net income (loss)........................................................... 445 (508)
</TABLE>
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<PAGE> 23
Net Interest Income
GBC's results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and investment
losses, to generate non-interest income, and to control operating expenses.
Since interest rates are determined by market forces and economic conditions
beyond the control of GBC, GBC's ability to generate net interest income is
dependent upon its ability to obtain an adequate net interest spread between
the rate paid on interest-bearing liabilities and the rate earned on
interest-earning assets.
The net yield on average interest-earning assets was 7.21% in 1999 as
compared to 7.76% in 1998. Average loans increased by $19.8 million which
accounted for the majority of the increase in total average interest-earning
assets. Average interest-bearing liabilities increased by $17.6 million with
average interest-bearing demand and time deposits accounting for the vast
majority of this increase. The rate earned on average interest-earning assets
increased to 10.70% in 1999 from 10.43% in 1998. The rate paid on average
interest-bearing liabilities was 4.96% in 1999 and 4.98% in 1998.
The net yield on average interest-earning assets was 7.76% in 1998 as
compared to 5.74% in 1997. Average loans increased by $13.5 million which
accounted for the majority of a $21.7 million increase in total average
interest-earning assets. Average interest-bearing liabilities increased by
$12.5 million with average interest-bearing demand and time deposits accounting
for the vast majority of this increase. The rate earned on average
interest-earning assets increased to 10.43% in 1998 from 6.18% in 1997. The
rate paid on average interest-bearing liabilities was 4.98% in 1998 and 3.49%
in 1997.
Provision for Loan Losses
The provision for loan losses was $309,000 in 1999 as compared to
$344,000 in 1998. The amounts provided were due primarily to the growth of the
portfolio. Based upon management's evaluation of the loan portfolio, management
believes the reserve for loan losses to be adequate to absorb possible losses
on existing loans that may become uncollectible. This evaluation considers past
due and classified loans, underlying collateral values, and current economic
conditions which may affect the borrower's ability to repay. As of December 31,
1999, GBC had nonaccrual loans of $4,000. There were no nonaccrual or impaired
loans at December 31, 1998. The allowance for loan losses as a percentage of
total loans at December 31, 1999 and 1998 was 1.52%. Actual loan charge-offs
were $8,000 during 1999.
Other Income
Other income consists of service charges on deposit accounts, mortgage
loan origination fees, and other miscellaneous revenue and fees. Other income
increased to $177,000 in 1999 from $86,000 in 1998. This increase is due
primarily to an increase in service charges on deposit accounts of $41,000 and
an increase in mortgage loan origination fees of $23,000.
-21-
<PAGE> 24
Other income was $86,000 in 1998 as compared to $33,000 in 1997. The
increases are due to GBC being open for an entire year versus only two months
in 1997.
Other Expenses
Other expenses were $2,534,000 in 1999 as compared to $2,098,000 in
1998, an increase of $436,000. Salaries and employee benefits increased by
$237,000 due to an increase in the number of full time employees from 21 to 23
and normal salary increases. Equipment and occupancy expenses increased by
$267,000 due primarily to increased equipment depreciation of $114,000 and
increased building lease expense of $120,000. GBC, which leases its building
from a partnership formed by GBC's organizers, occupied the building for the
entire year of 1999 as opposed to six months in 1998. Other operating expenses
decreased by $67,000 due primarily to a $100,000 increase in data processing
costs, communication costs, and other taxes, being offset by a decrease of
$167,000 related to the write-off of organization costs.
Other expenses were $2,098,000 in 1998 as compared to $836,000 in
1997. The increases over 1997 ($519,000 for salaries and employee benefits,
$243,000 for equipment and occupancy, and $333,000 for other operating
expenses) are due primarily to GBC being open for an entire year versus only
two months in 1997. GBC also adopted SOP 98-5 which required the write-off of
$167,000 of organization costs.
Income Tax
GBC has reported no income tax expense for 1999 and 1998 due to
accumulated net operating losses.
Asset/Liability Management
It is GBC's objective to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing, and capital policies. Certain
officers are charged with the responsibility for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix. It is the overall philosophy of management to support
asset growth primarily through growth of core deposits of all categories made
by local individuals, partnerships, and corporations.
GBC's asset/liability mix is monitored on a regular basis with a
report reflecting the interest rate-sensitive assets and interest
rate-sensitive liabilities being prepared and presented to the Board of
Directors of the Bank on a monthly basis. The objective of this policy is to
monitor interest rate-sensitive assets and liabilities so as to minimize the
impact of substantial movements in interest rates on earnings. An asset or
liability is considered to be interest rate-sensitive if it will reprice or
mature within the time period analyzed, usually one year or less. The interest
rate-sensitivity gap is the difference between the interest-earning assets and
interest-bearing liabilities scheduled to mature or reprice within such time
period. A gap is considered positive when the amount of interest rate-sensitive
assets exceeds the amount of interest rate-sensitive liabilities. A gap is
considered negative when the amount of interest rate-sensitive liabilities
exceeds the interest rate-sensitive assets. During a period of rising interest
rates, a negative gap would tend to adversely affect net interest income, while
a positive gap would tend to result in an increase in net interest income.
Conversely, during a period of falling interest rates, a negative gap would
tend to result in an increase in net interest income, while a positive gap
would tend
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<PAGE> 25
to adversely affect net interest income. If GBC's assets and liabilities were
equally flexible and moved concurrently, the impact of any increase or decrease
in interest rates on net interest income would be minimal.
A simple interest rate "gap" analysis by itself may not be an accurate
indicator of how net interest income will be affected by changes in interest
rates. Accordingly, GBC also evaluates how the repayment of particular assets
and liabilities is impacted by changes in interest rates. Income associated
with interest-earning assets and costs associated with interest-bearing
liabilities may not be affected uniformly by changes in interest rates. In
addition, the magnitude and duration of changes in interest rates may have a
significant impact on net interest income. For example, although certain assets
and liabilities may have similar maturities or periods of repricing, they may
react in different degrees to changes in market interest rates. Interest rates
on certain types of assets and liabilities fluctuate in advance of changes in
general market rates, while interest rates on other types may lag behind
changes in general market rates. In addition, certain assets, such as
adjustable rate mortgage loans, have features (generally referred to as
"interest rate caps and floors") which limit changes in interest rates.
Prepayment and early withdrawal levels also could deviate significantly from
those assumed in calculating the interest rate gap. The ability of many
borrowers to service their debts also may decrease during periods of rising
interest rates.
Changes in interest rates also affect GBC's liquidity position. GBC
currently prices deposits in response to market rates and it is management's
intention to continue this policy. If deposits are not priced in response to
market rates, a loss of deposits could occur which would negatively affect
GBC's liquidity position.
At December 31, 1999, GBC's cumulative one year interest
rate-sensitivity gap ratio was 110%. GBC's targeted ratio is 80% to 120% in
this time horizon. This indicates that GBC's interest-earning assets will
reprice during this period at a rate faster than GBC's interest-bearing
liabilities.
The following table sets forth the distribution of the repricing of
GBC's interest-earning assets and interest-bearing liabilities as of December
31, 1999, the interest rate-sensitivity gap, the cumulative interest
rate-sensitivity gap, the interest rate-sensitivity gap ratio and the
cumulative interest rate-sensitivity gap ratio. The table also sets forth the
time periods in which earning assets and liabilities will mature or may reprice
in accordance with their contractual terms. However, the table does not
necessarily indicate the impact of general interest rate movements on the net
interest margin since the repricing of various categories of assets and
liabilities is subject to competitive pressures and the needs of GBC's
customers. In addition, various assets and liabilities indicated as repricing
within the same period may in fact, reprice at different times within such
period and at different rates.
-23-
<PAGE> 26
<TABLE>
<CAPTION>
After Three After One
Within Months but Year but
Three Within One Within Five After
Months Year Years Five Years Total
-------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold........................ $ 6,650 $ -- $ -- $ -- $ 6,650
Securities................................ -- -- 3,931 2,906 6,837
Loans..................................... 33,370 5,121 4,645 1,150 44,286
-------- -------- -------- -------- --------
40,020 5,121 8,576 4,056 57,773
======== ======== ======== ======== ========
Interest-bearing liabilities:
Interest-bearing demand deposits.......... 9,150 -- -- -- 9,150
Savings................................... 3,010 -- -- -- 3,010
Certificates, less than $100,000.......... 3,640 8,487 2,666 -- 14,793
Certificates, $100,000 and over........... 5,042 11,750 2,638 -- 19,430
20,842 20,237 5,304 -- 46,383
======== ======== ======== ======== ========
Interest rate sensitivity gap................ $ 19,178 $(15,116) $ 3,272 $ 4,056 $ 11,390
Cumulative interest rate sensitivity gap..... $ 19,178 $ 4,062 $ 7,334 $ 11,390
Interest rate sensitivity gap ratio.......... 1.92 .25 1.62 --
Cumulative interest rate
sensitivity gap ratio....................... 1.92 1.10 1.16 1.25
</TABLE>
-24-
<PAGE> 27
SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA
The tables and schedules on the following pages set forth certain
significant financial information and statistical data with respect to: the
distribution of assets, liabilities and stockholders' equity of GBC, the
interest rates experienced by GBC; the investment portfolio of GBC; the loan
portfolio of GBC, including types of loans, maturities, and sensitivities of
loans to changes in interest rates and information on nonperforming loans;
summary of the loan loss experience and reserves for loan losses of GBC; types
of deposits of GBC and the return on equity and assets for GBC.
-25-
<PAGE> 28
DISTRIBUTION OF ASSETS, LIABILITIES, AND
STOCKHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIALS
AVERAGE BALANCES
The condensed average balance sheet for the years indicated is presented
below.(1)
<TABLE>
<CAPTION>
Years Ended
December 31,
-----------------------------
ASSETS 1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and due from banks ............................ $ 1,841 $ 1,041
Taxable securities ................................. 5,502 3,323
Securities valuation account ....................... (109) 3
Federal funds sold ................................. 4,063 6,762
Loans(2) ........................................... 33,561 13,744
Allowance for loan losses .......................... (502) (194)
Other assets ....................................... 1,145 535
$ 45,501 $ 25,214
======== ========
Total interest-earning assets ...................... $ 43,126 $ 23,829
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand .................... $ 6,824 $ 4,031
Interest-bearing demand ....................... 7,568 4,581
Savings ....................................... 3,706 1,847
Time .......................................... 19,071 6,351
Total deposits ............................ $ 37,169 $ 16,810
Other liabilities ............................. 218 111
Total liabilities ......................... 37,387 16,921
Stockholders' equity .......................... 8,114 8,293
$ 45,501 $ 25,214
======== ========
Total interest-bearing liabilities ................. $ 30,345 $ 12,779
======== ========
</TABLE>
- ------------
(1) For each category, average balances were determined using the daily
average balances during the year for 1999 and 1998.
(2) The average balance of nonaccrual loans included in average loans for
1999 was less than $1,000. There were no nonaccrual loans included in
average loans for 1998.
-26-
<PAGE> 29
INTEREST INCOME AND INTEREST EXPENSE
The following tables set forth the amount of GBC's interest income and
interest expense for each category of interest-earning assets and
interest-bearing liabilities and the average interest rate for total
interest-earning assets and total interest-bearing liabilities, net interest
spread and net yield on average interest-earning assets.
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------
1999 1998
-------------------------- --------------------------
Average Average
Interest Rate Interest Rate
-------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans(1) .................... $4,066 12.12% $1,908 13.89%
Interest on taxable securities ................... 338 6.14 206 6.20
Interest on Federal funds sold ................... 211 5.19 370 5.47
------ ------
Total interest income ............................ $4,615 10.70 $2,484 10.43
====== ======
INTEREST EXPENSE:
Interest on interest-bearing
demand deposits ................................ $ 277 3.67 $ 171 3.74%
Interest on savings deposits ..................... 177 4.77 92 5.00
Interest on time deposits ........................ 1,050 5.51 373 5.87
------ ------
Total interest expense ........................... $1,504 4.96 $ 636 4.98
====== ======
NET INTEREST INCOME ................................ $3,111 $1,848
Net interest spread .............................. 5.74% 5.45%
Net yield on average interest-earning assets ..... 7.21% 7.76%
</TABLE>
- ------------
(1) Interest and fees on loans includes $889,000 and $571,000 of loan fee
income for the years ended December 31, 1999 and 1998, respectively.
There was no interest income recognized on nonaccrual loans during
1999 or 1998.
RATE AND VOLUME ANALYSIS
The following table describes the extent to which changes in interest
rates and changes in volume of interest-earning assets and interest-bearing
liabilities have affected GBC's interest income and expense during the year
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to (1) change in
volume (change in volume multiplied by old rate); (2) change in rate (change in
rate multiplied by old volume); and (3) a combination of change in rate and
change in volume. The changes in interest income and interest expense
attributable to both volume and rate have been allocated proportionately on a
consistent basis to the change due to volume and the change due to rate.
-27-
<PAGE> 30
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1999 1998
------------------------ --------------------
Changes Due to:
Increase
Rate Volume (Decrease)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans ..................... $ (272) $ 2,430 $ 2,158
Interest on taxable securities ................. (2) 134 132
Interest on Federal funds sold ................. (18) (141) (159)
Total interest income ................... (292) 2,423 2,131
-------- -------- --------
Expense from interest-bearing liabilities:
Interest on interest-bearing
demand deposits .............................. (3) 109 106
Interest on savings deposits ................... (4) 89 85
Interest on time deposits ...................... (25) 702 677
Total interest expense .................. (32) 900 868
-------- -------- --------
Net interest income ..................... $ (260) $ 1,523 $ 1,263
======== ======== ========
</TABLE>
-28-
<PAGE> 31
INVESTMENT PORTFOLIO
TYPES OF INVESTMENTS
The carrying amounts of securities at the dates indicated, which are all
classified as available-for-sale, are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1999 1998
--------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
U.S. Government agencies.................................................... $ 6,837 $ 4,009
</TABLE>
MATURITIES
The amounts of securities in each category as of December 31, 1999 are
shown in the following table according to contractual maturity classifications
(1) one year or less, (2) after one year through five years, (3) after five
years through ten years and (4) after ten years.
<TABLE>
<CAPTION>
After one year After five years
One year or less through five years Through ten years
-------------------- ---------------------- --------------------
Yield(1) Amount Yield(1) Amount Yield(1) Amount
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government
Agencies.................. $ - $ - 5.88% $ 3,931 7.10% $ 2,906
</TABLE>
<TABLE>
<CAPTION>
After ten years Total
-------------------- ---------------------
Yield(1) Amount Yield(1) Amount
-------- ------ -------- ------
<S> <C> <C> <C> <C>
U.S. Government
Agencies.................. $ - $ - 6.40% $ 6,837
</TABLE>
- ------------
(1) Yields were computed using coupon interest, adding discount accretion
or subtracting premium amortization, as appropriate, on a ratable
basis over the life of each security. The weighted average yield for
each maturity range was computed using the carrying value of each
security in that range.
-29-
<PAGE> 32
LOAN PORTFOLIO
TYPES OF LOANS
The amount of loans outstanding at the indicated dates are shown in
the following table according to the type of loan.
<TABLE>
<CAPTION>
December 31,
-----------------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Commercial ......................................... $ 8,662 $ 7,275
Construction loans secured by real estate .......... 22,850 13,307
Commercial loans secured by real estate ............ 8,237 1,496
Consumer installment loans and other ............... 4,537 2,362
44,286 24,440
Less allowance for loan loses ...................... (674) (373)
Net Loans .....................................
$ 43,612 $ 24,067
======== ========
</TABLE>
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
Total loans as of December 31, 1999 are shown in the following table according
to contractual maturity classifications (1) one year or less, (2) after one
year through five years, and (3) after five years.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Commercial
One year or less............................................ $11,084
After one year through five years........................... 4,429
After five years............................................ 1,386
-------
16,899
Construction
One year or less............................................ 22,517
After one year through five years........................... 321
After five years............................................ 12
-------
22,850
Other
One year or less............................................ 3,846
After one year through five years........................... 682
After five years............................................ 9
-------
4,537
-------
44,286
=======
</TABLE>
-30-
<PAGE> 33
The following table summarizes loans at December 31, 1999 with the due dates
after one year which have predetermined and floating or adjustable interest
rates.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
$ 4,705
Floating or adjustable interest rates......................... 2,134
$ 6,839
========
</TABLE>
RISK ELEMENTS
Information with respect to nonaccrual, past due, and restructured loans at
December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans ................................... $ 4 $ 0
Loans contractually past due ninety days
or more as to interest or principal
payments and still accruing ..................... 0 0
Restructured loans ................................. 0 0
Loans, now current about which there are serious
doubts as to the ability of the borrower to
comply with loan repayment terms ................ 52 0
Interest income that would have been recorded
on nonaccrual and restructured loans under
original terms .................................. 1 0
Interest income that was recorded on
Nonaccrual and restructured loans ............... 0 0
</TABLE>
It is the policy of the Bank to discontinue the accrual of interest
income when, in the opinion of management, collection of such interest becomes
doubtful. This status is accorded such interest when (1) there is a significant
deterioration in the financial condition of the borrower and full repayment of
principal and interest is not expected and (2) the principal or interest is
more than ninety days past due, unless the loan is both well-secured and in the
process of collection.
Loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been included in the table above
do not represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity,
or capital resources. These classified loans do not represent material credits
about which management is aware of any information which causes management to
have serious doubts as to the ability of such borrowers to comply with the loan
repayment terms.
-31-
<PAGE> 34
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes average loan balances for the year determined
using the daily average balances during the period of banking operations;
changes in the allowance for loan losses arising from loans charged off and
recoveries on loans previously charged off; additions to the allowance which
have been charged to operating expense; and the ratio of net charge-offs during
the period to average loans.
<TABLE>
<CAPTION>
December 31,
-----------------------
1999 1998
--------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Average amount of loans outstanding........................................... $ 33,561 $ 13,744
Balance of allowance for loan losses at beginning of year..................... $ 373 $ 29
Loans charged off.............................................................
Commercial and financial 8 --
Real estate................................................................ -- --
Installment................................................................ 8 --
------- --------
8 --
Loans recovered...............................................................
Commercial and financial................................................... -- --
Real estate mortgage....................................................... -- --
Installment................................................................ -- --
------- --------
-- --
Net charge-offs............................................................ 8 --
------- --------
Additions to allowance charged to
operating expense during year............................................ 309 344
------- --------
Balance of allowance for loan
losses at end of year.................................................... $ 674 $ 373
======= ========
Ratio of net loans charged off during the year
to average loans outstanding............................................. $ .02 $ --%
======= =======
</TABLE>
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is maintained at a level that is deemed
appropriate by management to adequately cover all known and inherent risks in
the loan portfolio. Management's evaluation of the loan portfolio includes a
periodic review of loan loss experience, current economic conditions which may
affect the borrower's ability to pay and the underlying collateral value of the
loans.
-32-
<PAGE> 35
As of December 31, 1999 and 1998, management had made no allocations of its
allowance for loan losses to specific categories of loans. Based on
management's best estimate, the allocation of the allowance for loan losses to
types of loans, as of the indicated dates, is as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
Percent of loans in Percent of loans in
each category each category
--------------------------- ---------------------------
Amount to total loans Amount to total loans
--------- -------------- -------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Commercial.......................................... $ 128 19% $ 56 30%
Construction loans secured by real estate........... 351 52 243 54
Commercial loans secured by real estate............. 128 19 37 6
Consumer installment loans and other................ 67 10 37 10
--------- ---- -------- ----
$ 674 100% $ 373 100%
========= ==== ======== ====
</TABLE>
DEPOSITS
Average amount of deposits and average rates paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand deposits, savings
deposits, and time deposits is presented below.(1)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
-------------------------------------------------
Amount Percent Amount Percent
--------- ------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits.......................... $ 6,824 --% $ 4,031 --%
Interest-bearing demand deposits............................. 7,568 3.67 4,581 3.74
Savings deposits............................................. 3,706 4.77 1,847 5.00
Time deposits................................................ 19,071 5.51 6.351 5.87
--------- ---------
$ 37,169 $ 16,810
========= =========
</TABLE>
- ------------
(1) Average balances were determined using the daily average balances.
-33-
<PAGE> 36
The amounts of time certificates of deposit issued in amounts of $100,000 or
more as of December 31, 1999 are shown below by category, which is based on
time remaining until maturity of (1) three months or less, (2) over three
through six months, (3) over six through twelve months, and (4) over twelve
months.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less......................................................... $ 5,143
Over three months through six months......................................... 6,696
Over six through twelve months............................................... 5,054
Over twelve months........................................................... 2,638
---------
Total............................................................... $ 19,531
=========
</TABLE>
RETURN ON ASSETS AND STOCKHOLDERS' EQUITY
The following rate of return information for the years indicated is presented
below.
<TABLE>
<CAPTION>
December 31,
---------------------
1999 1998
------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Return on assets(1).......................................................... .98% (2.01)%
Return on equity(2).......................................................... 5.48 (6.12)
Dividend payout ratio(3)..................................................... -- --
Equity to assets ratio(4).................................................... 17.83 32.89
</TABLE>
- ------------
(1) Net income (loss) divided by average total assets.
(2) Net income (loss) divided by average equity.
(3) Dividends declared per share of common stock divided by net income
(loss) per share.
(4) Average common equity divided by average total assets.
ITEM 7. FINANCIAL STATEMENTS
<PAGE> 37
GBC BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1999
35
<PAGE> 38
GBC BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT................................................37
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS............................................38
CONSOLIDATED STATEMENTS OF OPERATIONS..................................39
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS).................40
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY .......................41
CONSOLIDATED STATEMENTS OF CASH FLOWS..................................42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..........................43-63
</TABLE>
36
<PAGE> 39
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
GBC Bancorp, Inc.
Lawrenceville, Georgia
We have audited the accompanying consolidated balance sheets
of GBC Bancorp, Inc. and subsidiary as of December 31, 1999 and 1998, and the
related consolidated statements of operations, comprehensive income (loss),
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of GBC
Bancorp, Inc. and subsidiary as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
/S/ MAULDIN & JENKINS, LLC
Atlanta, Georgia
March 2, 2000
37
<PAGE> 40
GBC BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
----------- -----------
<S> <C> <C>
Cash and due from banks $ 3,192,647 $ 1,600,046
Federal funds sold 6,650,000 2,740,000
Securities available-for-sale 6,836,993 4,008,520
Loans 44,285,792 24,439,863
Less allowance for loan losses 674,143 372,683
----------- -----------
Loans, net 43,611,649 24,067,180
Equipment 491,628 612,166
Other assets 1,548,909 296,928
----------- -----------
Total assets $62,331,826 $33,324,840
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $ 7,310,817 $ 5,311,665
Interest-bearing demand 9,149,735 6,808,561
Savings 3,099,601 3,473,772
Time, $100,000 and over 19,530,671 5,544,381
Other time 14,693,018 3,869,148
----------- -----------
Total deposits 53,783,842 25,007,527
Other liabilities 304,077 263,047
----------- -----------
Total liabilities 54,087,919 25,270,574
----------- -----------
Commitments and contingent liabilities
Stockholders' equity
Common stock, par value $1; 3,000,000 shares authorized;
951,580 and 950,080 issued and outstanding, respectively 951,580 950,080
Capital surplus 8,540,327 8,526,827
Accumulated deficit (989,210) (1,434,200)
Accumulated other comprehensive income (loss) (258,790) 11,559
----------- -----------
Total stockholders' equity 8,243,907 8,054,266
----------- -----------
Total liabilities and stockholders' equity $62,331,826 $33,324,840
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
38
<PAGE> 41
GBC BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
Interest income
Loans $4,066,177 $ 1,908,548
Taxable securities 337,830 206,090
Federal funds sold 210,913 369,851
---------- -----------
Total interest income 4,614,920 2,484,489
Interest expense on deposits 1,504,334 636,249
---------- -----------
Net interest income 3,110,586 1,848,240
Provision for loan losses 309,161 343,987
---------- -----------
Net interest income after provision for
loan losses 2,801,425 1,504,253
---------- -----------
Other income
Service charges on deposit accounts 66,863 25,630
Other operating income 110,200 60,645
---------- -----------
Total other income 177,063 86,275
---------- -----------
Other expenses
Salaries and employee benefits 1,390,288 1,154,611
Equipment and occupancy expenses 593,637 327,031
Other operating expenses 549,573 449,770
---------- -----------
Total other expenses 2,533,498 1,931,412
---------- -----------
Income (loss) before income taxes and cumulative
effect of a change in accounting principle 444,990 (340,884)
Income tax expense -- --
---------- -----------
Income (loss) before cumulative effect of a
change in accounting principle 444,990 (340,884)
Cumulative effect of a change in accounting principle -- (166,884)
---------- -----------
Net income (loss) $ 444,990 $ (507,768)
========== ===========
Basic and diluted earnings (losses) per common share before
cumulative effect of a change in accounting principle $ 0.47 $ (0.36)
Cumulative effect of a change in accounting principle 0.00 (0.17)
---------- -----------
Basic and diluted earnings (losses) per common share $ 0.47 $ (0.53)
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
39
<PAGE> 42
GBC BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Net income (loss) $ 444,990 $(507,768)
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities
available-for-sale arising during period (270,349) 11,559
--------- ---------
Comprehensive income (loss) $ 174,641 $(496,209)
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
40
<PAGE> 43
GBC BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER TOTAL
------------------ CAPITAL ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
SHARES PAR VALUE SURPLUS DEFICIT INCOME (LOSS) EQUITY
------- --------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 950,080 $950,080 $8,526,827 $ (926,432) $ -- $ 8,550,475
Net loss -- -- -- (507,768) -- (507,768)
Other comprehensive income -- -- -- -- 11,559 11,559
------- -------- ---------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1998 950,080 $950,080 $8,526,827 $(1,434,200) $ 11,559 $ 8,054,266
Net income -- -- -- 444,990 -- 444,990
Exercise of stock options 1,500 1,500 13,500 -- -- 15,000
Other comprehensive (loss) -- -- -- -- (270,349) (270,349)
------- -------- ---------- ----------- --------- -----------
BALANCE, DECEMBER 31, 1999 951,580 $951,580 $8,540,327 $ (989,210) $(258,790) $ 8,243,907
======= ======== ========== =========== ========= ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
41
<PAGE> 44
GBC BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 444,990 $ (507,768)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 213,763 117,320
Deferred income taxes (49,949) --
Write-off of organization costs -- 166,884
Provision for loan losses 309,161 343,987
Increase in interest receivable (176,295) (240,513)
Increase in interest payable 9,423 196,546
Other operating activities (61,130) 25,336
------------ ------------
Net cash provided by operating activities 689,963 101,792
------------ ------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (6,594,906) (4,496,563)
Proceeds from maturities of securities available-for-sale 3,496,084 499,602
Net (increase) decrease in Federal funds sold (3,910,000) 6,960,000
Net increase in loans (19,853,630) (22,569,394)
Purchase of equipment (93,225) (590,393)
Purchase of life insurance policies (933,000) --
------------ ------------
Net cash used in investing activities (27,888,677) (20,196,748)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 28,776,315 20,735,885
Proceeds from exercise of stock options 15,000 --
------------ ------------
Net cash provided by financing activities 28,791,315 20,735,885
------------ ------------
Net increase in cash and due from banks 1,592,601 640,929
Cash and due from banks at beginning of year 1,600,046 959,117
------------ ------------
Cash and due from banks at end of year $ 3,192,647 $ 1,600,046
============ ============
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 1,494,911 $ 439,703
Income taxes $ 80,000 $ --
NONCASH TRANSACTION
Unrealized (gains) losses on securities available-for-sale $ 270,349 $ (11,559)
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
42
<PAGE> 45
GBC BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
GBC Bancorp, Inc. (the "Company") is a bank holding company whose
business is conducted by its wholly-owned subsidiary, Gwinnett Banking
Company (the "Bank"). The Bank is a commercial bank located in
Lawrenceville, Gwinnett County, Georgia. The Bank provides a full range
of banking services in its primary market area of Gwinnett County and
surrounding counties.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its subsidiary. Significant intercompany transactions and
accounts are eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of
the balance sheet date and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Material estimates that are particularly susceptible
to significant change in the near term relate to the determination of
the allowance for loan losses and deferred tax assets.
CASH AND DUE FROM BANKS
Cash on hand, cash items in process of collection, and amounts due from
banks are included in cash and due from banks.
The Company maintains amounts due from banks which, at times, may
exceed Federally insured limits. The Company has not experienced any
losses in such accounts.
43
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITIES
Securities are classified based on management's intention on the date
of purchase. Securities which management has the intent and ability to
hold to maturity would be classified as held-to-maturity and recorded
at amortized cost. Currently, all securities are classified as
available-for-sale and recorded at fair value with net unrealized gains
and losses reported in other comprehensive income.
Interest and dividends on securities, including amortization of
premiums and accretion of discounts, are included in interest income.
Realized gains and losses from the sale of securities are determined
using the specific identification method.
LOANS
Loans are reported at their outstanding principal balances less
deferred fees and the allowance for loan losses. Interest income is
accrued based on the principal balance outstanding.
Nonrefundable loan fees and costs incurred for loans are deferred and
recognized in income over the estimated life of the loans.
The allowance for loan losses is maintained at a level that management
believes to be adequate to absorb potential losses in the loan
portfolio. Loan losses are charged against the allowance when
management believes the uncollectibility of a loan is confirmed.
Subsequent recoveries are credited to the allowance. Management's
determination of the adequacy of the allowance is based on an
evaluation of the portfolio, past loan loss experience, current
economic conditions, volume, growth, composition of the loan portfolio,
and other risks inherent in the portfolio. This evaluation is
inherently subjective as it requires material estimates that are
susceptible to significant change including the amounts and timing of
future cash flows expected to be received on impaired loans. In
addition, regulatory agencies, as an integral part of their examination
process, will periodically review the Company's allowance for loan
losses, and may require the Company to record additions to the
allowance based on their judgment about information available to them
at the time of their examinations.
The accrual of interest on loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they become
due. When accrual of interest is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only
to the extent cash payments are received.
44
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS (CONTINUED)
A loan is impaired when it is probable the Company will be unable to
collect all principal and interest payments due in accordance with the
contractual terms of the loan agreement. Individually identified
impaired loans are measured based on the present value of payments
expected to be received, using the contractual loan rate as the
discount rate. Alternatively, measurement may be based on observable
market prices or, for loans that are solely dependent on the collateral
for repayment, measurement may be based on the fair value of the
collateral. If the recorded investment in the impaired loan exceeds the
measure of fair value, a valuation allowance is established as a
component of the allowance for loan losses. Changes to the valuation
allowance are recorded as a component of the provision for loan losses.
EQUIPMENT
Equipment is carried at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over
the estimated useful lives of the assets.
INCOME TAXES
Income tax expense consists of current and deferred taxes. Current
income tax provisions approximate taxes to be paid or refunded for the
applicable year. Deferred income tax assets and liabilities are
determined using the balance sheet method. Under this method, the net
deferred tax asset or liability is determined based on the tax effects
of the differences between the book and tax bases of the various
balance sheet assets and liabilities and gives current recognition to
changes in tax rates and laws.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences will be realized.
A valuation allowance is recorded for those deferred tax items for
which it is more likely than not that realization will not occur in the
near term.
The Company and the Bank file a consolidated income tax return. Each
entity provides for income taxes based on its contribution to income
taxes (benefits) of the consolidated group.
45
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSSES) PER COMMON SHARE
Basic earnings (losses) per common share are computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding. Diluted earnings (losses) per share are computed by
dividing net income (loss) by the sum of the weighted-average number of
shares of common stock outstanding and potential common shares.
Potential common shares consist of stock options.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE
In April of 1998, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start Up
Activities". SOP 98-5 requires that costs of start-up activities and
organization costs be expensed as incurred. SOP 98-5 became effective
for financial statements for fiscal years beginning after December 15,
1998. However, early adoption was encouraged for fiscal years in which
financial statements had not been issued. During 1998, the Company
wrote off $166,884 of unamortized organization costs upon adoption of
SOP 98-5. Prior to the adoption of SOP 98-5, the Company was amortizing
these costs over a five year period.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards ("SFAS") No. 130,
("Reporting Comprehensive Income"), describes comprehensive income as
the total of all components of comprehensive income, including net
income. Other comprehensive income refers to revenues, expenses, gains
and losses that under generally accepted accounting principles are
included in comprehensive income but excluded from net income.
Currently, the Company's other comprehensive income consists of
unrealized gains and losses on available-for-sale securities.
RECLASSIFICATIONS
Certain items of other expenses in the statement of operations for the
year ended December 31, 1998 have been reclassified to be consistent
with classifications adopted for the year ended December 31, 1999.
46
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". The
effective date of this statement has been deferred by SFAS No. 137
until fiscal years beginning after June 15, 2000. However, the
statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. The Company expects to adopt this statement
effective January 1, 2001. SFAS No. 133 requires the Company to
recognize all derivatives as either assets or liabilities in the
balance sheet at fair value. For derivatives that are not designated as
hedges, the gain or loss must be recognized in earnings in the period
of change. For derivatives that are designated as hedges, changes in
the fair value of the hedged assets, liabilities, or firm commitments
must be recognized in earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings, depending on
the nature of the hedge. The ineffective portion of a derivative's
change in fair value must be recognized in earnings immediately.
Management does not believe the adoption of SFAS No. 133 will have a
significant effect on the Company's earnings or financial position.
There are no other recent accounting pronouncements that have had, or
are expected to have, a material effect on the Company's financial
statements.
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
DECEMBER 31, 1999:
U.S. GOVERNMENT AND
AGENCY SECURITIES $ 7,095,783 -- $ (258,790) $ 6,836,993
=========== ========== =========== ===========
SECURITIES AVAILABLE-FOR-SALE
DECEMBER 31, 1998:
U.S. GOVERNMENT AND
AGENCY SECURITIES $ 3,996,961 $ 11,559 $ -- $ 4,008,520
=========== ========== =========== ===========
</TABLE>
47
<PAGE> 50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SECURITIES (CONTINUED)
The amortized cost and fair value of securities as of December 31, 1999
by contractual maturity are shown below.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due from one year to five years $ 4,095,783 $ 3,930,526
Due from five years to ten years 3,000,000 2,906,447
----------- ------------
$ 7,095,783 $ 6,836,993
=========== ============
</TABLE>
Securities with a carrying value of $486,565 and $500,000 at December
31, 1999 and 1998, respectively, were pledged to secure public deposits
and for other purposes.
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
Commercial $ 8,662,176 $ 7,275,141
Commercial loans secured by real estate 8,384,203 1,606,074
Construction loans secured by real estate 22,850,298 13,307,286
Consumer installment and other 4,536,847 2,361,648
------------- ------------
44,433,524 24,550,149
Deferred fees (147,732) (110,286)
Allowance for loan losses (674,143) (372,683)
------------- ------------
Loans, net $ 43,611,649 $ 24,067,180
============= ============
</TABLE>
48
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
BALANCE, BEGINNING OF YEAR $ 372,683 $ 28,696
Provision for loan losses 309,161 343,987
Loans charged off (7,701) --
Recoveries of loans previously charged off -- --
-------------- ---------------
BALANCE, END OF YEAR $ 674,143 $ 372,683
============== ===============
</TABLE>
The total recorded investment in impaired loans was $63,097 at
December 31, 1999. There were no impaired loans that had related
allowances for loan losses determined in accordance with SFAS No. 114,
("Accounting by Creditors for Impairment of a Loan"), at December 31,
1999. The average recorded investment in impaired loans for 1999 was
$56,631. Interest income recognized on impaired loans for cash payments
received was not material for the year ended 1999. Management had
identified no amounts of impaired loans in 1998.
The Company has granted loans to certain directors, executive
officers, and their related entities. The interest rates on these loans
were substantially the same as rates prevailing at the time of the
transaction and repayment terms are customary for the type of loan
involved. Changes in related party loans for the year ended December
31, 1999 are as follows:
<TABLE>
<S> <C>
BALANCE, BEGINNING OF YEAR $ 2,285,643
Advances 2,330,778
Repayments (1,360,092)
----------------
BALANCE, END OF YEAR $ 3,256,329
================
</TABLE>
NOTE 4. EQUIPMENT
Equipment is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1999 1998
------------- --------------
<S> <C> <C>
Equipment $ 827,937 $ 734,712
Accumulated depreciation (336,309) (122,546)
------------- --------------
$ 491,628 $ 612,166
============= ==============
</TABLE>
49
<PAGE> 52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. DEPOSITS
The scheduled maturities of time deposits at December 31, 1999 are as
follows:
<TABLE>
<S> <C>
2000 $ 28,908,361
2001 4,443,035
2002 148,418
2003 723,875
----------------
$ 34,223,689
================
</TABLE>
The Company had related party deposits of $2,549,876 and $2,134,156 at
December 31, 1999 and 1998, respectively.
NOTE 6. DEFERRED COMPENSATION PLAN
In 1999, the Company established a deferred compensation plan providing
for death and retirement benefits for its directors and executive
officers. The estimated amounts to be paid under the compensation plan
have been funded through the purchase of life insurance policies on the
directors and executive officers. The balance of the policy cash
surrender values included in other assets at December 31, 1999 is
$935,494. Income recognized on the policies amounted to $2,494 for the
year ended December 31, 1999. There was no deferred compensation
liability or expense recognized as of and for the year ended December
31, 1999.
NOTE 7. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Current $ 175,471 $ (65,289)
Deferred (31,629) (107,012)
Change in valuation allowance (143,842) 172,301
--------------- ---------------
Income tax expense $ -- $ --
=============== ===============
</TABLE>
50
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES (CONTINUED)
The Company's income tax expense differs from the amounts computed by
applying the Federal income tax statutory rates to income before income
taxes. A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1999 1998
--------------------------- --------------------------
AMOUNT PERCENT AMOUNT PERCENT
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income taxes at statutory rate $ 151,297 34% $ (172,641) (34)%
Change in valuation allowance (143,842) (32) 172,301 34
(7,455) (2) 340 --
---------- ---------- ---------- ----------
Other $ -- --% $ -- --%
========== ========== ========== ==========
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves $ 175,168 $ 88,310
Loan fees 50,229 37,497
Preopening and organization expenses 181,382 245,344
Net operating loss carryforward -- 125,522
Securities available-for-sale 87,988 --
Other -- 102
--------- ---------
494,767 496,775
Valuation allowance (431,434) (483,358)
--------- ---------
63,333 13,417
--------- ---------
Deferred tax liabilities:
Depreciation 13,384 9,487
Loan loss reserves -- --
Securities available-for-sale -- 3,930
--------- ---------
13,384 13,417
--------- ---------
Net deferred tax assets $ 49,949 $ --
========= =========
</TABLE>
51
<PAGE> 54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. RELATED PARTY TRANSACTIONS AND LEASES
The Company leases its main office banking facilities under a
noncancelable operating lease agreement from GBC Properties, LLC, a
partnership formed by the organizers of the Company. The lease term is
for fifteen years with the monthly rental payment adjusting every fifth
year for changes in the Consumer Price Index. The lease agreement also
requires the Company to pay normal operating and occupancy expenses of
the facilities. The total minimum rental commitment under this lease at
December 31, 1999 is due as follows:
<TABLE>
<S> <C>
During the next five years $ 1,432,980
During the remaining term of the lease 2,865,960
--------------
$ 4,298,940
==============
</TABLE>
Total rental expense is summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998
--------- ---------
<S> <C> <C>
GBC Properties, LLC $ 238,830 $ 59,708
Other third parties -- 58,293
--------- ---------
$ 238,830 $ 118,001
========= =========
</TABLE>
NOTE 9. STOCK OPTIONS
The Company has reserved 180,000 shares of common stock for
issuance to key employees and directors under an incentive stock option
plan. The options granted are exercisable at a price of $10 and expire
ten years from the grant date.
52
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. STOCK OPTIONS (CONTINUED)
Other pertinent information related to the options is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1999 1998
------------------------- -------------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE EXERCISE
NUMBER PRICE NUMBER PRICE
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Under option, beginning of year 60,000 $ 10.00 -- $ --
Granted 45,000 10.00 60,000 10.00
Exercised (1,500) 10.00 -- --
Terminated --------- -- -- --
----------
Under option and exercisable, end of year 103,500 10.00 60,000 10.00
========= ==========
Weighted average remaining contractual life 9 10
========= ==========
Weighted average fair value of
options granted during the year $ 4.86 $ 3.97
========= ==========
</TABLE>
As permitted by SFAS No. 123, ("Accounting for Stock-Based
Compensation"), the Company recognizes compensation cost for
stock-based employee compensation awards in accordance with APB Opinion
No. 25, ("Accounting for Stock Issued to Employees"). As allowed by APB
Opinion No. 25, the Company recognized no compensation cost for
stock-based employee compensation awards for the years ended December
31, 1999 and 1998. If the Company had recognized compensation cost in
accordance with SFAS No. 123, net income (loss) and earnings (losses)
per share would have changed as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
---------------------------------
BASIC AND
DILUTED EARNINGS
NET INCOME PER SHARE
---------- ----------------
<S> <C> <C>
As reported $ 444,990 $ 0.47
Stock-based compensation,
net of related tax effect (144,382) (0.15)
--------- ---------
As adjusted $ 300,608 $ 0.32
========= =========
</TABLE>
53
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. STOCK OPTIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
------------------------------
BASIC AND
DILUTED LOSSES
NET LOSS PER SHARE
---------- --------------
<S> <C> <C>
As reported $ (507,768) $ (0.53)
Stock-based compensation,
net of related tax effect (157,145) (0.16)
---------- --------------
As adjusted $ (664,913) $ (0.69)
========== ==============
</TABLE>
The fair value of the options granted during the year was based upon
the Black-Scholes method of valuing options using the following
weighted-average assumptions:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1999 1998
--------------- ------------------
<S> <C> <C>
Risk-free interest rate 6.77% 5.12%
Expected life of the options 10 years 10 years
Expected dividends (as a percent of the fair value of the stock) 0% 0%
Volatility 0% 0%
</TABLE>
NOTE 10. EARNINGS (LOSSES) PER COMMON SHARE
The following is a reconciliation of net income (loss) and
weighted-average shares outstanding used in determining basic and
diluted earnings (losses) per common share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-------------------------------------------
NET WEIGHTED-AVERAGE PER SHARE
INCOME SHARES AMOUNT
----------- ----------- --------
<S> <C> <C> <C>
BASIC EARNINGS PER COMMON SHARE $ 444,990 950,298 $ 0.47
========
EFFECT OF DILUTIVE SECURITIES
Stock options -- --
----------- -----------
DILUTED EARNINGS PER COMMON SHARE $ 444,990 950,298 $ 0.47
=========== =========== ========
</TABLE>
54
<PAGE> 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. EARNINGS (LOSSES) PER COMMON SHARE (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------
NET WEIGHTED-AVERAGE PER SHARE
LOSS SHARES AMOUNT
--------- ---------------- ----------
<S> <C> <C> <C>
BASIC LOSSES PER COMMON SHARE $(507,768) 950,080 $ (0.53)
=========
EFFECT OF DILUTIVE SECURITIES
Stock options -- --
--------- ---------
DILUTED LOSSES PER COMMON SHARE $(507,768) 950,080 $ (0.53)
========= ========= =========
</TABLE>
Because the exercise price of the stock options approximate the fair
value of the Company's common stock, the stock options have no dilutive
effect.
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into
off-balance-sheet financial instruments which are not reflected in the
financial statements. These financial instruments include commitments
to extend credit and standby letters of credit. Such financial
instruments are included in the financial statements when funds are
disbursed or the instruments become payable. These instruments involve,
to varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. A summary of the Company's commitments is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
------------- -------------
<S> <C> <C>
Letters of credit $ 704,246 $ 26,605
Commitments to extend credit 21,739,731 16,080,774
------------ -------------
$ 22,443,977 $ 16,107,379
============ =============
</TABLE>
55
<PAGE> 58
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Commitments to extend credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many
of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The credit risk involved in issuing these financial
instruments is essentially the same as that involved in extending loans
to customers. The Company evaluates each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on
management's credit evaluation of the customer. Collateral held varies
but may include real estate and improvements, marketable securities,
accounts receivable, inventory, equipment, and personal property.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loans to
customers. Collateral held varies as specified above and is required in
instances which the Company deems necessary.
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management of the Company, any
liability resulting from such proceedings would not have a material
effect on the Company's financial statements.
NOTE 12. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and consumer
loans to customers in Gwinnett County and surrounding counties. The
ability of the majority of the Company's customers to honor their
contractual loan obligations is dependent on the economy in these
areas.
Seventy percent the Company's loan portfolio is concentrated in loans
secured by real estate, of which a substantial portion is secured by
real estate in the Company's primary market area. Accordingly, the
ultimate collectibility of the loan portfolio is susceptible to changes
in market conditions in the Company's primary market area. The other
significant concentrations of credit by type of loan are set forth in
Note 3.
The Company, as a matter of policy, does not generally extend credit to
any single borrower or group of related borrowers in excess of 25% of
the lesser of statutory capital or net assets as defined, or
approximately $2,025,000.
56
<PAGE> 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends
that may be declared without prior regulatory approval. At December 31,
1999, no dividends could be declared without regulatory approval.
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and Bank must meet
specific capital guidelines that involve quantitative measures of the
assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors. Prompt
corrective provisions are not applicable to bank holding companies.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts
and ratios of Total and Tier I capital to risk-weighted assets and of
Tier I capital to average assets. Management believes, as of December
31, 1999, the Company and the Bank met all capital adequacy
requirements to which they are subject.
57
<PAGE> 60
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. REGULATORY MATTERS (CONTINUED)
As of December 31, 1999, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum Total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth
in the following table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
-------------------- ---------------- -------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
-------- -------- ------- ------- -------- -------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1999:
TOTAL CAPITAL TO RISK WEIGHTED ASSETS:
CONSOLIDATED $9,094 19.28% $3,773 8% $ N/A N/A
BANK $8,785 18.63% $3,773 8% $4,716 10%
TIER I CAPITAL TO RISK WEIGHTED ASSETS:
CONSOLIDATED $8,503 18.03% $1,887 4% $ N/A N/A
BANK $8,194 17.37% $1,887 4% $2,830 6%
TIER I CAPITAL TO AVERAGE ASSETS:
CONSOLIDATED $8,503 14.98% $2,271 4% $ N/A N/A
BANK $8,194 14.43% $2,271 4% $2,839 5%
December 31, 1998:
Total Capital to Risk Weighted Assets:
Consolidated $8,365 32.50% $2,060 8% $ N/A N/A
Bank $8,040 31.24% $2,060 8% $2,574 10%
Tier I Capital to Risk Weighted Assets:
Consolidated $8,043 31.25% $1,030 4% $ N/A N/A
Bank $7,718 29.99% $1,030 4% $1,545 6%
Tier I Capital to Average Assets:
Consolidated $8,043 25.77% $1,249 4% $ N/A N/A
Bank $7,718 24.73% $1,249 4% $1,561 5%
</TABLE>
58
<PAGE> 61
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments. In
cases where quoted market prices are not available, fair values are
based on estimates using discounted cash flow models. Those models are
significantly affected by the assumptions used, including the discount
rates and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. The use of different
methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1999
and 1998. Such amounts have not been revalued for purposes of these
financial statements since those dates and, therefore, current
estimates of fair value may differ significantly from the amounts
presented herein.
CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD:
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
SECURITIES AVAILABLE-FOR-SALE:
Fair values for securities are based on available quoted market prices.
LOANS:
For variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. For
other loans, the fair values are estimated using discounted cash flow
models, using current market interest rates offered for loans with
similar terms to borrowers of similar credit quality. Fair values for
impaired loans are estimated using discounted cash flow models or based
on the fair value of the underlying collateral.
DEPOSITS:
The carrying amounts of demand deposits, savings deposits, and
variable-rate certificates of deposit approximate their fair values.
Fair values for fixed-rate certificates of deposit are estimated using
discounted cash flow models, using current market interest rates
offered on certificates with similar remaining maturities.
59
<PAGE> 62
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
ACCRUED INTEREST:
The carrying amounts of accrued interest approximate their fair values.
OFF-BALANCE SHEET INSTRUMENTS:
The fair values of the Company's off-balance sheet financial
instruments are based on fees charged to enter into similar agreements.
However, commitments to extend credit and standby letters of credit do
not represent a significant value to the Company until such commitments
are funded. The Company has determined that these instruments do not
have a distinguishable fair value and no fair value has been assigned.
The carrying amounts and estimated fair values of the Company's
financial instruments were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999 December 31, 1998
-------------------------- -------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash, due from banks,
and Federal funds sold $ 9,842,647 $ 9,842,647 $ 4,340,046 $ 4,340,046
Securities available-for-sale 6,836,993 6,836,993 4,008,520 4,008,520
Loans 43,611,649 44,248,307 24,067,180 24,540,036
Accrued interest receivable 434,485 434,485 258,190 258,190
FINANCIAL LIABILITIES:
Deposits 53,783,842 54,104,299 25,007,527 25,084,466
Accrued interest payable 210,922 210,922 201,499 201,499
</TABLE>
60
<PAGE> 63
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. SUPPLEMENTAL FINANCIAL DATA
Components of other operating income and expenses in excess of 1% of
total revenue are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1999 1998
--------- ---------
<S> <C> <C>
Other operating income:
Mortgage origination fees $ 62,790 $ 39,793
Other operating expenses:
Telephone 46,547 31,202
Office supplies 37,556 49,385
Professional and consulting 116,048 107,274
Data processing 79,485 67,152
</TABLE>
NOTE 16. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets,
statements of operations and cash flows of GBC Bancorp, Inc., as of and
for the years ended December 31, 1999 and 1998
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Cash $ 308,287 $ 329,372
Investment in subsidiary 7,935,620 7,729,894
---------- ----------
Total assets $8,243,907 $8,059,266
========== ==========
LIABILITIES $ -- $ 5,000
STOCKHOLDERS' EQUITY 8,243,907 8,054,266
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $8,243,907 $8,059,266
========== ==========
</TABLE>
61
<PAGE> 64
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
EXPENSES
Write-off of organization costs $ -- $ 72,514
Other expenses 31,085 36,749
---------- ----------
TOTAL EXPENSES 31,085 109,263
---------- ----------
LOSS BEFORE EQUITY IN UNDISTRIBUTED
EARNINGS (LOSS) OF SUBSIDIARY (31,085) (109,263)
EQUITY IN UNDISTRIBUTED EARNINGS (LOSS)
OF SUBSIDIARY 476,075 (398,505)
---------- ----------
NET INCOME (LOSS) $ 444,990 $ (507,768)
========== ==========
</TABLE>
62
<PAGE> 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 444,990 $ (507,768)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Write-off of organization costs -- 72,514
Equity in undistributed (earnings) loss of subsidiary (476,075) 398,505
Other operating activities (5,000) 5,000
---------- ----------
Net cash used in operating activities (36,085) (31,749)
---------- ----------
FINANCING ACTIVITIES
Proceeds from exercise of stock options 15,000 --
---------- ----------
Net cash provided by financing activities 15,000 --
---------- ----------
Net decrease in cash (21,085) (31,749)
Cash at beginning of year 329,372 361,121
---------- ----------
Cash at end of year $ 308,287 $ 329,372
========== ==========
</TABLE>
63
<PAGE> 66
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth the current members our Board of
Directors and the Board of Directors of the Bank, our senior and executive
officers and the senior executive officers of the Bank (a) their names,
addresses and ages at December 31, 1999, (b) the positions they hold, if any,
and (c) the year first elected as a Director.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED AS
NAME AGE POSITION HELD A DIRECTOR
------------ --- ------------- ----------
<S> <C> <C> <C>
Larry D. Key 54 President, Chief Executive Officer 1996
and Chairman of the Company and the Bank
John T. Hopkins III 58 Executive Vice President, Chief
Financial Officer, Secretary and
Treasurer of the Company and the Bank
Michael A. Roy 55 Executive Vice President and Chief
Credit Officer of the Bank
Paul C. Birkhead 55 Senior Vice President and
Commercial Loan Officer of the Bank
Michael L. Couch 39 Senior Vice President of the Bank
Marcia N. Watkins 54 Senior Vice President and Chief
Operations Officer of the Bank
James B. Ballard 55 Director of the Company and the Bank 1996
Jerry M. Boles 59 Director of the Company and the Bank 1996
</TABLE>
64
<PAGE> 67
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED AS
NAME AGE POSITION HELD A DIRECTOR
------------ --- ------------- ----------
<S> <C> <C> <C>
W. H. Britt 61 Director of the Company and the Bank 1996
Richard F. Combs 52 Director of the Company and the Bank 1997
William G. Hayes 61 Director of the Company and the Bank 1997
Douglas A. Langley 42 Director of the Company and the Bank 1997
Norris J. Nash 72 Director of the Company and the Bank 1996
J. Joseph Powell 56 Director of the Company and the Bank 1997
William S. Stanton, Jr. 45 Director of the Company and the Bank 1996
</TABLE>
BIOGRAPHIES
JAMES B. BALLARD has been a member of our Board of Directors since
1996. Mr. Ballard was the Chief Executive Officer, founder, and a member of the
board of directors from 1972 until January 1996 of Spartan Constructors, Inc.
Mr. Ballard currently serves as President and Chief Executive Officer of The
Spartan Group, an industrial contractor serving the continental United States.
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 our organizing group. 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 a member of our Board of Directors since 1996.
Mr. 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 a member of our Board of Directors since 1996.
Mr. Britt has been an active businessman in the Gwinnett County area, since
1975. He is the founder and owner of
65
<PAGE> 68
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.
RICHARD F. COMBS has been a member of our Board of Directors since
1997. Mr. Combs is the Founder and President of Pureflow Ultraviolet, Inc., a
company specializing in ultraviolet disinfecting equipment, parts and services
to industrial clients since 1978.
MICHAEL L. COUCH has served as Senior Vice President of the Bank since
February 1998. Prior to February 1998, Mr. Couch served as Senior Vice
President of Construction Lending for Colonial Bank. Colonial Bank acquired
Commercial Bank of Georgia in 1996. Mr. Couch served as Senior Vice President
of Commercial Bank of Georgia from 1988 until the merger with Colonial Bank in
1996.
WILLIAM G. HAYES has been a member of our Board of Directors since
1997. Mr. Hayes is President and Chairman of Hayes, James and Associates, an
engineering and survey company based in Duluth, Georgia. Mr. Hayes was a
director of the First National Bank of Gwinnett from 1984 to 1986.
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 our organizing group. Mr. Hopkins was Chief Financial 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 has been a member of our Board of Directors since 1996.
Mr. 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 our organizing group and the Bank's 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.
DOUGLAS A. LANGLEY has been a member of our Board of Directors since
1997. Mr. Langley is the current managing partner of Ashworth and Associates, a
CPA firm in Tucker and Lawrenceville, Georgia. He has been a member of the firm
since 1977.
66
<PAGE> 69
NORRIS J. NASH has been a member of our Board of Directors since 1996.
Mr. 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.
J. JOSEPH POWELL has been a member of our Board of Directors since
1997. Mr. Powell has been President of Joe Powell and Associates, Inc. since
1971 representing Liebert Corporation, provider of mechanical equipment for
computer operations.
MICHAEL A. ROY has served as an Assistant Director and a Field Manager
with the Office of Thrift Supervision in Atlanta, Georgia, from 1988 through
1997 when he resigned to join the Bank. Prior to that time, he was Vice
President and Senior Lender at Capital-Union Savings, FA in Baton Rouge,
Louisiana for three years and was Executive Vice President and Director at
Citizens Savings and Loan Association in Baton Rouge, Louisiana for eight
years.
WILLIAM S. STANTON, JR. has been a member of our Board of Directors
since 1996. Mr. 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 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.
We are not subject to filings required by Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). We are filing this
Annual Report on Form 10-KSB pursuant to Section 15(d) of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION
The following table provides information with respect to the annual
compensation for services in all capacities to the Company for 1997, 1998 and
1999 for the Chief Executive Officer. No other officer of the Company earned
more than $100,000 in 1999.
67
<PAGE> 70
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION AWARDS
COMPENSATION (1) -------------------
NAME AND ---------------- SECURITIES
PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS
------------------ ---- -------- ----- -------------------
<S> <C> <C> <C> <C>
Larry D. Key 1999 $130,000 -- 10,000
President, Chief Executive Officer 1998 $130,000 -- 6,000
and Chairman 1997 $130,000 -- --
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange
Commission, the compensation set forth in the table does not include
medical, group life insurance or other benefits which are available to
all salaried employees of the Company and certain perquisites and
other benefits, securities or property which do not exceed the lesser
of $50,000 or 10% of the Chief Executive Officer's salary and bonus
shown in the table.
STOCK OPTIONS GRANTS AND YEAR END VALUES
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE OF
UNDERLYING OPTIONS TO EMPLOYEES BASE PRICE
NAME GRANTED(1) IN FISCAL YEAR PER SHARE EXPIRATION DATE
---- -------------------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C>
Larry D. Key 10,000 22.2% $10.00 9/20/09
</TABLE>
- ---------------
(1) Options granted to Mr. Key were incentive options and were granted at
an exercise price of not less than fair market value on the date of
grant, as determined by the Board of Directors. The options granted to
Mr. Key are fully vested and expire 10 years after the date of grant.
No options were exercised by Mr. Key in 1999.
AGGREGATES/YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISABLE
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME OPTIONS AT YEAR-END(1) AT YEAR-END(1)
---- ---------------------- ---------------------
<S> <C> <C>
Larry D. Key 16,000 $40,000
</TABLE>
68
<PAGE> 71
- --------------------
(1) There was no public trading market for the common stock as of December
31, 1999. Accordingly, these values have been calculated by
determining the difference between the estimated fair market value of
our common stock underlying the option as of December 31, 1999 ($12.50
per share) and the exercise price per share payable upon exercise of
such options ($10.00 per share). In determining the fair market value
of our common stock, the Board of Directors considered various
factors, including our financial condition and business prospects, our
operating results and the absence of a market for our common stock.
All options granted to Mr. Key are currently exercisable.
EMPLOYEE BENEFIT PLANS
1998 Stock Option Plan. On October 19, 1999, our shareholders adopted
the 1998 Option Plan of GBC Bancorp, Inc. (the "1998 Option Plan"). Under the
1998 Option Plan, the Board of Directors, or the Compensation Committee of the
Board of Directors, has the flexibility to determine the type and amount of
awards to be granted to eligible participants. The 1998 Option Plan is intended
to secure for us and our shareholders the benefits arising from ownership of
the common stock by individuals employed or retained by us or the Bank who will
be responsible for the future growth of the enterprise. The 1998 Option Plan is
designed to help attract and retain superior personnel for positions of
substantial responsibility with us and the Bank (including advisory
relationships where appropriate), and to provide individuals with an additional
incentive to contribute to our success.
The Board or the Compensation Committee may make the following types
of grants under the 1998 Option Plan, each of which will be an "Award":
- incentive stock options ("ISOs") and
- nonqualified stock options ("NSOs").
Our or the Bank's officers, key employees, employee directors,
consultants and other independent contractors or agents who are responsible for
or contribute to the management growth or profitability of our business will be
eligible for selection by our Board of Directors or the Compensation Committee
to participate in the 1998 Option Plan, provided, however, that ISOs may be
granted only to a person employed by us or the Bank.
The Georgia Department has placed certain restrictions on the award of
options under the 1998 Option Plan. In particular, any option granted under the
1998 Option Plan may be subject to accelerated exercise or forfeiture if the
Bank's Tier 1 leverage capital falls below certain minimum regulatory
requirements. Additionally, since the Georgia Department must grant prior
approval to any shareholder (including the shareholder's spouse and children)
before a shareholder may own more than twenty percent (20%) of our outstanding
stock, the exercise of options may be limited by the Georgia Department. These
restrictions may be lifted in the future by the Georgia Department.
We have authorized and reserved for issuance an aggregate of 180,000
shares of our common stock under the 1998 Option Plan. As of March 30, 2000 we
have granted options to
69
<PAGE> 72
purchase 105,000 shares of our common stock. The shares of common stock
issuable under the 1998 Option Plan are authorized but unissued shares. If any
of the Awards granted under the 1998 Option Plan expire, terminate or are
forfeited for any reason before they have been exercised, vested or issued in
full, the unused shares subject to those expired, terminated or forfeited
Awards will again be available for purposes of the 1998 Option Plan. The 1998
Option Plan will continue in effect until December 14, 2008 unless sooner
terminated under the general provisions of the 1998 Option Plan.
The 1998 Option Plan is administered by the Board of Directors or upon
its delegation to the Compensation Committee of the Board of Directors, by the
Compensation Committee, consisting of not less than two directors who are
"non-employee directors" (within the meaning of SEC Rule 16b-3 promulgated
pursuant to the Securities Exchange Act of 1934, as amended). Subject to the
foregoing limitations, as applicable, the Board of Directors may from time to
time remove members from the Compensation Committee, fill all vacancies on the
Compensation Committee, however caused, and may select one of the members of
the Compensation Committee as its chairman. The Compensation Committee may hold
meetings at such times and places as they may determine, will keep minutes of
their meetings, and may adopt, amend and revoke rules and procedures in
accordance with the terms of the 1998 Option Plan.
COMPENSATION OF DIRECTORS
The Conditions provide that the directors and committee members of the
Bank will not receive any fees, bonuses, or other payments until the Bank earns
a cumulative profit.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Stock as of March 30, 2000, by each director and our Chief Executive Officer,
and all of our directors and our Chief Executive Officer as a group. No person
known by us beneficially owns more than 5% of our common stock. The information
in this table was based in part on information supplied by the named
individuals.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK BENEFICIALLY OWNED(1) OWNERSHIP
- ------------------------------------ --------------------------- ----------
<S> <C> <C>
Larry D. Key (2)
3300 Jim Moore Road
Dacula, Georgia 30019 32,510 3.08%
James B. Ballard (3)
2400 Bagley Road
Cumming, Georgia 30040 43,406 4.11%
</TABLE>
70
<PAGE> 73
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK BENEFICIALLY OWNED(1) OWNERSHIP
- ------------------------------------ --------------------------- ----------
<S> <C> <C>
Jerry M. Boles (4)
Boles Parts Supply, Inc.
1057 Boulevard, S.E.
Atlanta, Georgia 30312 31,700 3.00%
W. H. Britt (5)
W. H. Britt & Associates, Inc.
535 Grayson Parkway
Grayson, Georgia 30221 20,337 1.93%
Richard F. Combs (6)
Pureflow Ultraviolet, Inc.
1750 Spectrum Drive
Lawrenceville, Georgia 30043 24,761 2.35%
William G. Hayes (7)
Hayes, James & Associates
3005 Breckenridge Boulevard, Suite 200
Duluth, Georgia 30096 6,000 *
Douglas A. Langley (8)
Ashworth & Associates
270 Constitution Boulevard
Lawrenceville, Georgia 30045 25,900 2.45%
Norris J. Nash (9)
Gwinnett DeKalb Realty, Inc.
4830 Lawrenceville Highway
Lilburn, Georgia 30047 31,385 2.97%
J. Joseph Powell (10)
Joe Powell & Associates
500 Miller Court
Norcross, Georgia 30071 28,900 2.74%
William S. Stanton, Jr. (11)
Print Direction, Inc.
1455 Oakbrook Drive
Norcross, Georgia 30093 45,110 4.28%
ALL DIRECTORS AND OFFICER AS A GROUP (15 PERSONS) 374,285 35.47%
</TABLE>
71
<PAGE> 74
- ---------------
* Represents less than one percent (1%) of the shares outstanding.
(1) On a fully-diluted basis, except as otherwise indicated, the persons
named in the table have sole voting and investment power with respect
to all shares shown as beneficially owned by them. The information
shown above is based upon information furnished by the named persons
and based upon "beneficial ownership" concepts set forth in rules
promulgated under the Exchange Act. Under such rules, a person is
deemed to be a "beneficial owner" of a security if that person has or
shares "voting power," which includes the power to vote or to direct
the voting of such security, or "investment power," which includes the
power to dispose or to direct the disposition of such security. A
person is also deemed to be a beneficial owner of any security of
which that person has the right to acquire beneficial ownership within
60 days.
(2) Includes options to purchase 16,000 shares of the Company's common
stock.
(3) Includes 5,000 shares owned by Mr. Ballard's son, 5,000 shares owned
by a company that Mr. Ballard controls, and options to purchase 6,700
shares of the Company's common stock.
(4) Includes options to purchase 6,700 shares of the Company's common stock
(5) Includes 1,500 shares owned by Mr. Britt's children and options to
purchase 5,000 shares of the Company's common stock.
(6) Includes 1,000 shares owned by Mr. Combs' wife, and options to
purchase 3,400 shares of the Company's common stock.
(7) Includes 2,500 shares owned by a company that Mr. Hayes controls,
and options to purchase 1,000 shares of the Company's common stock.
(8) Includes 20,000 shares held by the Ashworth & Associates, P.C. Profit
Sharing Plan in which Mr. Langley is the Trustee, and options to
purchase 2,400 shares of the Company's common stock.
(9) Includes 2,500 shares owned by a company that Mr. Nash controls,
and options to purchase 6,700 shares of the Company's common stock.
(10) Includes 1,000 shares owned by Mr. Powell's son, and options to
purchase 3,900 shares of the Company's common stock.
(11) Includes options to purchase 5,700 shares of the Company's common
stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
It is possible that the Bank will have banking and other business
transactions in the ordinary course of business with our directors and officers
and the directors and officers of 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 us.
72
<PAGE> 75
Columbus Bank and Trust Company, The Bankers Bank, Regions Bank and
SunTrust Bank, Atlanta operate as correspondent banks for the Bank
(collectively, the "Correspondents"). The Correspondents provide bank services
such as check clearing, international services, wire transfers and various
additional services for the Bank. The Correspondents also serve the Bank
through purchasing and selling federal funds, purchasing other investments, and
providing short-term lines of credit for the purpose of borrowing and
purchasing federal funds from other institutions.
All of the relationships established with the Correspondents were at
arms-length. There is no affiliation between the Bank and any of its officers
and directors and any of the Correspondents.
On January 1, 2000, the Bank entered into a Lease Agreement with GBC
LLC to lease the banking facility. Most of the members of GBC LLC are our
directors and officers. We believe is as favorable as rates that would be
obtained from an unaffiliated third party.
73
<PAGE> 76
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-B
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1 Articles of Incorporation of the Company, as
amended (filed as Exhibit 3.1 to the
Registration Statement on Form SB-2, as amended
(Registration No. 333-19081)).
3.2 Amended and Restated Bylaws
4.1 Specimen Common Stock Certificate (filed as Exhibit 4.2
to the Registration Statement on Form SB-2, as amended
(Registration No. 333-19081)).
10.1 Escrow Agreement between the Registrant and Columbus
Bank and Trust Company (filed as Exhibit 10.1 to the
Registration Statement on Form SB-2, as amended
(Registration No. 333-19081)).
10.2 Line of Credit Promissory Note in the amount of
$500,000 having Registrant as Maker and Gwinnett
Banking Company GBC LLC as Holder (filed as Exhibit
10.2 to the Registration Statement on Form SB-2, as
amended (Registration No. 333-19081)).
10.3 Provesa, Inc. Data Processing Agreement (filed as
Exhibit 10.3 to the Registration Statement on Form
SB-2, as amended (Registration No. 333-19081)).
10.4 Real Estate Commercial Lease Contract dated as of
January 1, 2000, by and between GBC Properties, LLC
and Gwinnett Banking Company.
21.1 Subsidiaries of the Registrant (filed as Exhibit 21.1 to
the Registration Statement on Form SB-2, as amended
(Registration No. 333-19081)).
27 Financial Data Schedule (for SEC use only).
99.1 Proxy Materials and Proxy for 1999 Annual Shareholders
Meeting
</TABLE>
(b) Reports on Form 8-K filed in the fourth quarter of 1999: None.
74
<PAGE> 77
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(D) OF THE
EXCHANGE ACT BY NON-REPORTING ISSUERS
We have not sent to our security holders any annual report covering
our last fiscal year.
The proxy statement, form of proxy or other proxy soliciting material
with respect to the 1999 annual or other meeting of shareholders is filed
herewith as Exhibit 99.1.
If such report or proxy material is furnished to security holders
subsequent to the filing of this Form 10-KSB, we shall furnish copies of such
material to the Securities and Exchange Commission when it is sent to security
holders.
75
<PAGE> 78
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GBC BANCORP, INC.
By: /s/ Larry D. Key
----------------------------------
Larry D. Key, President and Chief
Executive Officer
Date: March 28, 2000
76
<PAGE> 79
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant in the capacities and on
the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Larry D. Key President, Chief Executive Officer March 28, 2000
- ----------------------------------- and Chairman of the Company and the
Larry D. Key Bank
/s/ John T. Hopkins III Executive Vice President, Chief March 28, 2000
- ----------------------------------- Financial Officer, Secretary and
John T. Hopkins III Treasurer of the Company and the Bank
/s/ James B. Ballard Director of the Company and the Bank March 28, 2000
- -----------------------------------
James B. Ballard
/s/ Jerry M. Boles Director of the Company and the Bank March 28, 2000
- -----------------------------------
Jerry M. Boles
/s/ W. H. Britt Director of the Company and the Bank March 28, 2000
- -----------------------------------
W. H. Britt
/s/ Richard F. Combs Director of the Company and the Bank March 28, 2000
- -----------------------------------
Richard F. Combs
/s/ William G. Hayes Director of the Company and the Bank March 28, 2000
- -----------------------------------
William G. Hayes
/s/ Douglas A. Langley Director of the Company and the Bank March 28, 2000
- -----------------------------------
Douglas A. Langley
/s/ Norris J. Nash Director of the Company and the Bank March 28, 2000
- -----------------------------------
Norris J. Nash
/s/ J. Joseph Powell Director of the Company and the Bank March 28, 2000
- -----------------------------------
J. Joseph Powell
/s/ William S. Stanton, Jr. Director of the Company and the Bank March 28, 2000
- -----------------------------------
William S. Stanton, Jr.
</TABLE>
77
<PAGE> 80
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1 Articles of Incorporation of the Company, as
amended (filed as Exhibit 3.1 to the
Registration Statement on Form SB-2, as amended
(Registration No. 333-19081)).
3.2 Amended and Restated Bylaws of the Company
4.1 Specimen Common Stock Certificate (filed as
Exhibit 4.2 to the Registration Statement on
Form SB-2, as amended (Registration No. 333-
19081)).
4.2 10.1 Escrow Agreement between the Registrant and
Columbus Bank and Trust Company (filed as Exhibit
10.1 to the Registration Statement on Form SB-2, as
amended (Registration No. 333-19081)).
10.2 Line of Credit Promissory Note in the amount of
$500,000 having Registrant as Maker and Gwinnett
Banking Company GBC LLC as Holder (filed as Exhibit
10.2 to the Registration Statement on Form SB-2, as
amended (Registration No. 333-19081)).
10.3 Provesa, Inc. Data Processing Agreement (filed as
Exhibit 10.3 to the Registration Statement on Form
SB-2, as amended (Registration No. 333-19081)).
10.4 Real Estate Commercial Lease Contract dated as of
January 1, 2000, by and between GBC Properties, LLC
and Gwinnett Banking Company.
21.1 Subsidiaries of the Registrant (filed as Exhibit 21.1
to the Registration Statement on Form SB-2, as
amended (Registration No. 333-19081)).
27 Financial Data Schedule.
99.1 Proxy Materials and Proxy for 1999 Annual Shareholders
Meeting
</TABLE>
78
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS OF GBC BANCORP, INC.
<PAGE> 2
AMENDED AND RESTATED BYLAWS
GBC BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE ONE - OFFICE..............................................................................................1
ARTICLE TWO - SHAREHOLDERS' MEETINGS..............................................................................1
2.1 Annual Meeting..................................................................................1
2.2 Special Meetings................................................................................1
2.3 Place...........................................................................................1
2.4 Notice..........................................................................................1
2.5 Quorum..........................................................................................2
2.6 Proxies; Required Vote..........................................................................2
2.7 Presiding Officer and Secretary.................................................................2
2.8 Shareholder List................................................................................2
2.9 Action in Lieu of Meeting.......................................................................2
ARTICLE THREE - DIRECTORS.........................................................................................2
3.1 Management......................................................................................2
3.2 Number of Directors.............................................................................3
3.3 Vacancies.......................................................................................3
3.4 Election of Directors...........................................................................3
3.5 Removal.........................................................................................3
3.6 Resignation.....................................................................................3
3.7 Compensation....................................................................................3
3.8 Honorary and Advisory Directors.................................................................3
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE FOUR - COMMITTEES.........................................................................................4
4.1 Executive Committee.............................................................................4
4.2 Other Committees................................................................................5
4.3 Removal.........................................................................................5
ARTICLE FIVE - MEETINGS OF THE BOARD OF DIRECTORS.................................................................5
5.1 Time and Place..................................................................................5
5.2 Regular Meetings................................................................................5
5.3 Special Meetings................................................................................5
5.4 Content and Waiver of Notice....................................................................5
5.5 Quorum; Participation by Telephone..............................................................6
5.6 Action in Lieu of Meeting.......................................................................6
5.7 Interested Directors and Officers...............................................................6
ARTICLE SIX - OFFICERS, AGENTS AND EMPLOYEES......................................................................7
6.1 General Provisions..............................................................................7
6.2 Powers and Duties of the Chairman of the Board, Directors
and the President...............................................................................7
6.3 Powers and Duties of Vice Presidents............................................................8
6.4 Powers and Duties of the Secretary..............................................................8
6.5 Powers and Duties of the Treasurer..............................................................8
6.6 Appointment, Powers and Duties of Assistant Secretaries.........................................8
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.7 Appointment, Powers and Duties of Assistant Treasurers..........................................8
6.8 Delegation of Duties............................................................................9
ARTICLE SEVEN - CAPITAL STOCK.....................................................................................9
7.1 Certificates....................................................................................9
7.2 Shareholder List...............................................................................10
7.3 Transfer of Shares.............................................................................10
7.4 Record Dates...................................................................................10
7.5 Registered Owner...............................................................................10
7.6 Transfer Agent and Registrar...................................................................10
7.7 Lost Certificates..............................................................................10
7.8 Fractional Shares or Scrip.....................................................................11
ARTICLE EIGHT - BOOKS AND RECORDS; SEAL; ANNUAL STATEMENTS.......................................................11
8.1 Inspection of Books and Records................................................................11
8.2 Seal...........................................................................................12
8.3 Annual Statements..............................................................................12
ARTICLE NINE - INDEMNIFICATION...................................................................................12
9.1 Authority to Indemnify.........................................................................12
9.2 Mandatory Indemnification......................................................................12
9.3 Advances for Expenses..........................................................................13
9.4 Court-ordered Indemnification and Advances for Expenses........................................13
9.5 Determination of Indemnification...............................................................13
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
9.6 Authorization of Indemnification...............................................................13
9.7 Other Rights...................................................................................14
9.8 Insurance......................................................................................14
9.9 Continuation of Expenses.......................................................................14
ARTICLE TEN - NOTICES: WAIVERS OF NOTICE.........................................................................14
10.1 Notices........................................................................................14
10.2 Waivers of Notice..............................................................................15
ARTICLE ELEVEN - EMERGENCY POWERS................................................................................15
11.1 Bylaws.........................................................................................15
11.2 Lines of Succession............................................................................15
11.3 Head Office....................................................................................15
11.4 Period of Effectiveness........................................................................15
11.5 Notices........................................................................................15
11.6 Officers as Directors Pro Tempore..............................................................16
11.7 Liability of Officers, Directors and Agents....................................................16
ARTICLE TWELVE - CHECKS, NOTES, DRAFTS, ETC......................................................................16
ARTICLE THIRTEEN - AMENDMENTS....................................................................................16
</TABLE>
iv
<PAGE> 6
AMENDED AND RESTATED
BYLAWS
OF
GBC BANCORP, INC.
ARTICLE ONE
OFFICES
The Corporation shall at all times maintain its principal office in
Lawrenceville, Georgia, its registered office in the State of Georgia and its
registered agent at that address, but it may have other offices located within
or outside the State of Georgia as the Board of Directors may determine.
ARTICLE TWO
SHAREHOLDERS' MEETING
2.1 Annual Meeting. A meeting of the shareholders of the Corporation
shall be held annually. The annual meeting shall be held at such time and place
and on such date as the Directors shall determine from time to time and as shall
be specified in the notice of the meeting.
2.2 Special Meetings. Special meeting of the shareholders may be called
at any time by the Corporation's Board of Directors, its President, and by the
Corporation upon the written request of any one or more shareholders, owning an
aggregate of not less than twenty-five percent (25%) of the outstanding capital
stock of the Corporation. Special meetings shall beheld at such time and place
and on such dates as shall be specified in the notice of the meeting.
2.3 Place. Annual special meetings of shareholders may beheld within
the State of Georgia.
2.4 Notice. Notice of annual or special shareholders meetings stating
the place, day and hour of the meeting shall be given in writing not less than
ten nor more than sixty days before the date of the meeting, either mailed to
the last known address or personally given to each shareholder. Notice of any
special meeting of shareholders shall state the purpose or purposes for which
the meeting is called. The notice of any meeting at which amendments to or
restatements of the Articles of Incorporation, merger or share exchange of the
Corporation, or the disposition of corporate assets requiring shareholder
approval are to be considered shall state such purpose, and shall further comply
with all requirements of law. Notice of a meeting may be waived by an instrument
in writing executed before or after the meeting. The waiver need not specify the
purpose of the meeting or the business transacted, unless one of the purposes of
the meeting concerns a plan of merger or share exchange, in which event the
waiver shall comply with the further requirements of law concerning such
waivers. Attendance at such meeting in person or by proxy shall constitute a
waiver or notice thereof.
-5-
<PAGE> 7
2.5 Quorum. At all meetings of shareholders a majority of the
outstanding shares of stock shall constitute a quorum for the transaction of
business, and no resolution or business shall be transacted without the
favorable vote of the holders of a majority of the shares represented at the
meeting and entitled to vote. A lesser number may adjourn from day to day, and
shall announce the time and place to which the meeting is adjourned.
2.6 Proxies; Required Vote. At every meeting of the
shareholders, including meetings of shareholders for the election of directors,
any shareholder having the right to vote shall be entitled to vote in person or
by proxy, but no proxy shall be voted after eleven months from its date, unless
said proxy provides for a longer period. Each shareholder shall have one vote
for each share of stock having voting power, registered in his or her name on
the books of the Corporation. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders, except as otherwise
provided by law, by the Articles of Incorporation or by these Bylaws.
2.7 Presiding Officer and Secretary. At every meeting of
shareholders, the Chairman or the President, or, if such officers shall not be
present, then the person appointed by one of them shall preside. The Secretary
or an Assistant Secretary, or if such officers shall not be present, the
appointee of the presiding officer of the meeting, shall act as secretary of the
meeting.
2.8. Shareholder List. The officer or agent having charge of
the stock transfer books of the Corporation shall produce for inspection of any
shareholder at, and continuously during, every meeting of the shareholders, a
complete alphabetical list of shareholders showing the address and share
holdings of each shareholder. If the record of shareholders readily shows such
information, it may be produced in lieu of such a list.
2.9 Action in Lieu of Meeting. Any action to be taken at a
meeting of the shareholders of the Corporation, or any action that may be taken
at a meeting of the shareholders, may be taken without a meeting if consent in
writing setting forth the action so taken shall be signed by those persons who
would be entitled to vote at a meeting those shares having voting power to cast
not less than the minimum number (or numbers, in the case of voting by class) of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote were present and voted.
ARTICLE III
DIRECTORS
3.1 Management. Subject to these Bylaws, or any lawful
agreement between the shareholders, the full and entire management of the
affairs and business of the Corporation shall be vested in the Board of
Directors, which shall have and may exercise all of the powers that may be
exercised or performed by the Corporation.
3.2 Number of Directors. The Board of Directors shall consist
of not less than seven (7) nor more than fifteen (15) members. The number of
Directors may be fixed or
-6-
<PAGE> 8
changed from time to time, within the minimum and maximum, by the shareholders
by the affirmative vote of two-thirds (66-%) of the issued and outstanding
shares of the Corporation entitled to vote in an election of Directors, or by
the Board of Directors by the affirmative vote of two-thirds (66-%) of all
Directors then in office.
3.3 Vacancies. The directors, even though less than a quorum,
may fill any vacancy on the Board of Directors, including a vacancy created by
an increase in the number of directors. Such appointment by the directors shall
continue until the expiration of the term of the director whose place has become
vacant or, in the case of an increase in the number of directors, until the next
meeting of the shareholders.
3.4 Election of Directors. The Directors shall be elected at
each annual shareholders meeting and shall serve for a term of one year and
until their successors are elected or qualified.
3.5 Removal. Any Director may be removed from office, at a
meeting with respect to which notice of such purpose is given (a) without cause,
only upon the affirmative vote of the holders of a majority of the issued and
outstanding shares of the Corporation, and (b) with cause, only upon the
affirmative vote of the holders of a majority of the issued and outstanding
shares of the Corporation represented at the meeting either in person or by
proxy.
3.6 Resignation. Any director may resign at any time either
orally at any meeting of the Board of Directors or by so advising the Chairman
of the Board of Directors or the President or by giving written notice to the
Corporation. A director who resigns may postpone the effectiveness of his or her
resignation to a future date or upon the occurrence of a future event specified
in a written tender of resignation. If no time of effectiveness is specified
therein, a resignation shall be effective upon tender. A vacancy shall be deemed
to exist at the time a resignation is tendered, and the Board of Directors or
the shareholders may, then or thereafter, elect a successor to take office when
the resignation by its terms becomes effective.
3.7 Compensation. Directors may be allowed such compensation
for their services as directors as may from time to time be fixed by resolution
of the Board of Directors.
3.8 Honorary and Advisory Directors. When a director of the
Corporation retires under the retirement policies of the Corporation as
established from time to time by the Board of Directors, such director
automatically shall become an Honorary Director of the Corporation following his
or her retirement. The Board of Directors of the Corporation also may appoint
any individual an Honorary Director, Director Emeritus, or member of any
advisory board established by the Board of Directors. Any individual
automatically becoming an Honorary Director or appointed an Honorary Director,
Director Emeritus, or member of an advisory board as provided by this Section
3.8 may be compensated as provided in Section 3.7, but such individual may not
vote at any meeting of the Board of Directors or be counted in determining a
quorum as provided in Section 5.5 and shall not have any responsibility or be
subject to any liability imposed upon a director, or otherwise be deemed a
director.
-7-
<PAGE> 9
ARTICLE FOUR
COMMITTEES
4.1 Executive Committee.
(a) The Board of Directors may, by resolution adopted
by a majority of the entire Board of Directors, designate an Executive Committee
consisting of one or more directors. Each Executive Committee member shall hold
office until the first meeting of the Board of Directors after the annual
meeting of shareholders and until the member's successor is elected and
qualified, or until the member's death, resignation or removal, or until the
member shall cease to be a director.
(b) During the intervals between the meetings of the
Board of Directors, the Executive Committee may exercise all the authority of
the Board of Directors; provided, however, that the Executive Committee shall
not have the power to amend or repeal any resolution of the Board of Directors
that by its terms shall not be subject to amendment or repeal by the Executive
Committee, and the Executive Committee shall not have the authority of the Board
of Directors in reference to (i) the amendment of the Articles of Incorporation
or Bylaws of the Corporation; (ii) the adoption of a plan of merger or
consolidation; (iii) the sale, lease, exchange or other disposition of all or
substantially all the property and assets of the Corporation; or (iv) a
voluntary dissolution of the Corporation or the revocation of any such voluntary
dissolution.
(c) The Executive Committee shall meet from time to
time on call of the Chairman of the Board of Directors or the President or of
any two or more members of the Executive Committee. Meetings of the Executive
Committee may be held at such place or places, within or without the State of
Georgia, as the Executive Committee shall determine or as may be specified or
fixed in the respective notices or waivers of such meetings. The Executive
Committee may fix its own rules of procedure, including provision for notice of
its meetings. It shall keep a record of its proceedings and shall report these
proceedings to the Board of Directors at the meeting thereof held next after
they have been taken, and all such proceedings shall be subject to revision or
alteration by the Board of Directors except to the extent that action shall have
been taken pursuant to or in reliance upon such proceedings prior to any such
revision or alteration.
(d) The Executive Committee shall act by majority
vote of its members; provided, however, that contracts or transactions of and by
the Corporation in which officers or directors of the Corporation are interested
shall require the affirmative vote of a majority of the disinterested members of
the Executive Committee at a meeting of the Executive Committee at which the
material facts as to the interest and as to the contract or transaction are
disclosed or known to the members of the Executive Committee prior to the vote.
(e) Members of the Executive Committee may
participate in committee proceedings by means of conference telephone or similar
communications equipment by means of which all persons participating in the
proceedings can hear each other, and such participation shall constitute
presence in person at such proceedings.
-8-
<PAGE> 10
(f) The Board of Directors, by resolution adopted in
accordance with paragraph (a) of this Section, may designate one or more
directors as alternate members of the Executive Committee who may act in the
place and stead of any absent member or members at any meeting of said
committee.
4.2 Other Committees. The Board of Directors, by
resolution adopted by a majority of the entire Board of Directors, may designate
one or more additional committees, each committee to consist of one or more of
the directors of the Corporation, which shall have such name or names and shall
have and may exercise such powers of the Board of Directors, except the powers
denied to the Executive Committee, as may be determined from time to time by the
Board of Directors. Such committees shall provide for their own rules of
procedure, subject to the same restrictions thereon as provided above for the
Executive Committee.
4.3 Removal. The Board of Directors shall have power at
any time to remove any member of any committee, with or without cause, and to
fill vacancies in and to dissolve any such committee.
ARTICLE FIVE
MEETINGS OF THE BOARD OF DIRECTORS
5.1 Time and Place. Meetings of the Board of Directors
may be held at any place either within or without the State of Georgia.
5.2 Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place, within or without
the State of Georgia, as shall be determined by the Board of Directors from time
to time.
5.3 Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board of Directors or the
President on not less than one day's notice by mail, telegram, cablegram,
personal delivery or telephone to each director and shall be called by the
Chairman of the Board of Directors or the President in like manner and on like
notice on the written request of any two or more directors. Any such special
meeting shall be held at such time and place, within or without the State of
Georgia, as shall be stated in the notice of the meeting.
5.4 Content and Waiver of Notice. No notice of any
meeting of the Board of Directors need state the purposes thereof, except as may
be otherwise provided in these Bylaws. Notice of any meeting may be waived by an
instrument in writing executed before or after the meeting. Attendance in person
at any such meeting shall constitute a waiver of notice thereof unless the
director at the beginning of the meeting (or promptly upon his or her arrival)
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
5.5 Quorum; Participation by Telephone. At all meetings
of the Board of Directors, the presence of a majority of the authorized number
of directors shall be necessary and sufficient to constitute a quorum for the
transaction of business. Directors may participate in any meeting by means of
conference telephone or similar communications equipment by means of
-9-
<PAGE> 11
which all persons participating in the meeting can hear each other, and
participation in a meeting by means of such communications equipment shall
constitute the presence in person at such meeting. Except as may be otherwise
specifically provided by law, the Articles of Incorporation or these Bylaws, all
resolutions adopted and all business transacted by the Board of Directors shall
require the affirmative vote of a majority of the directors present at the
meeting. In the absence of a quorum, a majority of the directors present at any
meeting may adjourn the meeting from time to time until a quorum is present.
Notice of any adjourned meeting need only be given by announcement at the
meeting at which the adjournment is taken.
5.6 Action in Lieu of Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting if a written consent thereto is signed by
all members of the Board of Directors or of such committee, as the case may be,
and such written consent is filed with the minutes of the proceedings of the
Board of Directors and upon compliance with any further requirements of law
pertaining to such consents.
5.7 Interested Directors and Officers. An interested
director or officer is one who is a party to a contract or transaction with the
Corporation or who is an officer or director of, or has a financial interest in,
another corporation, partnership or association which is a party to a contract
or transaction with the Corporation. Contracts and transactions between the
Corporation and one or more interested directors or officers shall not be void
or voidable solely because of the involvement or vote of such interested persons
as long as (a) the contract or transaction is approved in good faith by the
Board of Directors or appropriate committee by the affirmative vote of a
majority of disinterested directors, even if the disinterested directors be less
than a quorum, at a meeting of the Board of Directors or committee at which the
material facts as to the interested person or persons and the contract or
transaction are disclosed or known to the Board of Directors or committee prior
to the vote; or (b) the contract or transaction is approved in good faith by the
shareholders after the material facts as to the interested person or persons and
the contract or transaction have been disclosed to them; or (c) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified by the Board of Directors, committee or shareholders.
Interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or committee which authorizes the contract or
transaction.
ARTICLE SIX
OFFICERS, AGENTS AND EMPLOYEES
6.1 General Provisions. The officers of the Corporation
shall be a President and a Secretary, and may include a Treasurer, Chairman of
the Board of Directors, one or more Vice Presidents, one or more Assistant
Secretaries, and one or more Assistant Treasurers. The officers shall be elected
by the Board of Directors at the first meeting of the Board of Directors after
the annual meeting of the shareholders in each year or shall be appointed as
provided in these Bylaws. The Board of Directors may elect other officers,
agents and employees, who shall have such authority and perform such duties as
may be prescribed by the Board of Directors. All officers shall hold office
until the meeting of the Board of Directors following the next annual meeting of
the shareholders after their election or appointment and until their successors
shall
-10-
<PAGE> 12
have been elected or appointed and shall have qualified. Any two or more offices
may be held by the same person. Any officer, agent or employee of the
Corporation may be removed by the Board of Directors with or without cause.
Removal without cause shall be without prejudice to such person's contract
rights, if any, but the election or appointment of any person as an officer,
agent or employee of the Corporation shall not of itself create contract rights.
The compensation of officers, agents and employees elected by the Board of
Directors shall be fixed by the Board of Directors or by a committee thereof,
and this power may also be delegated to any officer, agent or employee as to
persons under his or her direction or control. The Board of Directors may
require any officer, agent or employee to give security for the faithful
performance of his or her duties.
6.2 Powers and Duties of the Chairman of the Board of
Directors and the President. The powers and duties of the Chairman of the Board
of Directors and the President, subject to the supervision and control of the
Board of Directors, shall be those usually appertaining to their respective
offices and whatever other powers and duties are prescribed by these Bylaws or
by the Board of Directors.
(a) The Chairman of the Board of Directors shall
preside at all meetings of the Board of Directors and at all meetings of the
shareholders. The Chairman of the Board shall perform such other duties as the
Board of Directors may from time to time direct. The Vice-Chairman shall act as
Chairman of the Board of Directors unless another director is elected Chairman.
(b) The President shall, unless otherwise provided by
the Board of Directors, be the chief executive officer of the Corporation. The
President shall have general charge of the business and affairs of the
Corporation and shall keep the Board of Directors fully advised. The President
shall employ and discharge employees and agents of the Corporation, except such
as shall be elected by the Board of Directors, and he or she may delegate these
powers. The President shall have such powers and perform such duties as
generally pertain to the office of the President, as well as such further powers
and duties as may be prescribed by the Board of Directors. The President may
vote the shares or other securities of any other domestic or foreign corporation
of any type or kind which may at any time be owned by the Corporation, may
execute any shareholders' or other consents in respect thereof and may in his or
her discretion delegate such powers by executing proxies, or otherwise, on
behalf of the Corporation. The Board of Directors, by resolution from time to
time, may confer like powers upon any other person or persons.
6.3 Powers and Duties of Vice Presidents. Each Vice
President shall have such powers and perform such duties as the Board of
Directors or the President may prescribe and shall perform such other duties as
may be prescribed by these Bylaws. In the absence or inability to act of the
President, unless the Board of Directors shall otherwise provide, the Vice
President who has served in that capacity for the longest time and who shall be
present and able to act, shall perform all duties and may exercise any of the
powers of the President. The performance of any such duty by a Vice President
shall be conclusive evidence of his or her power to act.
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6.4 Powers and Duties of the Secretary. The Secretary
shall have charge of the minutes of all proceedings of the shareholders and of
the Board of Directors and shall keep the minutes of all their meetings at which
he or she is present. Except as otherwise provided by these Bylaws, the
Secretary shall attend to the giving of all notices to shareholders and
directors. He or she shall have charge of the seal of the Corporation, shall
attend to its use on all documents the execution of which on behalf of the
Corporation under its seal is duly authorized and shall attest the same by his
or her signature whenever required. The Secretary shall have charge of the
record of shareholders of the Corporation, of all written requests by
shareholders that notices be mailed to them at an address other than their
addresses on the record of the shareholders, and of such other books and papers
as the Board of Directors may direct. Subject to the control of the Board of
Directors, the Secretary shall have all such powers and duties as generally are
incident to the position of Secretary or as may be assigned to the Secretary by
the President or the Board of Directors.
6.5 Powers and Duties of the Treasurer. The Treasurer
shall have charge of all funds and securities of the Corporation, shall endorse
the same for deposit or collection when necessary and deposit the same to the
credit of the Corporation in such Corporations or depositories as the Board of
Directors may authorize. The Treasurer may endorse all commercial documents
requiring endorsements for or on behalf of the Bank and may sign all receipts
and vouchers for payment made to the Corporation. The Treasurer shall have all
such powers and duties as generally are incident to the position of Treasurer or
as may be assigned to the Treasurer by the President or by the Board of
Directors.
6.6 Appointment, Powers and Duties of Assistant
Secretaries. Assistant Secretaries may be appointed by the President or elected
by the Board of Directors. In the absence or inability of the Secretary to act,
any Assistant Secretary may perform all the duties and exercise all the powers
of the Secretary. The performance of any such duty shall be conclusive evidence
of the Assistant Secretary's power to act. An Assistant Secretary shall also
perform such other duties as the Secretary or the Board of Directors may assign
to him or her.
6.7 Appointment, Powers and Duties of Assistant
Treasurers. Assistant Treasurers may be appointed by the President or elected by
the Board of Directors. In the absence or inability of the Treasurer to act, an
Assistant Treasurer may perform all the duties and exercise all the powers of
the Treasurer. The performance of any such duty shall be conclusive evidence of
the Assistant Treasurer's power to act. An Assistant Treasurer shall also
perform such other duties as the Treasurer or the Board of Directors may assign
to him or her.
6.8 Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of Directors
may deem sufficient, the Board of Directors (or in the case of Assistant
Secretaries or Assistant Treasurers only, the President) may confer for the time
being the powers and duties, or any of them, of such officer upon any other
officer or elect or appoint any new officer to fill a vacancy created by death,
resignation, retirement or termination of any officer. In such latter event such
new officer shall serve until the next annual election of officers.
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ARTICLE SEVEN
CAPITAL STOCK
7.1 Certificates.
(a) The interest of each shareholder shall be
evidenced by a certificate or certificates representing shares of the
Corporation which shall be in such form as the Board of Directors may from time
to time adopt and shall be numbered and shall be entered into the books of the
Corporation as they are issued. Each certificate representing shares shall set
forth upon the face thereof the following:
(i) the name of the Corporation;
(ii) that the Corporation is organized
under the laws of the State of Georgia;
(iii) the name or names of the person or
persons to whom the certificate is issued;
(iv) the number and class of shares, and
the designation of the series, if any, which the certificate represents; and
(v) if any shares represented by the
certificates are nonvoting shares, a statement or notation to that effect; and,
if the shares represented by the certificate are subordinate to shares of any
other class or series with respect to dividends or amounts payable on
liquidation, the certificate shall further set forth on either the face or the
back thereof a clear and concise statement to that effect.
(b) Each certificate shall be signed by the
President or a Vice President and the Secretary or an Assistant Secretary and
may be sealed with the seal of the Corporation or a facsimile thereof. If a
certificate is countersigned by a transfer agent or registered by a registrar,
other than the Corporation itself or an employee of the Corporation, the
signature of any such officer of the Corporation may be a facsimile. In case any
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on, any such certificate or certificates shall
cease to be such officer or officers of the Corporation, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Corporation, such certificate or certificates may
nevertheless be delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signatures shall have been used
thereon had not ceased to be such officer or officers.
7.2 Shareholder List. The Corporation shall keep or cause
to be kept a record of the shareholders of the Corporation which readily shows,
in alphabetical order or by alphabetical index, and by classes or series of
stock, if any, the names of the shareholders entitled to vote, with the address
of and the number of shares held by each. Said record shall be presented and
kept open at all meetings of the shareholders.
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7.3 Transfer of Shares. Transfers of stock shall be made
on the books of the Corporation only by the person named in the certificate, or
by power of attorney lawfully constituted in writing, and upon surrender of the
certificate, or in the case of a certificate alleged to have been lost, stolen
or destroyed, upon compliance with the provisions of Section 7.7 of these
Bylaws.
7.4 Record Dates. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purpose, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date to be not more than seventy days and,
in case of a meeting of shareholders, not less than ten days, prior to the date
on which the particular action requiring such determination of shareholders is
to be taken.
7.5 Registered Owner. The Corporation shall be entitled
to treat the holder of record of any share of stock of the Corporation as the
person entitled to vote such share, to receive any dividend or other
distribution with respect to such share, and for all other purposes and
accordingly shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
7.6 Transfer Agent and Registrars. The Board of Directors
may appoint one or more transfer agents and one or more registrars and may
require each stock certificate to bear the signature or signatures of a transfer
agent or a registrar or both.
7.7 Lost Certificates. Any person claiming a certificate
of stock to be lost, stolen or destroyed shall make an affidavit or affirmation
of the fact in such manner as the Board of Directors may require and, if the
directors so require, shall give the Corporation a bond of indemnity in form and
amount and with one or more sureties satisfactory to the Board of Directors,
whereupon an appropriate new certificate may be issued in lieu of the
certificate alleged to have been lost, stolen or destroyed.
7.8 Fractional Shares or Scrip. The Corporation may, when
and if authorized so to do by its Board of Directors, issue certificates for
fractional shares or scrip in order to effect share transfers, share
distributions or reclassifications, mergers, consolidations or reorganizations.
Holders of fractional shares shall be entitled, in proportion to their
fractional holdings, to exercise voting rights, receive dividends and
participate in any of the assets of the Corporation in the event of liquidation.
Holders of scrip shall not, unless expressly authorized by the Board of
Directors, be entitled to exercise any rights of a shareholder of the
Corporation, including voting rights, dividend rights or the right to
participate in any assets of the Corporation in the event of liquidation. In
lieu of issuing fractional shares or scrip, the Corporation may pay in cash the
fair value of fractional interests as determined by the Board of Directors; and
the Board of Directors may adopt resolutions regarding rights with respect to
fractional shares or scrip as it may deem appropriate, including without
limitation the right for persons entitled to receive fractional shares to sell
such fractional shares or purchase such additional fractional
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shares as may be needed to acquire one full share, or sell such fractional
shares or scrip for the account of such persons.
ARTICLE EIGHT
BOOKS AND RECORDS; SEAL; ANNUAL STATEMENTS
8.1 Inspection of Books and Records.
(a) Any person who shall be the holder of record of,
or authorized in writing by the holders of record of, at least two percent (2%)
of the outstanding shares of any class or series of the Corporation, upon
written demand stating the purpose thereof, shall have the right to examine in
person or by agent or attorney, at any reasonable time or times, for any proper
purpose, the books and records of account, minutes and record of shareholders
and to make extracts therefrom.
(b) A shareholder may inspect and copy the records
described in the immediately preceding paragraph only if (i) his or her demand
is made in good faith and for a proper purpose that is reasonably relevant to
his or her legitimate interest as a shareholder; (ii) the shareholder describes
with reasonable particularity his or her purpose and the records he or she
desires to inspect; (iii) the records are directly connected with the stated
purpose; and (iv) the records are to be used only for that purpose.
(c) If the Secretary or a majority of the
Corporation's Board of Directors or Executive Committee members find that the
request is proper, the Secretary shall promptly notify the shareholder of the
time and place at which the inspection may be conducted.
(d) If said request is found by the Secretary, the
Board of Directors or the Executive Committee to be improper, the Secretary
shall so notify the requesting shareholder on or prior to the date on which the
shareholder requested to conduct the inspection. The Secretary shall specify in
said notice the basis for the rejection of the shareholder's request.
(e) The Secretary, Board of Directors and the
Executive Committee shall at all times be entitled to rely on the corporate
records in making any determination hereunder.
8.2 Seal. The Corporate seal shall be in such form as the
Board of Directors may from time to time determine. In the event it is
inconvenient to use such a seal at any time, the signature of the Corporation
followed by the word "Seal" enclosed in parentheses or scroll shall be deemed
the seal of the Corporation.
8.3 Annual Statements. Not later than four months after
the close of each fiscal year, and in any case prior to the next annual meeting
of shareholders, the Corporation shall prepare:
(a) A balance sheet showing in reasonable detail the
financial condition of the Corporation as of the close of its fiscal year; and
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(b) A profit and loss statement showing the results
of its operations during its fiscal year. Upon written request, the Corporation
promptly shall mail to any shareholder of record a copy of its most recent
balance sheet and profit and loss statement.
ARTICLE NINE
INDEMNIFICATION
9.1 Authority to Indemnify. The Corporation shall
indemnify or obligate itself to indemnify an individual made a party to a
proceeding because he or she is or was a director, officer, employee or agent of
the Corporation (or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise) for reasonable expenses, judgments, fines, penalties
and amounts paid in settlement (including attorneys' fees), incurred in
connection with the proceeding if the individual acted in a manner he or she
believed in good faith to be in or not opposed to the best interests of the
Corporation and, in the case of any criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful. The termination of
a proceeding by judgment, order, settlement, or conviction, or upon a plea of
nolo contendere or its equivalent is not, of itself, determinative that the
director, officer, employee or agent did not meet the standard of conduct set
forth above. Indemnification permitted under this Section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
9.2 Mandatory Indemnification. To the extent that a
director, officer, employee or agent of the Corporation has been successful, on
the merits or otherwise, in the defense of any proceeding to which he or she was
a party, or in defense of any claim, issue, or matter therein, because he or she
is or was a director, officer, employee or agent of the Corporation, the
Corporation shall indemnify the director, employee or agent against reasonable
expenses incurred by him or her in connection therewith.
9.3 Advance for Expenses. The Corporation shall pay for
or reimburse the reasonable expenses incurred by a director, officer, employee
or agent of the Corporation who is a party to a proceeding in advance of final
disposition of the proceeding if (a) he or she furnishes the Corporation written
affirmation of his or her good faith belief that he or she has met the standard
of conduct set forth in Section 9.1 of this Article, and (b) he or she furnishes
the Corporation a written undertaking, executed personally or on his or her
behalf, to repay any advance if it is ultimately determined that he or she is
not entitled to indemnification. The undertaking required by this Section must
be an unlimited general obligation but need not be secured and may be accepted
without reference to financial ability to make repayment.
9.4 Court-ordered Indemnification and Advances for
Expenses. A director, officer, employee or agent of the Corporation who is a
party to a proceeding may apply for indemnification or advances for expenses to
the court conducting the proceeding or to another court of competent
jurisdiction.
9.5 Determination of Indemnification. Except as provided
in Section 9.2 and except as may be ordered by the court, the Corporation may
not indemnify a director, officer,
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employee or agent under Section 9.1 unless authorized thereunder and a
determination has been made in the specific case that indemnification of the
director, officer, employee or agent is permissible in the circumstances because
he or she has met the standard of conduct set forth in Section 9.1. The
determination shall be made:
(a) By the Board of Directors by majority vote
of a quorum consisting of directors not at the time parties to the proceeding;
(b) If a quorum cannot be obtained, by majority
vote of a committee duly designated by the Board of Directors (in which
designation directors who are parties may participate), consisting solely of two
or more directors not at the time parties to the proceeding;
(c) By special legal counsel:
(i) Selected by the Board of Directors
or its committee in the manner prescribed in paragraph (a) or (b) of this
Section; or
(ii) If a quorum of the Board of
Directors cannot be obtained and a committee cannot be designated, selected by a
majority vote of the full Board of Directors (in which selection directors who
are parties may participate); or
(d) By the shareholders, but shares owned by or
voted under the control of directors who are at the time parties to the
proceeding may not be voted on the determination.
9.6 Authorization of Indemnification. Authorization of
indemnification or an obligation to indemnify and evaluation as to the
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under subsection (c)
of Section 9.5 to select counsel.
9.7 Other Rights. The indemnification and advancement of
expenses provided by or granted pursuant to this Article Nine shall not be
deemed exclusive of any other rights, in respect of indemnification or
otherwise, to which those seeking indemnification or advancement of expenses may
be entitled under any bylaw, resolution, agreement or contract either
specifically or in general terms approved by the affirmative vote of the holders
of a majority of the shares entitled to vote thereon taken at a meeting the
notice of which specified that such bylaw, resolution or agreement would be
placed before the stockholders, both as to action by a director, trustee,
officer, employee or agent in his or her official capacity and as to action in
another capacity while holding such office or position; except that no such
other rights, in respect to indemnification or otherwise, may be provided or
granted to a director, trustee, officer, employee, or agent pursuant to this
Section 9.7 by the Corporation for liability for (a) any appropriation, in
violation of his or her duties, of any business opportunity of the Corporation;
(b) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (c) the types of liability set forth in Section
14-2-832 of the Georgia Business Corporation Code dealing with illegal or
unauthorized distributions of corporate assets, whether
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as dividends or in liquidation of the Corporation or otherwise; or (d) any
transaction from which the director derived an improper material tangible
personal benefit.
9.8 Insurance. The Corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee, or agent of the Corporation or who, while a director, officer,
employee, or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership joint venture, trust,
employee benefit plan, or other enterprise against liability asserted against or
incurred by him or her in that capacity or arising from his or her status as a
director, officer, employee, or agent whether or not the Corporation would have
power to indemnify him or her against the same liability under this Article
Nine.
9.9 Continuation of Expenses. The indemnification and
advancement of expenses provided by or granted pursuant to this Article Nine
shall continue as to a person who has ceased to be a director, trustee, officer,
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
ARTICLE TEN
NOTICES: WAIVERS OF NOTICE
10.1 Notices. Except as otherwise specifically provided in
these Bylaws, whenever under the provision of these Bylaws notice is required to
be given to any shareholder, director or officer, it shall not be construed to
mean personal notice, but such notice may be given by personal notice, by
telegram or cablegram, or by mail by depositing the same in the post office or
letter box in a postage prepaid sealed wrapper, addressed to such shareholder,
director or officer at such address as appears on the books of the Corporation,
and such notice shall be deemed to be given at the time when the same shall be
thus sent or mailed.
10.2 Waivers of Notice. Except as otherwise provided in
these Bylaws, when any notice is required to be given by law, by the Articles of
Incorporation or by these Bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. In the case of a shareholder, such waiver of notice
may be signed by the shareholder's attorney or proxy duly appointed in writing.
ARTICLE ELEVEN
EMERGENCY POWERS
11.1 Bylaws. The Board of Directors may adopt emergency
bylaws, subject to repeal or change by action of the shareholders, which shall,
notwithstanding any provision of law, the Articles of Incorporation or these
Bylaws, be operative during any emergency in the conduct of the business of the
Corporation resulting from an attack on the United States or on a locality in
which the Corporation conducts its business or customarily holds meetings of its
Board of Directors or its shareholders, or during any nuclear or atomic
disaster, or during the existence of any catastrophe, or other similar emergency
condition, as a result of which a quorum of the Board of Directors or a standing
committee thereof cannot readily be convened for action.
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The emergency bylaws may make any provision that may be practical and necessary
for the circumstances of the emergency.
11.2 Lines of Succession. The Board of Directors, either
before or during any such emergency, may provide, and from time to time modify,
lines of succession in the event that during such an emergency any or all
officers or agents of the Corporation shall for any reason be rendered incapable
of discharging their duties.
11.3 Head Office. The Board of Directors, either before or
during any such emergency, may (effective during the emergency) change the head
office or designate several alternative head offices or regional offices, or
authorize the officers to do so.
11.4 Period of Effectiveness. To the extent not
inconsistent with any emergency bylaws so adopted, these Bylaws shall remain in
effect during any such emergency and upon its termination, the emergency bylaws
shall cease to be operative.
11.5 Notices. Unless otherwise provided in emergency
bylaws, notice of any meeting of the Board of Directors during any such
emergency may be given only to such of the directors as it may be feasible to
reach at the time, and by such means as may be feasible at the time, including
publication, radio or television.
11.6 Officers as Directors Pro Tempore. To the extent
required to constitute a quorum at any meeting of the Board of Directors during
any such emergency, the officers of the Corporation who are present shall,
unless otherwise provided in emergency bylaws, be deemed, in order of rank and
within the same rank in order of seniority, directors for such meeting.
11.7 Liability of Officers, Directors and Agents. No
officer, director, agent or employee acting in accordance with any emergency
bylaw shall be liable except for willful misconduct. No officer, director, agent
or employee shall be liable for any action taken by him or her in good faith in
such an emergency in furtherance of the ordinary business affairs of the
Corporation even though not authorized by the bylaws then in effect.
ARTICLE TWELVE
CHECKS, NOTES, DRAFTS, ETC.
Checks, notes, drafts, acceptances, bills of exchange and
other orders or obligations for the payment of money shall be signed by such
officer or officers or person or persons as the Board of Directors by resolution
shall from time to time designate.
ARTICLE THIRTEEN
AMENDMENTS
The Bylaws of the Corporation may be altered or amended and
new bylaws may be adopted by the shareholders at any annual or special meeting
of the shareholders or by the Board of Directors at any regular or special
meeting of the Board of Directors; provided, however, that, if such action is to
be taken at a meeting of the shareholders, notice of the general nature of the
proposed change in the Bylaws shall be given in the notice of meeting. The
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shareholders may provide by resolution that any bylaw provision repealed,
amended, adopted, or altered by them may not be repealed, amended, adopted or
altered by the Board of Directors. Except as otherwise provided in the Articles
of Incorporation or these Bylaws, action by the shareholders with respect to
bylaws shall by taken by an affirmative vote of a majority of all shares
entitled to elect Directors, and action by the Board of Directors with respect
to bylaws shall be taken by an affirmative vote of a majority of all Directors
then holding office.
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EXHIBIT 10.4
LEASE AGREEMENT
THIS LEASE, made this 1st day of January, 2000, by and between GBC
PROPERTIES, LLC, a Georgia limited liability company, first party, (hereinafter
called "Landlord") and GWINNETT BANKING COMPANY, a Georgia banking corporation,
second party (hereinafter called "Tenant");
W I T N E S S E T H:
1. PREMISES. Landlord, for and in consideration of the rents,
covenants, agreements and stipulations hereinafter mentioned, reserved, and
contained, to be paid, kept and performed by the Tenant, has leased and rented,
and by these presents does lease and rent, unto the said Tenant, and said Tenant
hereby agrees to lease and take upon the terms and conditions which hereinafter
appear, the following described property (hereinafter called the "premises"),
being known as 165 Nash Street, Lawrenceville, Georgia 30246, together with all
improvements located thereon. No easement for light or air is included in the
premises.
2. TERM. To have and to hold the same for a term of five (5)
years beginning on the 1st day of January, 2000 and ending on the 31st day of
December 2004, at midnight, unless sooner terminated as hereinafter provided.
3. RENTAL. Tenant agrees to pay Landlord at the office of
Landlord in Lawrenceville promptly on the first day of each month in advance,
during the term of this lease, a monthly rental of Eighteen and No/100ths
Dollars ($18.00) per square foot.
4. UTILITY BILLS. Tenant shall pay all utility bills, including,
but not limited to water, sewer, gas, electricity, fuel, light, and heat bills
for the leased premises and Tenant shall pay all charges for garbage collection
or other sanitary services rendered to the leased premises or used by Tenant in
connection therewith. If Tenant fails to pay any of said utility bills or
charges for garbage collection or other sanitary services, Landlord may pay the
same and such payment may be added to the rental of the premises next due as
additional rental hereunder.
5. USE OF THE PREMISES. The premises shall be used for banking
and related purposes and no other. The premises shall not be used for any
illegal purposes; nor in any manner to create any nuisance or trespass; nor in
any manner to vitiate the insurance or increase the rate of insurance on the
premises.
6. ABANDONMENT OF LEASED PREMISES. Tenant agrees not to abandon
or vacate the leased premises during the term of this lease, and agrees to use
said premises for purpose herein leased until the expiration hereof.
7. REPAIRS BY TENANT. Tenant accepts the leased premises in their
present condition and as suited for the uses intended by Tenant. Tenant shall,
throughout the initial term of this lease and all renewals thereof, at its
expense, maintain in good order and repair the leased premises, including the
building and other improvements located thereon, except those repairs expressly
required to be made by Landlord. Tenant further agrees to care for the grounds
around
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the building, including mowing of grass, paving, care of shrubs and general
landscaping. Tenant agrees to return said premises to Landlord at the
expiration, or prior to termination, of this lease in as good condition and
repair as when first received, natural wear and tear, damage by storm, fire,
lightning, earthquake or other casualty alone excepted. Elevators (if any) are
accepted by Tenant as in satisfactory operating condition on this date, and
Tenant, at its own expense, shall maintain said elevators in good operating
condition during the term of this lease, or any extension thereof.
8. TAXES. Tenant covenants and agrees to pay all taxes, charges
and assessments of every kind and nature that may be liens upon the premises as
they become due, and that any tax, charge, assessment or lien not paid when due
by the Tenant may be paid by Landlord and such payment may be added to the
rental of the premises next due as additional rental hereunder. Such taxes for
the calendar year in which the lease terminates shall be prorated between the
parties as of the date of termination. Tenant may contest in good faith the
validity or amount of any tax assessment or other charge for which it is
responsible hereunder. If required to perfect such contest, Tenant may include
Landlord as a party thereto. Tenant shall hold Landlord harmless against all
costs and expenses in connection with such contest. Tenant shall not be
obligated to pay any tax which may be levied or assessed with respect to or
because of the income or other benefit derived by Landlord from, or by virtue
of, this lease or the ownership of the premises, or any corporate franchise or
excise tax which may be levied against Landlord or any corporate successor to
Landlord's interest.
9. DESTRUCTION OF, OR DAMAGE TO, THE PREMISES. If the premises
are totally destroyed by storm, fire, lightning, earthquake or other casualty,
this lease shall terminate as of the date of such destruction, and rental shall
be accounted for as between Landlord and Tenant as of that date. If the premises
are damaged but not wholly destroyed by any such casualties, rental shall abate
in such proportion as use of the premises has been destroyed, and Landlord shall
restore the premises to substantially the same condition as before such damage
as speedily as practicable, whereupon full rental shall recommence.
10. INDEMNITY. Tenant agrees to indemnify and save harmless the
Landlord against all claims for damages to persons or property by reason of use
or occupancy of the leased premises, and all expenses incurred by Landlord
because thereof, including attorneys' fees and court costs.
11. GOVERNMENTAL ORDERS. Tenant agrees, at its own expense, to
promptly comply with all requirements of any legally constituted public
authority made necessary by reason of Tenant's occupancy of said premises.
Landlord agrees to promptly comply with any such requirements if not made
necessary by reason of Tenant's occupancy. It is mutually agreed, however,
between Landlord and Tenant, that if in order to comply with such requirements,
the cost to Landlord or Tenant, as the case may be, shall exceed a sum equal to
one year's rent, then Landlord or Tenant who is obligated to comply with such
requirements is privileged to terminate this lease by giving written notice of
termination to the other party, by registered mail, which termination shall
become effective sixty (60) days after receipt of such notice, and which notice
shall eliminate necessity of compliance with such requirement by the party
giving such notice unless the party receiving such notice of termination shall,
before termination becomes effective,
2
<PAGE> 3
pay to the party giving notice all cost of compliance in excess of one year's
rent, or secure payment of said sum in a manner satisfactory to the party giving
notice.
12. CONDEMNATION. If the whole of the leased premises, or such
portion thereof as will make the premises unusable for the purposes herein
leased, be condemned by any legally constituted authority for any public use or
purpose, then in either of said events the term hereby granted shall cease from
the date when possession thereof is taken by public authorities, and rental
shall be accounted for as between Landlord and Tenant as of said date. Such
termination, however, shall be without prejudice to the rights of either
Landlord or Tenant to recover compensation and damage caused by condemnation
from the condemnor. It is further understood and agreed that neither the Tenant
nor Landlord shall have any rights in any award made to the other by any
condemnation authority notwithstanding the termination of the lease as herein
provided.
13. ASSIGNMENT AND SUBLETTING. Tenant may sublease portions of the
leased premises to others provided such sublessee's operation is a part of the
general operation of Tenant and under the supervision and control of Tenant, and
provided such operation is within the purposes for which said premises shall be
used. Except as provided in the preceding sentence, Tenant shall not, without
the prior written consent of Landlord endorsed hereon, assign this lease or any
interest hereunder, or sublet the premises or any part thereof, or permit the
use of the premises by any party other than Tenant. Consent to any assignment or
sublease shall not destroy this provision, and all later assignments or
subleases shall be made likewise only on the prior written consent of Landlord.
Assignee of Tenant, at option of Landlord, shall become directly liable to
Landlord for all obligations of Tenant hereunder, but no sublease or assignment
by Tenant shall relieve Tenant of any liability hereunder.
14. REMOVAL OF FIXTURES. Tenant may (if not in default hereunder)
prior to the expiration of this lease, or any extension thereof, remove all
fixtures and equipment which it has placed in the premises, provided Tenant
repairs all damage to the premises caused by such removal.
15. CANCELLATION OF LEASE BY LANDLORD. It is mutually agreed that
in the event the Tenant shall default in the payment of rent, including
additional rent, herein reserved, when due, and fails to cure said default
within five (5) days after written notice thereof from Landlord; or if Tenant
shall be in default in performing any of the terms or provisions of this lease
other than the provision requiring the payment of rent, and fails to cure such
default within thirty (30) days after the date of receipt of written notice of
default from Landlord; or if Tenant is adjudicated bankrupt or declared
insolvent; or if a permanent receiver is appointed for Tenant's property and
such receiver is not removed within sixty (60) days after written notice from
Landlord to Tenant to obtain such removal; or if, whether voluntarily or
involuntarily, Tenant takes advantage of any debtor relief proceedings under any
present or future law, whereby the rent or any part thereof is, or is proposed
to be, reduced or payment thereof deferred; or if Tenant makes an assignment for
benefit of creditors; or if Tenant's effects should be levied upon or attached
under process against Tenant, not satisfied or dissolved within thirty (30) days
after written notice from Landlord to Tenant to obtain satisfaction thereof;
then, and in any of said events, Landlord at its option may at once, or within
six (6) months thereafter (but only during continuance of such default or
condition), terminate this lease by written notice to Tenant; whereupon this
lease shall end.
3
<PAGE> 4
After an authorized assignment or subletting of the entire premises covered by
this lease, the occurring of any of the foregoing defaults or events shall
affect this lease only if caused by, or happening to, the assignee or sublessee.
Any notice provided in this paragraph may be given by Landlord, or its attorney.
Upon such termination by Landlord, Tenant will at once surrender possession of
the premises to Landlord and remove all of Tenant's effects therefrom; and
Landlord may forthwith re-enter the premises and repossess itself thereof, and
remove all persons and effects therefrom, using such force as may be necessary
without being guilty of trespass, forcible entry or detainer or other tort.
16. RELETTING BY LANDLORD. Landlord, as Tenant's agent, without
terminating this lease, upon Tenant's breaching this contract, may at Landlord's
option enter upon and rent the premises at the best price obtainable by
reasonable effort, without advertisement and by private negotiations and for any
term Landlord deems proper. Tenant shall be liable to Landlord for the
deficiency, if any, between Tenant's rent hereunder and the price obtained by
Landlord on reletting.
17. EXTERIOR SIGNS. Tenant shall place no signs upon the outside
walls or roof of the leased premises except with the written consent of the
Landlord. Any and all signs placed on the within leased premises by Tenant shall
be maintained in compliance with rules and regulations governing such signs and
the Tenant shall be responsible to Landlord for any damage caused by
installation, use, or maintenance of said signs, and Tenant agrees upon removal
of said signs to repair all damages incident to such removal.
18. ENTRY FOR CARDING, ETC. Landlord may card the premises "For
Rent" or "For Sale" thirty (30) days before the termination of this lease.
Landlord may enter the premises at reasonable hours to exhibit same to
prospective purchasers or tenants and to make repairs required of Landlord under
the terms hereof, or to make repairs to Landlord's adjoining property, if any.
19. EFFECT FOR TERMINATION OF LEASE. No termination of this lease
prior to normal ending thereof, by lapse of time or otherwise, shall affect
Landlord's right to collect rent for the period prior to termination thereof.
20. MORTGAGEE'S RIGHTS. Tenant's rights shall be subject to any
bona fide mortgage or deed to secure debt which is now, or may hereafter be,
placed upon the premises by Landlord.
21. NO ESTATE IN LAND. This contract shall create the relationship
of Landlord and Tenant between the parties hereto; no estate shall pass out of
Landlord. Tenant has only a usufruct, not subject to levy and sale, and not
assignable by Tenant except by Landlord's consent.
22. HOLDING OVER. If Tenant remains in possession of the premises
after expiration of the term hereof, with Landlord's acquiescence and without
any express agreement of the parties, Tenant shall be a tenant at will at the
rental rate in effect at end of lease; and there shall be no renewal of this
lease by operation of law.
23. ATTORNEY'S FEES AND HOMESTEAD. If any rent owing under this
lease is collected by or through an attorney at law, Tenant agrees to pay
fifteen percent (15%) thereof as attorneys' fees. Tenant waives all homestead
rights and exemptions which it may have under any law as
4
<PAGE> 5
against any obligation owing under this lease. Tenant hereby assigns to Landlord
its homestead and exemption.
24. RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon the parties hereto shall be cumulative but not restrictive to
those given by law.
25. SERVICE OF NOTICE. Tenant hereby appoints as his agent to
receive service of all dispossessory or distraint proceedings and notices
hereunder, and all notices required under this lease, the person in charge of
the leased premises at the time, or occupying said premises; and if no person is
in charge of or occupying said premises, then such service or notice may be made
by attaching the same on the main entrance to said premises. A copy of all
notices under this lease shall also be sent to Tenant's last known address, if
different from said premises.
26. WAIVER OF RIGHTS. No failure of Landlord to exercise any power
given Landlord hereunder, or to insist upon strict compliance by Tenant with its
obligations hereunder, and no custom or practice of the parties at variance with
the terms hereof shall constitute a waiver of Landlord's right to demand exact
compliance with the terms hereof.
27. TIME OF ESSENCE. Time is of the essence of this agreement.
28. EXTENSION OF TERM. At the expiration of the initial five (5)
year term of this lease and at the expiration of each extension period as
provided in this paragraph, provided that Tenant is not in default under any of
the terms or conditions of this lease, the term of this lease shall be
automatically extended for two (2) additional five (5) year periods pursuant to
the same terms and conditions as this lease, except as such terms and conditions
may be modified by the terms and conditions set forth below. Written notice of
such modifications shall be provided by Landlord to Tenant at least ten (10)
days prior to the end of the current term of the lease or any extension period
as provided herein. Either party desiring to terminate this lease shall give to
the other party written notice of the intent not to renew the term of the lease
at least ten (10) days prior to the end of the current term thereof, in which
case this lease shall terminate and be of no further force and effect at the end
of said term period.
29. CPI INCREASES. On the first day of the initial extension
period as described above and on the first day of each subsequent extension
period, the rental described in Paragraph 3 of this lease shall be adjusted and
changed. Such adjustment and change in the rental amount shall be determined in
accordance with adjustments in the Consumer Price Index ("CPI") as provided for
herein. The CPI is herein defined as the "United States Department of Labor,
Bureau of Labor Statistics, Consumer Price Index, United States, for all urban
consumers, All Items (1982-84 = 100)."
At the beginning of each extension period as provided above, the rental
shall be adjusted by the "percentage change" in the CPI on the initial day of
each extension period as compared to the CPI prevailing sixty (60) months prior
to such date. All such adjustments shall be made retroactive to such five-year
anniversary date. All such adjustments shall be made to the nearest one-eighth
of a percentage point (0.125%).
Landlord shall notify Tenant in writing of the amount of the newly
adjusted rental and same shall be due on the first day of the applicable
extension period and each month thereafter
5
<PAGE> 6
until adjusted again. However, in no event shall the rental due and payable
hereunder be less than the rental provided for during the initial term of this
lease, regardless of the value of the dollar as reflected by said CPI figure.
In the event the amount of CPI increase is not known until after the
first month of the period for which the adjustment is to be made, due to delays
in publication of the CPI, or any other reason, then, upon notification of the
increase by Landlord, Tenant shall pay the full amount of the increase which is
due for any prior month during the adjustment period within thirty (30) days
following receipt of Landlord's written notice of the amount due.
In the event the CPI is discontinued, ceases to incorporate significant
items now incorporated therein, or if a substantial change is made in such CPI,
the parties hereto shall use in its place any similar index established and
compiled by an agency of the United States Government, and, if no such index is
available, the parties shall attempt to agree on an alternative formula and, if
agreement cannot be reached, the matter shall be submitted to arbitration under
the rules of the American Arbitration Association then in effect.
The rental, as escalated, shall constitute the "rental" as such term is
used throughout the lease.
30. BANKRUPTCY OR INSOLVENCY. Notwithstanding any other provisions
contained in this lease, in the event (a) Tenant or its successors or assigns
shall become insolvent or bankrupt, or if it or their interest under this lease
shall be levied upon or sold under execution or other legal process, or (b) the
depository institution then operating on the premises is closed, or is taken
over by any depository institution supervisory authority ("Authority"), Landlord
may, in either such event, terminate this lease only with the concurrence of any
receiver or liquidator appointed by such Authority; provided, that in the event
this lease is terminated by the receiver or liquidator, the maximum claim of
Landlord for rent, damages, or indemnity for injury resulting from the
termination, rejection, or abandonment of the unexpired lease shall by law in no
event be in an amount equal to all accrued and unpaid rent to the date of
termination.
31. INSURANCE. Tenant covenants and agrees to keep the premises,
including the building and other improvements located thereon, fully insured
against loss by fire and other hazards and to maintain public liability
insurance with respect to the premises and the conduct and operation of Tenant's
business therein as may, from time to time, be required by Landlord in amounts,
with companies and with mortgage clause approved by Landlord, naming Landlord as
an additional insured. Landlord shall deliver the policies of insurance and any
renewals thereof to Landlord, and any premium of insurance not paid when due by
Tenant may be paid by Landlord and any sum so paid shall be additional rental
due hereunder. Landlord and Tenant hereby waive any right each may have against
the other on account of any loss or damage occasioned to Landlord or to Tenant,
as the case may be, their respective property, the premises or its contents,
arising from any risk generally covered by "Special Form" or All Risk insurance
coverage; and Landlord and Tenant, each on behalf of their respective insurance
companies insuring the foregoing against any such loss or damage, waive any
right of subrogation that it might have against the other.
6
<PAGE> 7
32. DEFINITIONS. "Landlord" as used in this lease shall include
first party, its representatives, assigns and successors in title to the
premises. "Tenant" as used in this lease shall include second party, its
representatives, and if this lease shall be validly assigned or sublet, shall
include also Tenant's assignees or sublessees, as to the premises covered by
such assignment or sublease. "Landlord" and "Tenant" include male and female,
singular and plural, corporation, partnership, limited liability company, or
individual, as may fit the particular parties.
This lease contains the entire agreement of the parties hereto and no
representations, inducements, promises or agreements, oral or otherwise, between
the parties, not embodied herein, shall be of any force or effect.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties herein have hereunto set their hands
and seals the day and year first above written.
Signed, sealed and delivered as to GBC PROPERTIES, LLC, a Georgia limited
Landlord, in the presence of: liability company
- -------------------------------------
By: (SEAL)
----------------------------
Name:
- ------------------------------------- ----------------------------
Notary Public Title:
---------------------------
Signed, sealed and delivered as to GWINNETT BANKING COMPANY, a
Tenant, the presence of: Georgia banking corporation
- -------------------------------------
By: (SEAL)
----------------------------
Name:
- ------------------------------------- ----------------------------
Notary Public Title:
---------------------------
[BANK SEAL]
8
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,192,647
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,650,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,836,993
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 44,285,792
<ALLOWANCE> 674,143
<TOTAL-ASSETS> 62,331,826
<DEPOSITS> 53,783,842
<SHORT-TERM> 0
<LIABILITIES-OTHER> 304,077
<LONG-TERM> 0
0
0
<COMMON> 951,580
<OTHER-SE> 7,292,327
<TOTAL-LIABILITIES-AND-EQUITY> 62,331,826
<INTEREST-LOAN> 4,066,177
<INTEREST-INVEST> 337,830
<INTEREST-OTHER> 210,913
<INTEREST-TOTAL> 4,614,920
<INTEREST-DEPOSIT> 1,504,334
<INTEREST-EXPENSE> 1,504,334
<INTEREST-INCOME-NET> 3,110,586
<LOAN-LOSSES> 309,161
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,533,498
<INCOME-PRETAX> 444,990
<INCOME-PRE-EXTRAORDINARY> 444,990
<EXTRAORDINARY> 0
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<NET-INCOME> 444,990
<EPS-BASIC> .47
<EPS-DILUTED> .47
<YIELD-ACTUAL> 7.21
<LOANS-NON> 4,000
<LOANS-PAST> 0
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<LOANS-PROBLEM> 52,000
<ALLOWANCE-OPEN> 373,000
<CHARGE-OFFS> 8,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 674,000
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</TABLE>
<PAGE> 1
EXHIBIT 99.1
GBC BANCORP, INC.
a bank holding company for
Gwinnett Banking Company
PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held October 19, 1999
PROXY SOLICITATION AND VOTING
GENERAL
This Proxy Statement is being furnished in connection with
the solicitation by the Board of Directors of Proxies from the shareholders of
GBC Bancorp, Inc. (the "Company") for use at the Annual Meeting of Shareholders
(the "Annual Meeting").
The enclosed Proxy is for use at the Annual Meeting if a
shareholder is unable to attend the Annual Meeting in person or wishes to have
his shares voted by Proxy, even if he attends the Annual Meeting. Any Proxy may
be revoked by the person giving it at any time before its exercise, by notice
to the Secretary of the Company, by submitting a Proxy having a later date, or
by such person appearing at the Annual Meeting and electing to vote in person.
All shares represented by valid Proxies received pursuant to this solicitation
and not revoked before their exercise will be voted in the manner specified
therein. If a Proxy is signed and no specification is made, the shares
represented by the Proxy will be voted for election of the nominees for
director identified below and in favor of any other Proposals described below
and in accordance with the best judgment of the persons exercising the Proxy
with respect to any other matters properly presented for action at the Annual
Meeting.
This Proxy Statement and the enclosed Proxy are being mailed
to the Company's shareholders on or about September 30, 1999.
<PAGE> 2
The Company is a bank holding company organized in 1996 under
the laws of the State of Georgia. The Company's subsidiary, Gwinnett Banking
Company (the "Bank"), commenced operations on October 31, 1997 as a
state-chartered commercial bank.
RECORD DATE AND OUTSTANDING SHARES
The Board of Directors has set September 15, 1999 as the
record date for the Annual Meeting. Only shareholders of record at the close of
business on the record date will be entitled to notice of and to vote at the
Annual Meeting. As of the record date, there were 950,080 shares of common
stock of the Company issued and outstanding.
QUORUM AND VOTING RIGHTS
A quorum for the Annual Meeting consists of the holders of
the majority of the outstanding shares of common stock of the Company entitled
to vote at the Annual Meeting, present in person or represented by Proxy.
Each share of common stock of the Company is entitled to one
vote on each matter to come before the Annual Meeting. The Proposals require
the affirmative vote of a majority of the shares of the common stock of the
Company present in person or represented by Proxy.
SOLICITATION OF PROXIES
In addition to this solicitation by mail, the officers and
employees of the Company and the Bank, without additional compensation, may
solicit Proxies in favor of the Proposal, if deemed necessary, by personal
contact, letter, telephone or other means of communication. Brokers, nominees
and other custodians and fiduciaries will be requested to forward Proxy
solicitation material to the beneficial owners of the shares of common stock of
the Company where appropriate, and the Company will reimburse them for their
reasonable expenses incurred in connection with such transmittals. The costs of
solicitation of Proxies for the Annual Meeting will be borne by the Company.
-2-
<PAGE> 3
ELECTION OF DIRECTORS
GENERAL
The members of the Board of Directors of the Company are elected by the
shareholders. The number of directors (not less than seven [7] nor more than
fifteen [15]) is determined by resolution of the Board of Directors. The Board
of Directors has, by resolution, fixed the number of directors at ten. Directors
are elected to hold office until the next Annual Meeting following their
election or until their successors are elected and qualified.
The Board of Directors of the Company presently consists of ten members
who also serve as directors of the Bank. The members of the Board of Directors
of the Bank are elected annually by the Company, acting as the sole shareholder
of the Bank.
All the nominees are presently directors of the Company. It is intended
that each Proxy solicited on behalf of the Board of Directors will be voted only
for the election of designated nominees. Each nominee has agreed to his
nomination and to serve as a director, if elected. If for any reason any nominee
should become unable or unwilling to accept nomination or election, persons
voting the Proxies will vote for the election of another nominee designated by
the Board of Directors or for such lesser numbers of nominees as may be
designated by the Board of Directors. Management of the Company has no reason to
believe that any nominee will not serve, if elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION AS DIRECTORS OF THE
PERSONS NAMED.
NOMINEES
The following description sets forth the name, age and principal
occupation of each nominee for election as a director and the period during
which he has previously served as a director.
James B. Ballard, age 55. Mr. Ballard has been a member of the Board
of Directors of the Company since 1996. Mr. 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 contractor serving the
continental United States as well as the international market. Mr. Ballard
currently serves as President and Chief Executive Officer of The Spartan Group,
an industrial contractor serving the continental United States.
-3-
<PAGE> 4
Jerry M. Boles, age 59, has been a member of the Board of Directors of
the Company since 1996. Mr. 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, age 61, has been a member of the Board of Directors of the
Company since 1996. Mr. 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.
Richard F. Combs, age 52, has been a member of the Board of Directors
of the Company since 1997. Mr. Combs is the Founder and President of Pureflow
Ultraviolet, Inc., a company specializing in ultraviolet disinfecting equipment,
parts and services to industrial clients since 1978.
William G. Hayes, age 61, has been a member of the Board of Directors
of the Company since 1997. Mr. Hayes is President and Chairman of Hayes, James
and Associates, an engineering and survey company based in Lawrenceville,
Georgia. Mr. Hayes was a director of the First National Bank of Gwinnett from
1984 to 1986.
Larry D. Key, age 54, has been a member of the Board of Directors of
the Company since 1996. Mr. 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 the organizing group of the Company and the
Bank. Mr. Key served as President and Chief Executive Officer of the former
Commercial Bank of Georgia from 1994 until the 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.
Douglas A. Langley, age 41, has been a member of the Board of
Directors of the Company since 1997. Mr. Langley has been a managing partner of
Ashworth and Associates, a CPA firm in Tucker and Lawrenceville, Georgia, since
1977.
-4-
<PAGE> 5
Norris J. Nash, age 72, has been a member of the Board of Directors of
the Company since 1996. Mr. 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 Georgia House of Representatives for Gwinnett
County, District 22, Post #1 from 1967 to 1969.
Joseph J. Powell, age 55, has been a member of the Board of Directors
of the Company since 1997. Mr. Powell has been President of Joe Powell and
Associates, Inc. since 1971 representing Liebert Corporation, provider of
mechanical equipment for computer operations.
William S. Stanton, age 44, has been a member of the Board of
Directors of the Company since 1996. Mr. 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.
There are no arrangements or understandings between the Company and any
person pursuant to which any of the above persons have been or will be elected a
director. There are no family relations between any of the directors or
executive officers of the Company or the Bank.
APPROVAL OF ADOPTION OF 1998 STOCK OPTION PLAN
BACKGROUND
The Board of Directors approved the adoption of the 1998 Stock Option
Plan (the "Plan") on December 15, 1998, subject to the approval of the Plan by
the shareholders at the 1999 annual meeting of shareholders. Options may be
granted under the Plan on and after the effective date, but no later than
December 14, 2008. The discussion which follows is qualified in its entirety by
reference to the Plan, a copy of which is attached to the proxy statement as
Exhibit A.
A maximum of 180,000 shares of common stock may be issued pursuant to
options granted under the Plan, and the Board of Directors has reserved shares
for this purpose. The number of shares reserved for issuance under the Plan and
the terms of options
-5-
<PAGE> 6
may be adjusted in the event of an adjustment in the capital stock structure of
the Company or a related corporation (due to a merger, stock split, stock
dividend or similar event).
PURPOSE AND ELIGIBILITY
The purpose of the Plan is to encourage and enable selected
(1) key employees; (2) directors; and (3) independent contractors, consultants
and advisors (collectively, "independent contractors") of the Company or its
related corporations to acquire or increase their holdings of common stock in
order to promote a closer identification of their interests with those of the
Company and its shareholders, thereby further stimulating their efforts to
enhance the efficiency, soundness, profitability, growth and shareholder value
of the Company. The purpose will be carried out by the granting of incentive
stock options and nonqualified stock options of such options. The material
terms of awards are discussed below. See "Material Terms of Options."
ADMINISTRATION; AMENDMENT AND TERMINATION
The Plan will be administered by the Board of Directors, or
upon its delegation, by a committee of the Board (the "Committee"). The Board
of Directors and the Committee are referred to in this discussion collectively
as the "Board." Under the terms of the Plan, the Board has full and final
authority to take any action with respect to the Plan, including, without
limitation, the authority to determine all matters relating to options,
including selection of individuals to be granted options, the nature of each
option as an incentive option or nonqualified option, the times when options
may be granted and exercised (and to accelerate the exercisability of options),
the number of shares of common stock subject to an option, the option price and
the terms, conditions, restrictions and limitations of an option and to make
all other determinations deemed necessary or advisable for administering the
Plan.
The Plan may be amended or terminated at any time by the
Board of Directors, subject to the following: (1) shareholder approval is
required of any Plan amendment if such approval is required by applicable law,
rule or regulation; and (2) an amendment or termination of an option may not
adversely affect the rights of a recipient with respect to an outstanding
option without the recipient's consent.
MATERIAL TERMS OF OPTIONS
As noted above, the Plan authorizes the grant of both
incentive stock options and nonqualified stock options, both of which are
exercisable for shares of common stock. The option price at which an option may
be exercised will be determined by the Board at the
-6-
<PAGE> 7
time of grant and may not be less than the par value per share of the common
stock. In addition, in the case incentive options, the option price must be
equal to or greater than the fair market value per share of the common stock on
the date of grant. The term of an option and the period or periods during which
an option may be exercised will be determined by the Board at the time of
option grant and, in the case of incentive options, the option term may not
exceed 10 years. Options are exercisable on such dates, during such periods,
for such number of shares and subject to such conditions as may be determined
by the Board. Payment must be made in cash or by check unless an individual
agreement authorizes payment by other means. Options are also subject to
certain restrictions on exercise if the participant terminates employment.
Incentive options are not transferable other than by will or
the laws of intestate succession. Nonqualified options are not transferable
other than by will or the laws of the intestate succession, except as only be
permitted by the Board in a manner consistent with the Securities Act of 1933,
as amended. The Plan requires recipients to pay in cash the amount of
withholding taxes unless the Company permits a recipient to elect to satisfy
such obligations by having the Company withhold shares.
The Plan generally provides that upon a change of control (as
defined in the Plan), all options outstanding as of the date of the change of
control will become fully exercisable, whether or not then otherwise
exercisable. However, the Plan authorizes the Board, in the event of a merger,
share exchange, reorganization or other business combination affecting the
Company or a related corporation, to determine that any or all options shall
not vest or become exercisable on an accelerated basis, if the Company or the
surviving or acquiring corporation takes such action (including but not limited
to the assumption of plan options or the grant of substitute options) which, in
the opinion of the Board is equitable or appropriate to protect the rights and
interest of participants under the Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary generally describes the principal
federal (and not state and local) income tax consequences of options granted
under the Plan. The summary is general in nature and is not intended to cover
all tax consequences that may apply to a particular employee or to the Company.
The provisions of the Code and regulations thereunder relating to these matters
are complicated and their impact in any one case may depend upon the particular
circumstances.
-7-
<PAGE> 8
Incentive Stock Options
Incentive stock options granted under the Plan are intended
to qualify as incentive stock options under Section 422 of the Code. Pursuant
to Section 422, the grant and exercise of an incentive stock option will
generally not result in taxable income to the optionee (with the possible
exception of alternative minimum tax liability) if the optionee does not
dispose of shares received upon exercise of an option less than one year after
the date of exercise and two years after the date of grant, and if the optionee
has continuously been an employee of the Company from the date of grant to
three months before the date of exercise (or twelve months in the event of
death or disability). The Company will not be entitled to a deduction for
income tax purposes in connection with the exercise of an incentive stock
option. Upon the disposition of shares acquired upon exercise of an incentive
stock option, the optionee will be taxed on the amount by which the amount
realized upon such disposition exceeds the option price, and the amount will be
treated as long-term capital gain or loss. If the holding period requirements
for incentive stock option treatment described above are not met, the option
will be treated as a nonqualified stock option.
Pursuant to the Code and the terms of the Plan, in no event
can there first become exercisable by an optionee in any one calendar year
incentive stock options granted by the Company with respect to shares having an
aggregate fair market value (determined at the time an option is granted)
greater than $100,000. To the extent an incentive stock option granted under
the Plan exceeds the foregoing limitation, it will be treated for all purposes
under the Plan as a nonqualified stock option. In addition, no incentive stock
option may be granted to an individual who owns, immediately before the time
that the option is granted, stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company unless the
option price is at least equal to 110% of the fair market value per share of
the common stock and the option term does not exceed five years.
Nonqualified Stock Options
If an optionee receives a nonqualified stock option, the
difference between the market value of the stock on the date of exercise and
the option price will constitute taxable ordinary income to the optionee on the
date of exercise. The Company will be entitled to a deduction in the same year
in an amount equal to the income taxable to the optionee. The optionee's basis
in shares of common stock acquired upon exercise of an option will equal the
option price plus the amount of income taxable at the time of exercise. Any
subsequent disposition of the stock by the optionee will be taxed as a capital
gain or loss to the optionee, and will be long-term capital gain or loss if the
optionee has held the stock for more than one year at the time of sale.
-8-
<PAGE> 9
The affirmative vote of the holders of a majority of the
shares of common stock present or represented and entitled to vote at the 1999
annual meeting of shareholders is required to adopt the Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE PROPOSAL
TO ADOPT THE PLAN.
CERTAIN TRANSACTIONS
The Company and the Bank 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. Such transactions are 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 do not involve more than the normal risk of collectibility or
present other unfavorable features to the Company and the Bank. As of December
31, 1998, there were no loans to executive officers and directors of the
Company or the Bank, or to principal shareholders of the Company or to
affiliates of such persons.
The Bank has entered into a Lease Agreement with GBC
Properties, L.L.C. ("GBC Properties") to lease the Bank's current premises in
Lawrenceville, Georgia (the "Premises"). Most of the members of GBC Properties
are directors of the Company and organizers of the Bank. The Premises lease
rate is market rental value established by two MAI appraisals and, therefore,
it is as favorable as rates obtainable from an unaffiliated third party.
-9-
<PAGE> 10
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding
the shares of the Company's common stock owned as of the record date (i) by
each person who beneficially owns more than 5% of the shares of the Company's
common stock, (ii) by each of the Company's nominees and directors, and (iii)
by all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Number of Percentage
Name of Beneficial Owner (1) Shares (2) Ownership (2)
---------------------------- ----------- -------------
<S> <C> <C>
Larry D. Key............................................ 17,173 1.81
Chairman, President and Chief
Executive Officer
John T. Hopkins, III.................................... 10,010 1.05
Executive Vice President, Chief
Financial Officer, Secretary and
Treasurer
Michael A. Roy.......................................... 7,931 .83
Executive Vice President and Chief
Credit Officer
Paul C. Birkhead........................................ 15,042 1.58
Senior Vice President
Michael L. Couch........................................ 3,993 .42
Senior Vice President
Marcia N. Watkins....................................... 1,300 .14
Senior Vice President and Chief
Operations Officer
James B. Ballard........................................ 41,706 4.39
Director
Jerry M. Boles.......................................... 25,000 2.63
Director
W. H. Britt............................................. 15,337 1.61
Director
Richard F. Combs........................................ 21,361 2.25
Director
William Grant Hayes..................................... 5,000 .53
Director
Douglas A. Langley...................................... 21,000 2.21
Director
</TABLE>
-10-
<PAGE> 11
<TABLE>
<CAPTION>
Number of Percentage
Name of Beneficial Owner (1) Shares (2) Ownership (2)
---------------------------- ----------- ------------
<S> <C> <C>
Norris J. Nash.......................................... 22,685 2.39
Director
James J. Powell......................................... 25,000 2.63
Director
William S. Stanton...................................... 39,410 4.15
Director
Directors and Executive Officers 271,948 28.62
as a group (15 persons)
</TABLE>
- ---------------------
(1) Except as otherwise indicated, the persons named in the above table have
sole voting and investment power with respect to all shares shown as
beneficially owned by them. The information as to beneficial ownership has been
furnished by the respective persons listed in the above table.
(2) Based on 950,080 shares outstanding as of the record date.
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the
Company was not aware of any matters to be presented for action at the Annual
Meeting other than the Proposal referred to herein. If other matters are
properly presented for action at the Annual Meeting, it is intended that the
persons named as Proxies will vote or refrain from voting in accordance with
their best judgment on such matters.
-11-
<PAGE> 12
PROXY
GBC BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder hereby appoints Larry D. Key and John T.
Hopkins, III, each or any one of them, with full power of substitution, as
Proxies to represent and to vote, as designated below, all the shares of common
stock of GBC BANCORP, INC. (the "Company") held of record by the undersigned on
September 15, 1999, at the Annual Meeting of the Shareholders (the "Annual
Meeting") to be held on October 19, 1999, or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSALS.
PROPOSAL (1): Election of Directors.
Nominees: James B. Ballard, Jerry M. Boles, W. H. Britt, Richard F. Combs,
William G. Hayes, Larry D. Key, Douglas A. Langley, Norris J. Nash
and Joseph J. Powell, William S. Stanton.
Check [ ] For all Nominees listed above [ ] Withhold Authority to vote for
- ----- (except as marked to the all Nominees listed above
One Box contrary below)
- -------
Instructions: To withhold authority to vote for any individual
Nominee, write that Nominee's name in the following space provided:
- --------------------------------------------------------------------
- --------------------------------------------------------------------
PROPOSAL (2): Approval of Adoption of 1998 Stock Option Plan
Check [ ] For [ ] Against [ ] Abstain
- -----
One Box
- -------
This Proxy revokes all prior proxies with respect to the Annual Meeting
and may be revoked prior to its exercise. Unless otherwise specified, this
Proxy will be voted for the election of the Nominees for director named in
Proposal 1 and for Proposal 2, and in the discretion of the persons named as
Proxies on all other matters which may properly come before the Annual Meeting
or any adjournments thereof.
Please sign exactly as name appears below. If a corporation, please sign
in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
-------------------------------------
DATED: ____________, 1999. Signature
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY -------------------------------------
USING THE ENCLOSED ENVELOPE Signature if held jointly
