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As filed with the Securities and Exchange Commission on December 21, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GBC BANCORP, INC.
(Name of Small Business Issuer in Its charter)
6712
(Primary Standard Industrial
Classification Code Number)
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<S> <C> <C>
Georgia 165 Nash Street 58-2265327
(State or jurisdiction of incorporation or Lawrenceville, Georgia 30045 (I.R.S. Employer Identification Number)
organization) (Address, and telephone number of
principal executive offices and
principal place of business)
</TABLE>
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Steven S. Dunlevie, Esq.
Womble Carlyle Sandridge & Rice, PLLC
3500 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
(404) 872-7000
(Name, address, and telephone number of agent for service)
WITH A COPY TO:
Elizabeth O. Derrick, Esq.
Womble Carlyle Sandridge & Rice, PLLC
3500 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
(404) 888-7433
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
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If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____________.
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________.
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________.
If the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ] _____________.
Calculation of Registration Fee
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============================================================================================================
Title of Each Proposed
Class of Securities Dollar Amount Proposed Maximum Maximum Aggregate Amount of
To Be Registered To Be Registered Offering Price Per Unit Offering Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock $10,000,000 $ 14.50 $10,000,000 $2,640
============================================================================================================
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
UP TO 689,655 SHARES
GBC BANCORP, INC.
COMMON STOCK
GBC Bancorp, Inc. is selling a minimum of 344,827 shares and a maximum
of 689,655 shares.
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<CAPTION>
Underwriters' Proceeds to
Offering Price Discounts GBC Bancorp, Inc.
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<S> <C> <C> <C>
Per share ............... $ 14.50 $0 $ 14.50
Minimum offering ........ $ 5,000,000 $0 $ 5,000,000
Maximum offering ........ $10,000,000 $0 $10,000,000
</TABLE>
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INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
, 2001
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<PAGE> 3
TABLE OF CONTENTS
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PROSPECTUS SUMMARY................................................................................................ 2
RISK FACTORS...................................................................................................... 4
THE OFFERING...................................................................................................... 9
USE OF PROCEEDS.................................................................................................. 10
CAPITALIZATION................................................................................................... 11
DIVIDEND POLICY.................................................................................................. 11
DILUTION......................................................................................................... 11
SELECTED CONSOLIDATED FINANCIAL DATA INFORMATION................................................................. 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................ 15
BUSINESS......................................................................................................... 33
MANAGEMENT....................................................................................................... 43
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................... 49
DESCRIPTION OF CAPITAL STOCK..................................................................................... 51
LEGAL MATTERS.................................................................................................... 56
EXPERTS.......................................................................................................... 56
WHERE YOU CAN FIND ADDITIONAL INFORMATION........................................................................ 56
INDEX TO FINANCIAL STATEMENTS.................................................................................... F-1
</TABLE>
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PROSPECTUS SUMMARY
The summary highlights selected information contained elsewhere in this
prospectus. This summary may not contain all of the information you should
consider before investing in our common stock. You should read the entire
prospectus carefully, including "Risk Factors" and the financial statements,
before making an investment decision.
GBC BANCORP, INC.
We are a holding company for Gwinnett Banking Company, a Georgia bank.
GWINNETT BANKING COMPANY
We are a Georgia bank that is owned by GBC Bancorp.
MARKET AND COMPETITION
We believe that Gwinnett County has a very active and competitive
banking market. Based on the Federal Deposit Insurance Corporation Summary of
Deposits as of June 30, 1999, there were 26 commercial banks, three thrift
institutions and four credit unions that operate 150 offices in Gwinnett County.
We believe that our personalized service enables us to compete favorably with
larger financial institutions in our target market of small to medium-sized
businesses.
LENDING POLICY
Our lending business consists principally of making loans to small- and
medium-sized businesses and to their owners, officers and employees, loans to
independent single-family residential contractors, loans that are guaranteed by
the Small Business Administration and loans to individual consumers. Our loan
portfolio consists of approximately 38.43% single-family residential
construction loans, 50.80% commercial loans, 9.61% consumer and 1.16% Small
Business Administration loans.
DEPOSITS
Our primary sources of deposits are residents of and businesses located
in Gwinnett County and to a lesser extent Cobb County, DeKalb County and Fulton
County. Our deposit mix at September 30, 2000 consists of approximately 13.61%
non interest-bearing demand deposits, 10.66% interest-bearing demand and money
market deposits, 8.49% savings deposits, 32.45% time deposits of $100,000 or
more and 34.79% other time deposits.
We are located at 165 Nash Street, Lawrenceville, Georgia 30045, our
telephone number is (770) 995-0000 and our Web site address is
www.gwinnettbanking.com. GBC Bancorp was incorporated in Georgia in 1996 and
Gwinnett Banking Company received its Georgia banking charter in 1997.
Information on our Web site does not constitute part of this prospectus and you
should rely only on information contained in this prospectus in deciding whether
to invest in our common stock.
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<PAGE> 5
THE OFFERING
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Common stock offered...................................... A minimum of 344,827 shares.
A maximum of 689,655 shares.
Common stock outstanding after this offering.............. Up to 1,641,235 shares.
Use of proceeds........................................... We intend to use the net proceeds of this offering
for general corporate purposes, including working
capital. See "Use of Proceeds" (page 10).
</TABLE>
The number of shares that will be outstanding after the offering is
based on the actual number of shares outstanding as of September 30, 2000. It
excludes options to purchase 103,500 shares of common stock outstanding as of
September 30, 2000, at an exercise price of $10.00 per share.
FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements, including
or related to our future results, including certain projections and business
trends. Assumptions relating to forward-looking statements involve judgments
with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control. When
used in this prospectus, the words "estimate," "project," "intend," "believe"
and "expect" and similar expressions identify forward-looking statements.
Although we believe that assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could prove inaccurate, and we may not
realize the results contemplated by the forward-looking statement. Management
decisions are subjective in many respects and susceptible to interpretations and
periodic revisions based on actual experience and business developments, the
impact of which may cause us to alter our business strategy that may, in turn,
affect our results of operations. In light of the significant uncertainties
inherent in the forward-looking information included in this prospectus, you
should not regard the inclusion of such information as our representation that
we will achieve any strategy, objectives or other plans. The forward-looking
statements contained in this prospectus speak only as of the date of this
prospectus as stated on the front cover and we have no obligation to update
publicly or revise any of these forward-looking statements.
These and other statements, which are not historical facts, are based
largely on management's current expectations and assumptions and are subject to
a number of risks and uncertainties that could cause actual results to differ
materially from those contemplated by such forward-looking statements. These
risks and uncertainties include, among other things, the risks and uncertainties
described in "Risk Factors" (page 4).
-----------------------
In this prospectus, we use the terms "GBC Bancorp," "we," "us" and
"our" to refer to GBC Bancorp, Inc., a Georgia corporation and its wholly owned
subsidiary, Gwinnett Banking Company, a Georgia bank.
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RISK FACTORS
An investment in our common stock involves a significant degree of
risk. In determining whether to make an investment, you should consider
carefully all of the information set forth in this prospectus and, in
particular, the following factors. The shares of our common stock we are
offering are not savings accounts, deposits or other obligations of a bank or
savings association and are not insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
THE MARKETS FOR OUR SERVICES ARE HIGHLY COMPETITIVE AND WE FACE SUBSTANTIAL
COMPETITION.
The banking business is highly competitive. We will compete as a
financial intermediary with other commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds, insurance
companies, and brokerage and investment banking firms soliciting business from
residents of Gwinnett County, Georgia, many of which have greater resources than
we have. Many of our competitors enjoy competitive advantages including greater
financial resources, a wider geographic presence or more accessible branch
office locations, the ability to offer additional services, more favorable
pricing alternatives and lower origination and operating costs. Increased
competitive pressures could be one effect of the recently adopted
Gramm-Leach-Bliley Act described below under "Business-Supervision and
Regulation." This competition could result in a decrease in loans we originate
and could negatively affect our results of operations.
In attracting deposits, we compete with insured depository institutions
such as banks, savings institutions and credit unions, as well as institutions
offering uninsured investment alternatives, including money market funds.
Traditional banking institutions, as well as entities intending to transact
business solely on-line, are increasingly utilizing the Internet as a means of
attracting deposits without geographic or physical limitations. In addition,
many nonbank competitors are not subject to the same extensive regulations that
govern us. These competitors may offer higher interest rates than we offer,
which could result in either our attracting fewer deposits or in our being
required to increase our rates in order to attract deposits. Increased deposit
competition could increase our cost of funds and could affect adversely our
ability to generate the funds necessary for our lending operations, which would
negatively affect our results of operations.
CHANGES IN INTEREST RATES COULD HAVE AN ADVERSE EFFECT ON OUR INCOME.
Our profitability depends to a large extent upon our net interest
income. Net interest income is the difference between interest income on
interest-earning assets, such as loans and investments, and interest expense on
interest-bearing liabilities, such as deposits and borrowings. Our net interest
income will be adversely affected if market interest rates change so that the
interest we pay on deposits and borrowings increases faster than the interest we
earn on loans and investments. Changes in interest rates also can affect the
value of our loans. An increase in interest rates could adversely affect
borrowers' ability to pay the principal or interest on our loans. This may lead
to an increase in our nonperforming assets and could have a material and
negative effect on our results of operations.
Interest rates are highly sensitive to many factors, including
governmental monetary policies and domestic and international economic and
political conditions. Conditions such as inflation, recession, unemployment,
money supply and other factors beyond our control may also affect interest
rates. Fluctuations in market interest rates are neither predictable nor
controllable and may have a material and negative effect on our business,
financial condition and results of operations.
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WE ARE SUBJECT TO SIGNIFICANT GOVERNMENT REGULATIONS, INCLUDING NEW LEGISLATION,
THAT AFFECT OUR OPERATIONS AND MAY RESULT IN HIGHER OPERATING COSTS OR INCREASED
COMPETITION FOR US.
Our success will depend not only on competitive factors, but also on
state and federal regulations affecting banks and bank holding companies
generally. Regulations now affecting us may change at any time, and such changes
may adversely affect our business.
We are subject to extensive regulation by the Board of Governors of the
Federal Reserve, the Federal Deposit Insurance Corporation and the Georgia
Department of Banking and Finance. Supervision, regulation and examination of
banks and bank holding companies by bank regulatory agencies are intended
primarily for the protection of depositors rather than shareholders. These
agencies examine bank holding companies and commercial banks, establish capital
and other financial requirements and approve new branches, acquisitions or other
changes of control. Our ability to establish new branches or to make
acquisitions is conditioned upon the receipt of required regulatory approvals
from the applicable regulators.
We believe that changes in legislation and regulations will continue to
have a significant impact on the banking industry. Although some of the
legislative and regulatory changes may benefit us and our bank, others will
increase our costs of doing business and could assist our competitors, which are
not subject to similar regulation.
The Gramm-Leach-Bliley Act became effective on March 11, 2000. This
major banking legislation now permits affiliation among depository institutions
and entities whose activities are considered financial in nature. Activities
that are expressly considered financial in nature include securities and
insurance underwriting and agency, investment management and merchant banking.
With certain exceptions, this act similarly expanded the authorized activities
of subsidiaries of national banks and, indirectly through the provisions of
state law, Georgia banks. In general, these expanded powers are reserved to bank
holding companies and banks where all depository institutions affiliated with
them are well capitalized and well managed based on applicable banking
regulation. The act clarifies state regulation of insurance products sold by
depository institutions, imposes rules on data privacy and repeals some of the
exemptions enjoyed by banks under federal securities laws relating to the
offering of securities and the licensing of broker-dealers and investment
advisors. This act will be the subject of extensive rulemaking by federal
banking regulators and others. Although the effects of this legislation will
only begin to be understood over the next several years and cannot presently be
predicted with any certainty, it may accelerate trends toward larger financial
services companies offering a wider range of products and services. Firms of
this type may have increased resources and market power that may adversely
affect our ability to compete effectively.
BECAUSE A SIGNIFICANT PORTION OF OUR LOAN PORTFOLIO IS SECURED BY REAL ESTATE,
ANY NEGATIVE CONDITIONS AFFECTING REAL ESTATE MAY HARM OUR BUSINESS.
A significant portion of our loan portfolio consists of commercial
loans that are secured by various types of real estate as collateral, as well as
real estate loans on commercial properties. Because these loans rely on real
estate as collateral, either totally in the case of real estate loans or
partially in the case of commercial loans secured by real estate, they are
sensitive to economic conditions and interest rates. Real estate lending also
presents additional credit related risks, including a borrower's inability to
pay and deterioration in the value of real estate held as collateral.
5
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WE HAVE A SIGNIFICANT AMOUNT OF CONSTRUCTION LOANS. THESE LOANS ARE SUBJECT TO
ADDITIONAL RISKS UNIQUE TO THE BUILDING INDUSTRY THAT COULD NEGATIVELY AFFECT
OUR NET INCOME.
Historically, our loan portfolio has included a concentration of
construction loans consisting of one-to-four family residential construction
loans, commercial construction loans and land loans for residential and
commercial development. At September 30, 2000, 38.43% of our total loan
portfolio was in construction loans. Approximately 27.70% of these loans were
for properties that were not pre-sold or for land loans. Conditions in the
construction-lending sector have been favorably affected by the same factors
affecting real estate loans generally. These favorable conditions may not
continue. In addition to the risk of nonpayment by borrowers, construction
lending poses additional risks in that:
- land values may decline;
- developers or builders may fail to complete or develop
projects;
- municipalities may place moratoriums on building;
- developers may fail to sell the improved real estate;
- there may be construction delays and cost overruns;
- insufficient collateral may exist; or
- permanent financing may not be obtained in a timely manner.
Any of these conditions could negatively affect our net income and our
financial condition.
IF OUR ALLOWANCE FOR LOAN LOSSES IS NOT ADEQUATE TO COVER ACTUAL LOSSES, OUR NET
INCOME MAY DECREASE.
We are exposed to the risk that our customers will be unable to repay
their loans in a timely fashion and that any collateral securing the payment of
loans may not be sufficient to assure repayment. Borrowers' inability to repay
their loans could erode our bank's earnings and capital. We maintain an
allowance for loan losses to cover loan defaults. We base our allowance for loan
losses on various assumptions and judgments regarding the collectibility of
loans, including our prior experience with loan losses, as well as an evaluation
of the risks in our loan portfolio. We maintain this allowance at a level we
consider adequate to absorb anticipated losses. The amount of future loan losses
is susceptible to changes in economic, operating and other conditions, including
changes in interest rates, that may be beyond our control.
Actual losses may exceed our estimates and we may have to increase the
allowance for loan losses. This would cause us to increase our provision for
loan losses, which would decrease our net income. Further, state and federal
regulatory agencies, as an integral part of their examination process, review
our loans and our allowance for loan losses. Regulators, when reviewing our loan
portfolio, may require us to increase our allowance for loan losses, which would
negatively affect our net income.
IF ECONOMIC CONDITIONS IN GWINNETT COUNTY DETERIORATE, OUR BUSINESS MAY BE
NEGATIVELY AFFECTED.
Our success depends on the general economic conditions of the markets
we serve. Our operations are concentrated in Gwinnett County, Georgia, and to a
lesser extent in Cobb, DeKalb and Fulton Counties, Georgia. If economic
conditions in Gwinnett County are unfavorable or deteriorate, we could
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experience an increase in the number of borrowers that are unable to repay their
loans on a timely basis. This could lead to higher rates of loss and loan
payment delinquencies. These factors could have a negative effect on our
business, financial condition and results of operations.
LOSING KEY PERSONNEL WILL NEGATIVELY AFFECT US.
Competition for personnel is stronger in the banking industry than many
other industries, and we may not be able to attract or retain the personnel we
require to compete successfully. We currently depend heavily on the services of
our Chairman and Chief Executive Officer, Larry D. Key, and a number of other
members of our senior management team. Losing Mr. Key's services or those of
other members of senior management could affect us in a material and adverse
way. Our success will also depend on attracting and retaining additional
qualified management personnel.
THERE IS NO ESTABLISHED TRADING MARKET FOR OUR COMMON STOCK.
There is no public trading market for the shares of our common stock,
and we do not anticipate that a market for our common stock will develop as a
result of this offering. As a result, investors who may wish or need to dispose
of all or a part of their investment in our common stock may not be able to do
so except by private direct negotiations with third parties, assuming that third
parties are willing to purchase our common stock.
WE DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK.
We have never declared or paid, and we do not currently intend to
declare or pay, cash dividends on our common stock because we expect to apply
any earnings to developing and expanding our business. In addition, our ability
to pay dividends is subject to regulatory limitations.
WE ARE STILL A YOUNG COMPANY WITH A LIMITED OPERATING HISTORY.
We opened for business only three years ago. Although we have grown
very rapidly, we have a relatively short operating history. We may not continue
to perform as well as we have in the past, and we may continue to be
unprofitable.
WE ENCOUNTER TECHNOLOGICAL CHANGE CONTINUALLY, AND WE HAVE FEWER RESOURCES THAN
MANY OF OUR COMPETITORS TO INVEST IN TECHNOLOGICAL IMPROVEMENTS.
The financial services industry is undergoing rapid technological
changes, with frequent introductions of new technology-driven products and
services. In addition to serving customers better, the effective use of
technology increases efficiency and enables financial institutions to reduce
costs. Our future success will depend, in part, upon our ability to address our
customers' needs by using technology to provide products and services that will
satisfy customer demands for convenience, as well as to create additional
efficiencies in our operations. Many of our competitors have substantially
greater resources to invest in technological improvements than we have. We may
not be able to implement new technology-driven products and services effectively
or be successful in marketing these products and services to our customers.
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SALES OF COMMON STOCK BY EXISTING SHAREHOLDERS COULD ADVERSELY AFFECT THE PRICE
OF OUR COMMON STOCK.
Sales of a significant number of shares of our common stock following
this offering, or the perception that the sales could occur, could adversely
affect the market price of our common stock. The shares offered by this
prospectus will be freely tradable without restriction, except for any shares
that are purchased by our affiliates.
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THE OFFERING
MINIMUM AND MAXIMUM OFFERING
We will offer a minimum of 344,827 shares of common stock and a maximum
of 689,655 shares of common stock. We have established a minimum investment of
500 shares.
SUBSCRIPTION
As indicated below under "How to Subscribe," upon execution and
delivery of a subscription agreement for shares of the common stock, subscribers
will be required to deliver to GBC Bancorp a check in the amount of $14.50 times
the number of shares subscribed for. All subscriptions will be binding and
irrevocable until the expiration date.
ESCROW
Subscription proceeds will be deposited in an escrow account with
Gwinnett Banking Company, our escrow agent, pending completion of this offering.
Subscription proceeds held in the escrow account will be invested in a separate
account designated as "GBC Bancorp, Inc. Escrow Account."
COMPANY DISCRETION
We reserve the right, in our sole discretion, to accept or reject any
subscription in whole or in part on or before the expiration date. Without
limiting the generality of the foregoing, we also reserve the right to accept
subscriptions on a prorated basis if we receive subscriptions for more than
344,827 shares. We will notify all subscribers within five business days after
the expiration date whether their subscriptions have been accepted. With respect
to any subscriptions that we do not accept in whole or in part, the notification
will be accompanied by the unaccepted portion of the subscription funds, without
interest.
TERMINATION
We reserve the right to terminate the offering on __________ 2001 or at
any time after 344,827 shares have been subscribed for.
RELEASE FROM ESCROW
When at least 344,827 shares have been sold, we intend to instruct the
escrow agent to release to us the amount of subscription proceeds relating to
subscriptions or portions of subscriptions we have accepted, together with any
interest earned on those amounts. We will issue shares of our common stock to
subscribers once the subscription proceeds have been released from escrow. Any
subscription proceeds we receive after the above conditions are met but before
termination of this offering will not be deposited in the escrow account, and
will be available for our immediate use, to the extent we accept the
subscription.
PLAN OF DISTRIBUTION
Offers and sales of the common stock will be made on our behalf
primarily by our officers and directors. Our officers and directors will not
receive any commissions or other remuneration in connection with these
activities, but they will be reimbursed for their reasonable expenses incurred
in the offering.
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HOW TO SUBSCRIBE
Each prospective investor who, together with the investor's affiliates,
desires to purchase 500 or more shares must:
1. Complete, date and execute the Subscription Agreement that is
attached as Exhibit "A" to this prospectus.
2. Make a check payable to "Gwinnett Banking Company--Escrow
Account for GBC Bancorp, Inc." in an amount equal to $14.50 multiplied by the
number of shares subscribed for.
3. Return the completed Subscription Agreement as follows:
By hand, U.S. Mail or overnight delivery to:
GBC Bancorp, Inc.
165 Nash Street
Lawrenceville, Georgia 30045
Attention: Larry D. Key, President
4. On our receipt of payment for the shares subscribed for, the
Subscription Agreement will become final, binding and irrevocable.
USE OF PROCEEDS
We will use the proceeds from the sale of shares of the common stock
offered by this prospectus to pay expenses of this offering and for working
capital.
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CAPITALIZATION
The following table sets forth our capitalization as of September 30,
2000, and pro forma capitalization as of completion of the offering, assuming
that 344,827 shares and 689,655 shares of the common stock are sold and the
proceeds from the sale are invested as described under "Use of Proceeds".
<TABLE>
<CAPTION>
AFTER THE
---------------------------------
AT SEPTEMBER 30, MINIMUM
2000 OFFERING MAXIMUM OFFERING
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<S> <C> <C> <C>
Total debt ................................................... $ 0 $ 0 $ 0
Shareholders' equity
Common stock, $1.00 par value, 3,000,000 shares authorized
(951,580 shares issued and outstanding) .................. $ 951,580 $ 1,296,407 $ 1,641,235
Additional paid-in capital (1) ............................... 8,540,327 13,115,492 17,770,670
Accumulated deficit .......................................... (262,529) (262,529) (262,529)
Accumulated other comprehensive loss ......................... (156,524) (156,524) (156,524)
----------- ------------ ------------
Total shareholders' equity ................................... $ 9,072,854 $ 13,992,846 $ 18,992,852
=========== ============ ============
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(1) Proceeds reduced by estimated offering expenses of $80,000.
DIVIDEND POLICY
It is our policy not to pay dividends until Gwinnett Banking Company is
currently and cumulatively profitable. As a result, we have no current plans to
initiate the payment of cash dividends.
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma book value per share of our common stock after
this offering. Pro forma book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of common stock in
this offering and the pro forma book value per share of common stock immediately
after completion of this offering.
Our book value as of September 30, 2000, was approximately $9.1
million, or $9.54 per share of common stock. After giving effect to our sale of
the 689,655 shares of common stock offered by this prospectus at a public
offering price of $14.50 per share and after deducting estimated offering
expenses, our adjusted book value as of September 30, 2000, would have been
approximately $19.0 million or $11.57 per share and an immediate dilution to new
investors of $2.93 per share. The following table illustrates the per share
dilution to new investors:
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<TABLE>
<S> <C> <C>
Assumed public offering price per share............................ $14.50
Book value per share............................................... $9.54
Increase per share attributable to this offering................... 2.03
-----
Book value per share after the offering............................ 11.57
------
Dilution per share to new investors in this offering............... $ 2.93
======
</TABLE>
The foregoing discussion and tables assume no exercise of any stock
options outstanding as of September 30, 2000. The foregoing discussion and
tables exclude options to purchase 103,500 shares of common stock outstanding as
of September 30, 2000 at an exercise price of $10.00 per share. To the extent
that any of these shares are issued, there will be further dilution to new
investors.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following summary presents our selected consolidated financial data
as of, and for the years ended, December 31, 1999, 1998, 1997 and 1996. We have
derived that financial data from our audited consolidated financial statements.
The following summary also presents our selected consolidated financial data as
of, and for the nine months ended September 30, 2000 and 1999. We have derived
that financial data from our unaudited consolidated quarterly financial
statements that, in our opinion, include all adjustments (consisting of only
normal, recurring adjustments) considered necessary for a fair presentation. The
summary selected consolidated financial data should be read in conjunction with
our consolidated financial statements and the related notes. The summary
selected consolidated financial data for the nine months ended September 30,
2000 is not necessarily indicative of our operating results for the entire year.
<TABLE>
<CAPTION>
AS OF AND FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
---------------------- ---------------------------------------------------
2000 1999 1999 1998 1997 1996
------- -------- ----- ----- ---- ----
(UNAUDITED)
(DOLLARS AND NUMBERS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT SUMMARY:
Net interest income ................... 3,202 2,203 3,111 1,848 145 (7)
Provision for loan losses ............. 376 188 309 344 29 --
Noninterest income .................... 213 136 177 86 33 --
Noninterest expense ................... 2,312 1,812 2,534 2,098 837 --
Income before taxes ................... 727 339 445 (508) (688) (239)
Income tax expense .................... -- -- -- -- -- --
Net income ............................ 727 339 445 (508) (688) (239)
COMMON SHARE SUMMARY:
Diluted earnings (losses) per share ... $ .76 $ .36 $ .47 $ (.53) $ (4.26) $(2,981.73)
Book value per share .................. 9.54 8.62 8.66 8.48 9.00 (2,971.73)
Weighted average diluted shares
outstanding ........................ 952 950 950 950 161 80
PERIOD-END BALANCE SHEET SUMMARY:
Assets ................................ 94,511 53,061 62,332 33,325 12,850 149
Loans, net of allowance for loan
losses............................... 64,954 35,814 43,612 24,067 1,842 --
Investment securities, at fair value .. 8,890 6,906 6,837 4,009 0 --
Noninterest-bearing deposits .......... 11,540 7,582 7,311 5,312 1,066 --
Total deposits ........................ 84,778 44,657 53,784 25,008 4,272 --
Shareholders' equity .................. 9,073 8,192 8,244 8,054 8,550 (238)
CAPITAL RATIOS:
Total risk-based capital ratio ........ 14.13 22.67 19.28% 32.50% 201.41% --
Tier 1 risk-based capital ratio ....... 12.88 21.42 18.03% 31.25% 200.72% --
Tier 1 leverage ratio ................. 10.29 17.23 14.98% 25.77% 109.11% --
Shareholders' equity to assets ........ 9.60 15.44 13.23% 24.17% 66.54% --
</TABLE>
13
<PAGE> 16
The following summary presents our selected consolidated asset quality
data and selected financial ratios as of, and for the years ended, December 31,
1999, 1998, 1997 and 1996. The following summary also presents our selected
consolidated asset quality data and selected financial ratios as of, and for the
nine months ended, September 30, 2000 and 1999. We have derived that data from
our unaudited consolidated quarterly financial statements that, in our opinion,
include all adjustments (consisting of only normal, recurring adjustments)
considered necessary for a fair presentation. The summary selected consolidated
asset quality data and selected financial ratios should be read in conjunction
with our consolidated financial statements and the related notes. The summary
selected consolidated financial asset quality data and selected financial ratios
for the nine months ended September 30, 2000 are not necessarily indicative of
our operating results for the entire year.
<TABLE>
<CAPTION>
AS OF AND FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31,
---------------------- ----------------------------------------------
2000 1999 1999 1998 1997 1996
------- -------- ----- ----- ---- ----
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED ASSET QUALITY DATA:
Loans past due 90 days or more and
still accruing interest............. 0 0 0 0 0 --
Nonaccrual loans ...................... 0 0 4 0 0 --
Total nonperforming loans ............. 0 0 4 0 0 --
Other real estate owned and other
foreclosed assets .................. 42 0 0 0 0 --
Total nonperforming assets ............ 42 0 4 0 0 --
Allowance for loan losses ............. 998 553 674 373 29 --
SELECTED FINANCIAL RATIOS:
Return on average assets(1) ........... 1.08 1.08 .98 (2.01) (5.12) --
Return on average shareholders'
equity(1) .......................... 11.29 5.59 5.48 (6.12) (6.61) --
Efficiency ratio(1) ................... 3.12 5.34 5.18 7.98 35.27 --
Net interest margin(1) ................ 6.01 7.36 7.21 7.76 5.74(2) --
Allowance for loan losses as a
percentage of:
total loans ........................ 1.51 1.52 1.52 1.52 1.53 --
total nonperforming loans .......... -- -- 16,850 -- -- --
Nonperforming loans to total loans .... -- -- .01 -- -- --
Nonperforming assets to total
assets ............................. .04 -- .01 -- -- --
Net charge-offs (recoveries) to
average loans(1) ................... .10 .03 .02 -- -- --
</TABLE>
---------------
(1) Annualized for the nine months ended September 30, 2000 and 1999.
(2) For period from October 31, 1997 (date of commencement of operations)
to December 31, 1997.
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our financial condition and the
financial condition of our bank subsidiary, Gwinnett Banking Company, at
September 30, 2000 and 1999; and December 31, 1999 and 1998 and the results of
operations for the nine months ended September 30, 2000 and 1999; and the years
ended December 31, 1999 and December 31, 1998. The purpose of this discussion is
to focus on information about our 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
We may from time to time make written or oral forward-looking
statements, including statements contained in this prospectus. Statements made
in this prospectus, 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. Our 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 our 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. We caution that such factors are not
exclusive. We do not undertake to update any forward-looking statement that may
be made from time to time by, or on behalf of, us.
NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
Liquidity and Capital Resources
As of September 30, 2000, our liquidity ratio, as determined under
guidelines established by regulatory authorities, was satisfactory. We consider
our liquidity to be adequate to meet operating and loan funding requirements.
Our liquidity ratio (i.e. cash, short-term assets and marketable assets divided
by deposits) was approximately 32%. As we continue to grow, we will continue to
monitor liquidity and make adjustments as deemed necessary.
At September 30, 2000, our capital ratios and those of the Bank were
adequate based on regulatory minimum capital requirements. The minimum capital
requirements and our actual capital ratios and those of the Bank are as follows:
15
<PAGE> 18
<TABLE>
<CAPTION>
ACTUAL
-------------------------- ------------
GWINNETT REGULATORY
GBC BANKING MINIMUM
BANCORP COMPANY REQUIREMENT
------- -------- -----------
<S> <C> <C> <C>
Leverage capital ratios 10.29% 9.97% 4.00%
Risk-based capital ratios:
Core capital 12.88 12.48 4.00
Total capital 14.13 13.73 8.00
</TABLE>
As we continue to grow and the loan portfolio increases, the capital
ratios will decrease to levels closer to, but still in excess of regulatory
minimum requirements.
At September 30, 2000, we had loan commitments outstanding of $24.9
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 September 30, 2000, the Bank has arrangements with
three commercial banks for additional short-term advances of $6,750,000.
Financial Condition
The following is a summary of our balance sheets for the periods
indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------
2000 1999 INCREASE (DECREASE)
------------- ------------ ----------------------
(DOLLARS IN THOUSANDS) AMOUNT PERCENT
-------- -------
<S> <C> <C> <C> <C>
Cash and due from banks $ 338 $ 3,193 $ (2,855) (89.41)%
Federal funds sold 18,020 6,660 11,370 170.98
Securities 8,890 6,837 2,053 30.03
Loans, net 64,954 43,612 21,342 48.94
Equipment 466 491 (25) (5.09)
Other assets 1,843 1,549 294 18.98
------- ------- --------
$94,511 $62,332 $ 32,179 51.63
======= ======== ========
Deposits $84,778 $53,784 $ 30,994 57.63%
Other liabilities 660 304 356 117.11
Shareholders' equity 9,073 8,244 829 10.06
------- ------- --------
$94,511 $62,332 $ 32,179 51.63
======= ======= ========
</TABLE>
As indicated in the above table, our total assets grew at a rate of
51.63% during the first nine months of 2000. Deposit growth of $30,994,000 and
reduced levels of cash were invested in loans, securities, and Federal funds
sold. Our loan to deposit ratio has decreased from 82.34% at December 31, 1999
to 77.79% at September 30, 2000, indicating that deposit growth associated with
higher rates paid on deposits has outpaced the loan demand in our primary market
area of Gwinnett County, Georgia. Shareholders' equity has increased by $829,000
due to net income of $727,000 and decreased unrealized losses on securities
available-for-sale of $102,000.
16
<PAGE> 19
We have received approval from regulatory authorities to open branch
banking facilities in Alpharetta, Georgia. We expect to begin branch operations
by January 31, 2001. We have entered into a five year lease agreement to lease
the facilities at a monthly cost of approximately $9,100. We anticipate
expending approximately $500,000 for leasehold improvements and other equipment.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
The following is a summary of our operations for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
2000 1999 INCREASE (DECREASE)
------ ------ -------------------
(DOLLARS IN THOUSANDS) AMOUNT PERCENT
------ -------
<S> <C> <C> <C> <C>
Interest income .............. $5,719 $3,182 $2,537 79.74%
Interest expense ............. 2,517 979 1,538 157.19
------ ------ ------
Net interest income .......... 3,202 2,203 999 45.33
Provision for loan losses .... 376 188 188 100.22
Other income ................. 213 136 77 56.70
Other expense ................ 2,312 1,812 500 27.58
------ ------ ------
Net income ................... $ 727 $ 339 $ 388 114.44%
====== ====== ======
</TABLE>
Our net interest income increased by $999,000 for the first nine months
of 2000 as compared to the same period in 1999. Our net interest margin
decreased to 6.01% during the first nine months of 2000 as compared to 7.36% for
the first nine months of 1999 and 7.21% for the entire year of 1999. The
increase in the net interest income is due primarily to the increased volume of
average loans and related loan fees. The decrease in the net interest margin is
due to the increase of securities and Federal funds sold as components of total
interest-earning assets which yield less than loans, coupled with the increase
in rates paid on deposits. The average rate paid on deposits was 5.74% for the
first nine months of 2000 as compared to 4.82% for the first nine months of 1999
and 4.96% for the entire year of 1999.
The provision for loan losses increased by $188,000 for the first nine
months of 2000 as compared to the same period in 1999. The increase is due to a
combination of increased net charge-offs of $44,000 and overall loan growth, as
well as inherent risk in the loan portfolio. We do not believe the increases in
net charge-offs indicate any significant negative trend in the overall credit
quality of the loan portfolio. Our allowance for loan losses as a percentage of
total loans amounted to 1.51% at September 30, 2000 as compared to 1.52% at
December 31, 1999. 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. Our evaluation of the loan portfolio includes a
continuing review of loan loss experience, current economic conditions which may
affect the borrower's ability to repay and the underlying collateral value.
Information with respect to nonaccrual, past due and restructured loans
is as follows:
17
<PAGE> 20
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
2000 1999
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Nonaccrual loans .................................................................... $ 0 $ 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 .................................... 0 0
Interest income that would have been recorded on nonaccrual and restructured
loans under original terms ...................................................... 2 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 90 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.
Information regarding certain loans and allowance for loan loss data is
as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------
SEPTEMBER 30,
------------------------
2000 1999
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Average amount of loans outstanding ................................................. $ 53,739 $ 31,126
======== ========
Balance of allowance for loan losses at beginning of period ......................... $ 674 $ 373
-------- --------
Loans charged off
Commercial and financial ..................................................... $ 42 $ 0
Real estate construction ..................................................... 10 0
Installment .................................................................. 0 0
Other ........................................................................ 0 8
-------- --------
52 8
-------- --------
Loans recovered
Commercial and financial ..................................................... 0 0
Real estate construction ..................................................... 0 0
Installment .................................................................. 0 0
-------- --------
0 0
-------- --------
Net charge-offs ..................................................................... 52 8
-------- --------
Additions to allowance charged to operating expense during period ................... 376 188
-------- --------
Balance of allowance for loan losses at end of period ............................... $ 998 $ 553
======== ========
Ratio of net loans charged off during the period to average loans outstanding ....... .10% .03%
======== ========
</TABLE>
18
<PAGE> 21
Other income increased by $77,000 for the first nine months of 2000 as
compared to the same period in 1999, due to increased service charges on deposit
accounts associated with the overall deposit growth and other miscellaneous
fees.
Other expenses increased by $500,000 for the first nine months of 2000
as compared to the same period in 1999. Salaries and employee benefits have
increased by $322,000 during this period due to an increase in the number of
full time equivalent employees to 26 as of September 30, 2000 from 23 as of
September 30, 1999 and to normal salary increases. Equipment and occupancy
expenses have increased by $99,000 during this period due to increased building
lease expense, equipment depreciation, and service contracts. Other operating
expenses have increased by $79,000 during this period due to our overall growth.
We have recorded no provision for income taxes due to cumulative net
operating losses.
We are not aware of any known trends, events or uncertainties, other
than the effect of events as described above, that will have or that are
reasonably likely to have a material effect on our liquidity, capital resources
or operations. We are also not aware of any current recommendations by the
regulatory authorities which, if they were implemented, would have such an
effect.
FINANCIAL CONDITION AT DECEMBER 31, 1999 AND 1998
Following is a summary of our 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
Shareholders' equity ......... 8,244 8,054
-------- --------
$ 62,332 $ 33,325
======== ========
</TABLE>
As of December 31, 1999, we 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. Our 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. Our loan to deposit ratio was 81.09% at
December 31, 1999 as compared
19
<PAGE> 22
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.
Our 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.
We have 70% of our loan portfolio collateralized by real estate located
in our primary market area of Gwinnett County and surrounding counties. Our real
estate construction portfolio consists of loans collateralized by loans to build
one- to four-family residential properties. We generally require that loans
collateralized by real estate not exceed 80%-85% of the collateral value.
The remaining 30% of our loan portfolio consists of commercial,
consumer, and other loans. We require collateral commensurate with the repayment
ability and creditworthiness of the borrower.
The specific economic and credit risks associated with our 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
our 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 our market area are stable with no indications of a
significant downturn in the general economy.
We attempt 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, we establish and periodically review our 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.
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
our other needs. 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. We attempt to
price our deposits to meet our asset/liability objectives consistent with local
market conditions.
20
<PAGE> 23
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, we 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. As of December 31, 1999, the Bank had arrangements with
three commercial banks for additional short-term advances of $4,500,000.
At December 31, 1999, our capital ratios and those of the Bank were
considered adequate based on regulatory minimum capital requirements. Our
shareholders' equity increased due to net income in 1999 of $445,000 and the
exercise of stock options of $13,500. Our shareholders' 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, our primary source of funds will be the payment of
dividends by our subsidiary Bank, Gwinnett Banking Company. 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 Gwinnett
Banking Company to us without regulatory approval.
The minimum capital requirements to be considered well capitalized
under prompt corrective action provisions and the actual capital ratios for GBC
Bancorp and Gwinnett Banking Company as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
ACTUAL
-------------------------------------
GWINNETT
BANKING REGULATORY
GBC BANCORP COMPANY 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, we 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.
We believe that our liquidity and capital resources are adequate and
will meet our foreseeable short and long-term needs. We anticipate that we will
have sufficient funds available to meet current loan commitments and to fund or
refinance, on a timely basis, our other material commitments and liabilities.
We are not aware of any known trends, events or uncertainties that will
have or that are reasonably likely to have a material effect on our liquidity,
capital resources or operations. We are also not aware of any current
recommendations by the regulatory authorities which, if they were implemented,
would have such an effect.
21
<PAGE> 24
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. We, through our asset-liability
committee, attempt 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 our 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 our 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
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>
NET INTEREST INCOME
Our results of operations are determined by our 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 our
control, our ability to generate net interest income is dependent upon our
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
22
<PAGE> 25
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, we 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.
Other income was $86,000 in 1998 as compared to $33,000 in 1997. The
increases were due to our 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. We lease our building from a
partnership formed by our organizing group, and we 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) were due
primarily to our being open for an entire year versus only two months in 1997.
We also adopted SOP 98-5 which required the write-off of $167,000 of
organization costs.
INCOME TAX
We have reported no income tax expense for 1999 and 1998 due to
accumulated net operating losses.
23
<PAGE> 26
ASSET/LIABILITY MANAGEMENT
It is our 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.
Our 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 to adversely
affect net interest income. If our 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, we also evaluate 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 our liquidity position. We
currently price 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 our
liquidity position.
At December 31, 1999, our cumulative one year interest rate-sensitivity
gap ratio was 110%. Our targeted ratio is 80% to 120% in this time horizon. This
indicates that our interest-earning assets will reprice during this period at a
rate faster than our interest-bearing liabilities.
24
<PAGE> 27
The following table sets forth the distribution of the repricing of our
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 our 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.
<TABLE>
<CAPTION>
AFTER THREE AFTER ONE
WITHIN MONTHS BUT YEAR BUT
THREE WITHIN ONE WITHIN AFTER FIVE
MONTHS YEAR FIVE YEARS 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>
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 shareholders' equity, the interest rates
experienced by us ; our investment portfolio; our loan portfolio, 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; types of deposits and the return on
equity and assets.
25
<PAGE> 28
DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS' 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,
------------------------
1999 1998
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
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
======== ========
$ 43,126 $ 23,829
Total interest-earning assets...................... ======== ========
LIABILITIES AND SHAREHOLDERS' 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
Shareholders' 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.
INTEREST INCOME AND INTEREST EXPENSE
The following tables set forth the amount of our interest income and
interest expense for each category of interest-earning assets and
interest-bearing liabilities and the average interest rate for total
26
<PAGE> 29
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 our 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>
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>
YEARS ENDED 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>
28
<PAGE> 31
<TABLE>
<CAPTION>
AFTER TEN YEARS TOTAL
--------------------- ---------------------- ----------------------
YIELD(1) AMOUNT YIELD(1) AMOUNT
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government Agencies ..... $ -- $ -- 6.40% $6,837 7.10% $2,906
</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.
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>
YEARS ENDED 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>
29
<PAGE> 32
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>
Predetermined interest rates ................ $ 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.
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
30
<PAGE> 33
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 --
-------- --------
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.
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 PERCENT OF DECEMBER 31, 1998 PERCENT OF
LOANS IN EACH CATEGORY LOANS IN EACH CATEGORY
---------------------------- ----------------------------
TO TOTAL TO TOTAL
AMOUNT LOANS AMOUNT 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>
31
<PAGE> 34
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.
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 months through twelve months ....... 5,054
Over twelve months .......................... 2,638
--------
Total .............................. $ 19,531
========
</TABLE>
RETURN ON ASSETS AND SHAREHOLDERS' EQUITY
The following rate of return information for the years indicated is
presented below.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
------ ------
<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.
32
<PAGE> 35
BUSINESS
GBC BANCORP
We were organized in August 1996 as a Georgia corporation for the
purpose of acquiring all of the common stock of Gwinnett Banking Company, a
Georgia bank which opened for business in October, 1997. We are a bank holding
company within the meaning of the Bank Holding Company Act of 1956, and the
Georgia Bank Holding Company 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. Any acquisitions will be subject to
certain regulatory approvals and requirements.
GWINNETT BANKING COMPANY
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. The Bank, however, 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.
INDUSTRY AND 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
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 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 26 full-time employees and one part time employee. GBC
Bancorp does not have any employees who are not also employees of the Bank.
33
<PAGE> 36
SUPERVISION AND REGULATION
GENERAL
We are subject to state and federal banking laws and regulations that
impose specific requirements or restrictions and provide for general regulatory
oversight over virtually all aspects of our operations. These laws and
regulations generally are intended to protect depositors, not shareholders. This
discussion is only a summary of various statutory and regulatory provisions.
This summary is qualified by reference to the particular statutory and
regulatory provisions. Any change in applicable laws or regulations may have a
material effect on our business and prospects.
Beginning with the enactment of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, numerous additional regulatory
requirements have been placed on the banking industry during the past ten years.
On November 12, 1999, the President signed into law a financial services
modernization act which effectively repealed the anti-affiliation provisions of
the 1933 Glass-Steagall Act and the 1956 Bank Holding Company Act. Legislative
changes and the policies of various regulatory authorities may affect our
operations. We are unable to predict the nature or the extent of the effect on
our business and earnings that fiscal or monetary policies, economic control or
new federal or state legislation may have in the future.
THE COMPANY
GBC Bancorp is a bank holding company registered with the Board of
Governors of the Federal Reserve System and the Georgia Department of Banking
and Finance under the Bank Holding Company Act of 1956, as amended, and the
Georgia Bank Holding Company Act. We are subject to the supervision, examination
and reporting requirements of the Bank Holding Company Act and the regulations
of the Federal Reserve, and the Georgia Bank Holding Company Act and the
regulations of the Georgia Department of Banking and Finance.
The Bank Holding Company 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 Bank Holding Company 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. In
addition, the Federal Reserve will not approve a transaction 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. However, such
transactions mat be approved in the event the anti-competitive effects of the
proposed transaction are clearly outweighed by the public interest in meeting
the convenience and needs
34
<PAGE> 37
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 Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
facilitates interstate branching and permits the establishment of agency
relationships across state lines. The Interstate Banking Act also permits bank
holding companies to acquire banks in any state without regard to whether the
transaction is prohibited under the laws of such state, subject to certain state
provisions, including minimum age requirements of banks that are the target of
the acquisition. The minimum age of local banks subject to interstate
acquisition is limited to a maximum of five years.
In response to the Interstate Banking Act, the Georgia General Assembly
adopted the Georgia Interstate Banking Act, which provides that:
- interstate acquisitions by institutions located in Georgia
will be permitted in states which also allow interstate
acquisitions, and
- interstate acquisitions of institutions located in Georgia
will be permitted by institutions located in states which
allow interstate acquisitions.
Additionally, in 1996, the Georgia General Assembly adopted the Georgia
Interstate Branching Act which permits Georgia-based banks and bank holding
companies owning banks outside of Georgia and all non-Georgia banks and bank
holding companies owning banks in Georgia the right to merge any bank into an
interstate branch network. The Georgia Interstate Branching Act also allows
banks to establish de novo branches on an unlimited basis throughout Georgia,
subject to the prior approval of the Georgia Department of Banking and Finance.
Except as amended by the Gramm-Leach-Bliley Act of 1999 discussed
below, the Bank Holding Company Act generally prohibits a bank holding company
from engaging in activities other than banking or managing or controlling banks
or other permissible subsidiaries. Bank holding companies are also generally
prohibited 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. Activities determined by the Federal Reserve to
fall within this category include acquiring or servicing loans, leasing personal
property, conducting discount securities brokerage activities, performing
certain data processing services, acting as agent or broker in selling certain
types of credit insurance, and performing certain insurance underwriting
activities. The BHC Act does not place territorial limitations on permissible
non-banking activities of bank holding companies. The Federal Reserve has the
power to order a bank holding company or its subsidiaries to terminate any
non-banking activity when it has reasonable cause to believe that continuation
of such activity constitutes a serious risk to the safety and soundness of any
bank subsidiary of that bank holding company.
THE BANK
Gwinnett Banking Company is incorporated under the laws of the State of
Georgia and is subject to examination by the Georgia Department of Banking and
Finance. The Georgia Department regulates all areas of the Bank's commercial
banking operations, including, without limitation, loans, deposits,
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<PAGE> 38
reserves, mergers, reorganizations, issuance of securities, payment of
dividends, and the establishment of branches.
The Bank is also a member of the Federal Deposit Insurance Corporation,
and as such, the FDIC, to the maximum extent provided by law, insures its
deposits. The Bank is also subject to numerous state and federal statutes and
regulations that affect its business, activities, and operations. The FDIC and
the Georgia Department regularly examine the operations of the Bank and have the
power to prevent the continuance or development of unsafe or unsound banking
practices or other violations of law.
GRAMM-LEACH-BLILEY ACT OF 1999
On November 12, 1999, the President signed into law the
Gramm-Leach-Bliley Act of 1999, which breaks down many of the barriers to
affiliations among banks and securities firms, insurance companies, and other
financial service providers. This new law provides financial organizations with
the flexibility to structure new affiliations through a holding company
structure or a financial subsidiary. As a result, the number an type of entities
competing with us in our markets could increase. It is too early to determine
what effect, if any, this new law will have on us.
The Gramm-Leach-Bliley Act also 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.
The legislation amends the Bank Holding Company Act to clarify that a
bank holding company may hold shares of any company that the Federal Reserve has
determined 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." 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:
- 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 explicitly
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;
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<PAGE> 39
- 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; 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 has found 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.
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 did not receive a Community
Reinvestment Act rating of at least "satisfactory" at its most recent
examination, the regulatory agencies are to prevent the insured depository
institution or financial holding company from exercising the new powers, either
directly or through a subsidiary.
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
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<PAGE> 40
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.
In addition, the Georgia Financial Institutions Code and the
regulations of the Georgia Department of Banking and Finance provide:
- that dividends of cash or property may be paid only out of the
retained earnings of Gwinnett Banking Company;
- that dividends may not be paid if the Banks' paid-in capital
and retained earnings which are set aside for dividend payment
and other distributions do not, in combination, equal at least
20% of the bank's capital stock; and
- that dividends may not be paid without prior approval of the
Georgia Department of Banking and Finance if:
- the bank's total classified assets exceed 80% of its
equity capital;
- the aggregate amount of dividends to be declared
exceeds 50% of the bank's net profits after taxes but
before dividends for the previous calendar year; or
- the ratio of equity capital to total adjusted assets
is less than 6%.
Applying these dividend restrictions, and without prior approval of the
Georgia Department of Banking and Finance, as of September 30, 2000, Gwinnett
Banking Company could not pay dividends to us.
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 Federal Deposit Insurance
Corporation 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-
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<PAGE> 41
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 of total capital to risk-weighted
assets is 8.0%. At least half of total capital must be comprised of Tier 1
Capital, which is 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. The
remainder may consist of Tier 2 Capital, which is subordinated debt, other
preferred stock and a limited amount of loan loss reserves. At September 30,
2000, GBC's total risk-based capital ratio and its Tier 1 risk-based capital
ratio were 14.13% and 12.88% respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets, of 3.0% for bank holding companies that meet specified
criteria. 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. GBC Bancorp's leverage ratio at September 30, 2000 was 10.29%. 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" and other indicia of
capital strength in evaluating proposals for expansion or new activities. The
Federal Reserve has not advised GBC Bancorp's of any specific minimum leverage
ratio or tangible Tier 1 leverage ratio applicable to it.
The Bank is subject to risk-based and leverage capital requirements
adopted by the Federal Deposit Insurance Corporation, which are substantially
similar to those adopted by the Federal Reserve for bank holding companies.
Gwinnett Banking Company was in compliance with applicable minimum capital
requirements as of September 30, 2000. We have not been advised by any federal
banking agency of any specific capital ratio requirement applicable to the Bank.
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 Federal Deposit Insurance Corporation, 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 Federal Deposit Insurance
Corporation have recently adopted regulations requiring regulators to consider
interest rate risk 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.
In addition to the capital standards imposed by federal banking
regulators, the Georgia Department of Banking and Finance imposed a requirement
for Gwinnett Banking Company to maintain a primary capital ratio of not less
than 8.0% during the first three years of the Bank's operation. Following the
expiration of this initial period, the Bank became subject to a 6.0% primary
capital ratio. Such standard is calculated as the ratio of total equity to total
assets, each as adjusted for unrealized gains and losses on securities and
allowance for loan losses.
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<PAGE> 42
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, Gwinnett Banking
Company. 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 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
The Federal Deposit Insurance Corporation Improvement Act of 1991 was
enacted in large measure to improve the supervision and examination of insured
depository institutions in an effort to reduce the number of bank failures and
the resulting demands on the deposit insurance system. This law establishes a
system of prompt corrective action to resolve the problems of undercapitalized
institutions. Under this system, the federal banking regulators have established
five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and are required 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 such
actions depends upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the banking regulator is required 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 regulations, a FDIC-insured bank will be:
- "well capitalized" if it has a total capital ratio of 10.0% or
greater, a tier 1 capital ratio of 6.0% or greater and a
leverage ratio of 5.0% or greater and is not subject to any
order or written directive by the appropriate regulatory
authority to meet and maintain a specific capital level for
any capital measure;
- "adequately capitalized" if it has a total capital ratio of
8.0% or greater, a tier 1 capital ratio of 4.0% or greater and
a leverage ratio of 4.0% or greater (3.0% in certain
circumstances) and is not "well capitalized";
- "undercapitalized" if it has a total capital ratio of less
than 8.0%, a tier 1 capital ratio of less than 4.0% or a
leverage ratio of less than 4.0% (3.0% in certain
circumstances);
- "significantly undercapitalized" if it has a total capital
ratio of less than 6.0%, a tier 1 capital ratio of less than
3.0% or a leverage ratio of less than 3.0%; and
- "critically undercapitalized" if its tangible equity is equal
to or less than 2.0% of average quarterly tangible assets.
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 in any one of four categories. As
a depository institution moves downward through the capitalization categories,
the degree of regulatory scrutiny will increase and the permitted activities of
the institution will decrease.
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<PAGE> 43
An FDIC-insured bank is generally prohibited from making any capital
distribution, including dividend payments, or paying any management fee to its
holding company if the bank would thereafter be "undercapitalized".
"Undercapitalized" banks are subject to growth limitations and are required to
submit a capital restoration plan. The federal regulators may not accept a
capital plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the bank's capital.
In addition, for a capital restoration plan to be acceptable, the bank's parent
holding company must guarantee that the institution will comply with such
capital restoration plan. The aggregate liability of the parent company is
limited to the lesser of an amount equal to 5.0% of the bank's total assets
at the time it became "undercapitalized" and the amount necessary to bring
the institution into compliance with all applicable capital standards. If a bank
fails to submit an acceptable plan, it is treated as if it is "significantly
undercapitalized". "Significantly undercapitalized" institutions may be subject
to a number of requirements and restrictions, including orders to sell
sufficient voting stock to become "adequately capitalized", requirements to
reduce total assets, and cessation of receipt of deposits from correspondent
banks. "Critically undercapitalized" institutions are subject to the appointment
of a receiver or conservator. A bank that is not "well capitalized" is subject
to certain limitations relating to so-called "brokered" deposits.
At September 30, 2000, Gwinnett Banking Company had the requisite
capital levels to qualify as "well capitalized."
FDIC INSURANCE ASSESSMENTS
The Federal Deposit Insurance Corporation has 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 assigns an institution to one of
three capital categories: well capitalized, adequately capitalized, and
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. The FDIC also assigns an institution to one of three supervisory
subgroups within each capital group. The supervisory subgroup to which an
institution is assigned is based on an evaluation provided to the FDIC by the
institution's primary federal regulator and information which the FDIC
determines to be relevant to the risk posed to the deposit insurance funds. An
institution's insurance assessment rate is then determined based on the capital
category and supervisory category to which it is assigned. The combination of
capital groups and supervisory subgroups results in nine assessment risk
classifications to which different assessment rates are applied.
The FDIC may terminate the insurance of the deposits of Gwinnett
Banking Company upon a finding that the bank has engaged in unsafe and unsound
practices, is in an unsafe or unsound condition to continue operations, or has
violated any applicable law, regulation, order, or condition the FDIC has
imposed.
SAFETY AND SOUNDNESS STANDARDS
The federal bank regulatory agencies have adopted a set of guidelines
prescribing safety and soundness standards. 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
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<PAGE> 44
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 an institution fails to submit or implement such
a plan, the agency must issue an order directing action to correct the
deficiency and may require other actions of the types to which an
undercapitalized institution is subject under the "prompt corrective action"
provisions described above. 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 requires federal bank regulatory
agencies to encourage financial institutions to meet the credit needs of low-
and moderate-income borrowers in their local communities. 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 may opt to be evaluated under a
strategic plan formulated with community input and pre-approved by the bank
regulatory agency.
Community Reinvestment Act regulations provide for certain disclosure
obligations. Each institution must post a notice advising the public of its
right to comment to the institution and its regulator on the institution's
Community Reinvestment Act performance and to review the institution's Community
Reinvestment Act 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. The Community Reinvestment Act requires public disclosure of a financial
institution's written Community Reinvestment Act evaluations. This promotes
enforcement of Community Reinvestment Act requirements by providing the public
with the status of a particular institution's community reinvestment record.
The recently enacted Gramm-Leach-Bliley Act makes various changes to
the CRA. Among other changes, CRA agreements with private parties must be
disclosed and annual CRA reports must be made to a bank's primary federal
regulator. A bank holding company will not be permitted to become a financial
holding company and no new activities authorized under this Act may be commenced
by a holding company or by a if any of its bank subsidiaries received less than
a "satisfactory" CRA rating in its latest CRA examination.
FACILITIES
The Bank leases its offices located at 165 Nash Street, Lawrenceville,
Gwinnett County, Georgia.
LEGAL PROCEEDINGS
We are subject to claims and litigation in the ordinary course of
business. We believe that any pending claims and litigation will not have a
material adverse effect on our consolidated position.
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MANAGEMENT
The following table sets forth for the current members of 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, their names, addresses
and ages at December 21, 2000, and the positions they hold.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
----------------------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Larry D. Key.................................... 55 President, Chief Executive Officer and Chairman of the
Company and the Bank
John T. Hopkins III............................. 59 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................................ 45 Senior Vice President of the Bank
Jan Smith....................................... 49 Senior Vice President, Commercial Lending
Marcia N. Watkins............................... 54 Senior Vice President and Chief Operations Officer of
the Bank
James B. Ballard................................ 56 Director of the Company and the Bank
Jerry M. Boles.................................. 60 Director of the Company and the Bank
W. H. Britt..................................... 62 Director of the Company and the Bank
Richard F. Combs................................ 53 Director of the Company and the Bank
William G. Hayes................................ 62 Director of the Company and the Bank
Douglas A. Langley.............................. 42 Director of the Company and the Bank
Norris J. Nash.................................. 73 Director of the Company and the Bank
J. Joseph Powell................................ 56 Director of the Company and the Bank
William S. Stanton, Jr.......................... 45 Director of the Company and the Bank
</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 has served as Senior Vice President and Commercial
Loan Officer of the Bank since 1997. Mr. 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
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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 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 in 1972
and served as a director until 1987 when the bank was merged with Heritage Bank.
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. Mr. Combs also serves on the board of
directors of Added Communications of Georgia, Inc., a company that manufactures
telephone communications equipment.
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 has served as Executive Vice President, Chief
Financial Officer, Secretary and Treasurer of us and the Bank since 1996. Mr.
Hopkins 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 President, Chief Executive Officer and Chairman
of us and the Bank 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 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 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. Mr. Langley is also a shareholder of Gwinnett Financial Services,
Inc. and is a licensed stock broker and holds insurance licenses.
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<PAGE> 47
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 Executive Vice President and Chief Credit
Officer of the Bank since 1997. He 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.
JAN SMITH has served as Senior Vice President, Commercial Lending of
the Bank since March 2000. Prior to joining us, Mr. Smith was employed in the
same capacity for 10 years at Colonial Bank, which purchased Commercial Bank of
Georgia in 1996.
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 has served as Senior Vice President and Chief
Operations Officer of the Bank since 1996. She 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.
EXECUTIVE COMPENSATION
The following table provides information with respect to the annual
compensation for services in all capacities for 1997, 1998 and 1999 for our
Chief Executive Officer. No other officer earned more than $100,000 in 1999.
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<PAGE> 48
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
------------------------------------
SECURITIES
UNDERLYING
OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS GRANTED
--------------------------------------- ----- ---------- ----- ----------
<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 -- 0
</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 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>
PERCENT OF
TOTAL OPTIONS
NUMBER OF GRANTED TO
SECURITIES EMPLOYEES EXERCISE
UNDERLYING IN FISCAL PRICE PER EXPIRATION
NAME OPTIONS GRANTED(1) YEAR SHARE DATE
------------------------ ------------------- ------------- --------- ----------
<S> <C> <C> <C> <C>
Larry D. Key............ 10,000 22.2% $10.00 09/19/2009
</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.
Mr. Key exercised no options in 1999.
AGGREGATE/YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NAME OPTIONS AT YEAR-END(1) AT YEAR-END(1)
------------------------------------------------------- ---------------------- -------------------
<S> <C> <C>
Larry D. Key........................................... 16,000 $ 0
</TABLE>
-------------
46
<PAGE> 49
(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 ($10.00 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.
STOCK OPTION PLANS
1998 STOCK OPTION PLAN
In October, 1999, our shareholders adopted the 1998 Stock Option Plan
of GBC Bancorp, Inc. Under the 1998 Option Plan, our Board of Directors, or the
Compensation Committee of our 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 our common stock by individuals employed or
retained by us or the Bank who will be responsible for our future growth. 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; and
- nonqualified stock options.
Officers, key employees, employee directors, consultants and other
independent contractors or agents of us or the Bank 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 incentive stock
options may be granted only to a person employed by us or the Bank.
The Georgia Department of Banking and Finance 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 of
Banking and Finance must grant prior approval to any shareholder (including the
shareholder's spouse and children) before a shareholder may own more than 20% of
our outstanding stock, the exercise of options may be limited by the Georgia
Department of Banking and Finance. The Georgia Department of Banking and Finance
may lift these restrictions in the future.
We have authorized and reserved for issuance an aggregate of 180,000
shares of our common stock under the 1998 Option Plan. As of September 30, 2000,
we have granted options to purchase 103,500 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
47
<PAGE> 50
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." 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
Neither our directors nor the Bank's directors receive any fees,
bonuses or payments for their service on the Board of Directors.
48
<PAGE> 51
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the beneficial ownership of the common
stock as of December 21, 2000, by each director and our Chief Executive Officer,
and all of our directors and our Chief Executive Officer as a group. We know of
no person that beneficially owns more than 5% of our common stock.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK BENEFICIALLY OWNED PERCENTAGE
---------------------------------------- ------------------------ ----------
<S> <C> <C>
Larry D. Key(2) 32,510 3.36%
3300 Jim Moore Road
Dacula, Georgia 30019
James B. Ballard(3) 43,406 4.53%
2400 Bagley Road
Cumming, Georgia 30040
Jerry M. Boles(4) 31,700 3.31%
4435 Pemberton Cove
Alpharetta, Georgia 30022
W. H. Britt(5) 20,837 2.18%
3260 Brisco Road
Loganville, Georgia 30052
Richard F. Combs(6) 28,661 3.00%
1985 Burgandy Drive
Braselton, Georgia 30517
W. Grant Hayes(7) 6,000 .63%
412 Summit Ridge Drive
Lawrenceville, Georgia 30045
Douglas A. Langley(8) 25,900 2.71%
270 Constitution Boulevard
Lawrenceville, Georgia 30045
Norris J. Nash(9) 31,385 3.28%
1176 Oleander Drive
Lilburn, Georgia 30247
J. Joseph Powell(10) 30,850 3.23%
2335 Bagley Road
Cumming, Georgia 30041
William S. Stanton, Jr.(11) 45,110 4.71%
5081 Hodgrins Place
Lilburn, Georgia 30047
All directors and officer as a group(10 296,359 29.35%
persons)
</TABLE>
-------------------
* Represents less than one percent (1%) of the shares outstanding.
49
<PAGE> 52
(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 16,510 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 500 shares owned by Mr. Britt's wife, 2,000 shares owned by
Mr. Britt's family members 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. 401(k)
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 7,000 shares owned by Mr. Nash's family member, 2,500 shares
held by a general partnership that Mr. Nash controls, and options to
purchase 6,700 shares of the Company's common stock.
(10) Includes 1,950 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.
CERTAIN 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 Bank's directors and officers, including members of their families or
corporations, partnerships or other organizations in which directors and
officers have a controlling interest. If these transactions occur, they will be
on substantially the same terms 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.
All of the relationships established with our correspondents were at
arms-length. There is no affiliation between the Bank and any of its officers
and directors and any of our correspondents.
On January 1, 2000, the Bank entered into a Lease Agreement with GBC
LLC to lease its banking facility. Most of the members of GBC LLC are our
directors and officers. We believe the lease terms are as favorable as those
that would be obtained from an unaffiliated third party.
50
<PAGE> 53
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our Articles of Incorporation authorize us to issue up to 3,000,000
shares of our common stock, par value $1.00 per share. We currently have 951,580
shares outstanding. After the offering, a minimum of 1,296,407 shares and a
maximum of 1,641,235 shares will be outstanding.
All shares of our common stock will be entitled to share equally in
dividends when, as and if our Board of Directors declares dividends, and on our
liquidation or dissolution, whether voluntary or involuntary, to share equally
in all of our assets available for distribution to our shareholders. We do not
expect that we will pay any cash dividends on our common stock in the near
future. See "Dividend Policy." Each holder of our common stock will be entitled
to one vote for each share owned on all matters submitted to our shareholders.
Holders of our common stock will not have any preemptive right to acquire
authorized but unissued capital stock. There is no cumulative voting, redemption
right, sinking fund provision or right of conversion with respect to our common
stock. All shares of our common stock issued in accordance with the terms of
this offering as described in this prospectus will be fully paid and
nonassessable.
SHARES HELD BY AFFILIATES
After this offering is completed, we will have a minimum of 1,296,407
shares and a maximum of 1,641,235 shares outstanding. All of these shares will
be freely tradeable without restriction or registration under the Securities Act
of 1933, as amended, except for shares our officers and directors purchase in
this offering.
Our officers and directors are affiliates under the securities laws and
as a result, their shares will be subject to certain resale restrictions.
A public market for our common stock may not exist at any time after
this offering. As a result, investors who may wish or who need to dispose of all
or a part of their investment in our common stock may not be able to do so
except by private direct negotiations with third parties, assuming that third
parties are willing to purchase our common stock.
ANTI-TAKEOVER PROVISIONS OF OUR
ARTICLES OF INCORPORATION AND BYLAWS
Our Articles of Incorporation contain certain provisions that would
impede an attempt to change or remove our management or to gain control of us in
a transaction our Board of Directors does not support. In general, one purpose
of these protective provisions is to assist our Board of Directors in playing a
role in connection with attempts to acquire control of us, so that our Board of
Directors can further and protect our interests and our shareholders' interests
as appropriate under the circumstances.
Although our management believes the protective provisions are
beneficial to our shareholders, the protective provisions also may discourage
takeover bids. As a result, our shareholders may be deprived of opportunities to
sell some or all of their shares at a premium over market prices. On the other
hand, defeating undesirable acquisition offers can be a very expensive and
time-consuming process. To the extent that the protective provisions discourage
undesirable proposals, we may be able to avoid those expenses.
51
<PAGE> 54
The protective provisions also may discourage open market purchases by
a potential acquirer. Such purchases may increase the market price of our common
stock temporarily, enabling our shareholders to sell their shares at a price
higher than that which otherwise would exist. In addition, the protective
provisions may decrease the market price of our common stock by making it less
attractive to persons who invest in securities in anticipation of price
increases from potential acquisition attempts. The protective provisions also
may make it more difficult and time consuming for a potential acquirer to obtain
control of us through replacing our Board of Directors and management.
Furthermore, the protective provisions may make it more difficult for our
shareholders to replace our Board of Directors or management, even if a majority
of our shareholders believe replacement is in our best interests. As a result,
the protective provisions may tend to perpetuate the incumbent Board of
Directors and management.
Our Articles of Incorporation also contain a provision that eliminates
the potential personal liability of our directors for monetary damages. In
addition, our Bylaws contain certain provisions that provide indemnification for
our directors. The protective provisions and the provisions relating to
elimination of liability and indemnification of directors are discussed more
fully below.
CHANGE IN NUMBER OF DIRECTORS
Article 7 of our Articles of Incorporation provides that any change in
the number of our directors would require the affirmative vote of two-thirds of
our Board of Directors or the affirmative vote of the holders of at least
two-thirds of the outstanding shares of our common stock.
Under Georgia law, the number of our directors may be increased or
decreased from time to time by amendment to our Bylaws, unless our Articles of
Incorporation provide otherwise or unless the number of our directors is
otherwise fixed by our shareholders.
REMOVAL OF DIRECTORS
Article 8 of our Articles of Incorporation provides that our directors
may be removed during their terms with or without cause by the affirmative vote
of the holders of a majority of the outstanding shares of common stock. "Cause"
for this purpose means the final conviction of a felony, request or demand for
removal by any bank regulatory authority having jurisdiction over us, or
determination by at least two-thirds of our incumbent directors that the conduct
of the director to be removed has been adverse to our best interests.
Under Georgia law, any or all of the directors of a corporation may be
removed with or without cause by the affirmative vote of a majority of the
shares represented at a meeting at which a quorum is represented and entitled to
vote, unless our Articles of Incorporation provide otherwise.
LIMITATION OF LIABILITY
Article 10 of our Articles of Incorporation, subject to certain
exceptions, eliminates the potential personal liability of a director for
monetary damages to us and to our shareholders for breach of a duty as a
director. There is no elimination of liability for:
- a breach of duty involving appropriation of our business
opportunities;
- an act or omission not in good faith or involving intentional
misconduct or a knowing violation of law;
52
<PAGE> 55
- a transaction from which the director receives an improper
material tangible personal benefit; or
- any payment of a dividend or approval of a stock repurchase
that is illegal under the Georgia Business Corporation Code.
Article 10 does not eliminate or limit our right or our shareholders' right to
seek injunctive or other equitable relief not involving monetary damages.
We adopted certain provisions of the Georgia Business Corporation Code
that allow Georgia corporations, with the approval of their shareholders, to
include in their articles of incorporation a provision eliminating or limiting
the liability of directors, except in the circumstances described above. We
included these provisions to encourage qualified individuals to serve and remain
as our directors. While we have not experienced any problems in locating
directors, we could experience difficulty in the future as our business
activities increase and diversify. We also included these provisions to enhance
our ability to obtain liability insurance for our directors at a reasonable
cost. While we have obtained liability insurance covering actions our directors
take in their capacities as directors, our Board of Directors believes that the
current directors' liability insurance environment, and the environment for the
foreseeable future, is characterized by increasing premiums, reduced coverage
and an increasing risk of litigation and liability. Our Board of Directors
believes that our limitation of directors' liability will enable us to obtain
such insurance in the future on terms more favorable than if such a provision
were not included in our Articles of Incorporation.
SUPERMAJORITY VOTING ON CERTAIN TRANSACTIONS
Under Article 12 of our Articles of Incorporation, with certain
exceptions, any merger or consolidation involving us or any sale or other
disposition of all or substantially all of our assets will require the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of our common stock. However, if two-thirds of our Board of Directors has
approved the particular transaction, then the applicable provisions of Georgia
law would govern and shareholder approval of the transaction would require the
affirmative vote of the holders of only a majority of the outstanding shares of
our common stock entitled to vote.
The primary purpose of this Article is to discourage any party from
attempting to acquire control of us through the acquisition of a substantial
number of shares of common stock followed by a forced merger or sale of assets
without negotiation with our management. Such a merger or sale might not be in
our best interests or the best interest of our shareholders. This provision may
also serve to reduce the risk of a potential conflict of interest between a
substantial shareholder on the one hand and us and our other shareholders on the
other.
Article 12 could enable a minority of our shareholders to prevent a
transaction that a majority of our shareholders favors. Also, in some
circumstances, our directors could require a two-thirds vote to approve the
transaction by withholding their consent to such a transaction, thereby
enhancing their positions with us and Gwinnett Banking Company.
EVALUATION OF AN ACQUISITION PROPOSAL
Article 13 of our Articles of Incorporation provides that our response
to any acquisition proposal made by another party will be based on our Board's
evaluation of our best interests and those of our
53
<PAGE> 56
shareholders. Article 13 charges our Board, in evaluating an acquisition
proposal, to consider all relevant factors, including:
- the expected social and economic effects of the transaction on
our employees, customers and other constituents;
- the expected social and economic effects on the communities in
which we operate; and
- the consideration being offered by the other corporation in
relation to our then-current value as determined by a freely
negotiated transaction and to our Board of Directors' estimate
of our future value as an independent entity. The enumerated
factors are not exclusive and our Board may consider other
relevant factors.
This Article has been included in our Articles of Incorporation because
Gwinnett Banking Company is charged with providing support to and being involved
with the communities it serves, and our Board believes its obligations in
evaluating an acquisition proposal extend beyond evaluating merely the
consideration being offered in relation to the then market or book value of the
common stock. No provisions of Georgia law specifically describe the factors a
corporation's board of directors should consider in the event the corporation is
presented with an acquisition proposal.
While the value of the consideration offered to shareholders is usually
the main factor a corporation considers when weighing the benefits of an
acquisition proposal, our Board believes it appropriate also to consider all
other relevant factors. For example, this Article directs our Board to evaluate
the consideration being offered in relation to our then-current value determined
in a freely negotiated transaction and in relation to our Board's estimate of
our future value as an independent company. A takeover bid often places the
target corporation virtually in the position of making a forced sale, sometimes
when the market price of its stock may be depressed. Our Board believes that
frequently the consideration offered in such a situation, even though it may be
in excess of market value, is less than that which could be obtained in a freely
negotiated transaction. In a freely negotiated transaction, management would
have the opportunity to seek a suitable partner at a time of its choosing and to
negotiate for the most favorable price and terms that reflect not only the
current value, but also our future value.
One effect of this Article may be to discourage a tender offer in
advance. Often an offeror consults the board of a target corporation before or
after beginning a tender offer in an attempt to prevent a contest from
developing. In our Board's opinion, this provision will strengthen its position
in dealing with any potential offeror which might attempt to acquire us through
a hostile tender offer. Another effect of this Article may be to dissuade
shareholders who might be displeased with the Board's response to an acquisition
proposal from engaging us in costly litigation. This provision, however, does
not affect the right of a shareholder displeased with the Board's response to an
acquisition proposal to institute litigation against us and to allege that the
Board breached an obligation to shareholders by not limiting its evaluation of
an acquisition proposal to the value of the consideration being offered in
relation to the then market or book value of the common stock.
Article 13 would not make an acquisition proposal regarded by our Board
as being in our best interests more difficult to accomplish. It would, however,
permit our Board to determine that an acquisition proposal was not in our best
interests on the basis of the various factors it deems relevant. In some cases,
such Board opposition might have the effect of maintaining the positions of
incumbent management.
54
<PAGE> 57
AMENDMENT OF PROVISIONS
Any amendment of Articles 7, 8, 10, 12 and 13 of our Articles of
Incorporation requires the affirmative vote of the holders of at least
two-thirds of the outstanding shares of our common stock, unless two-thirds of
our Board of Directors approves the amendment. If two-thirds of our Board of
Directors approves the amendment, the applicable provisions of Georgia law would
govern, and the approval of only a majority of the outstanding shares of common
stock would be required.
INDEMNIFICATION
Our Bylaws contain certain indemnification provisions that provide that
our directors, officers, employees and agents will be indemnified against
expenses they actually and reasonably incur if they are successful on the merits
of a claim or proceeding.
When a case or dispute is not determined ultimately on its merits, the
indemnification provisions provide that we will indemnify directors when they
meet the applicable standard of conduct. A director meets the applicable
standard of conduct if the director acted in a manner he or she reasonably
believed to be in or not opposed to our best interests and, with respect to any
criminal action or proceeding, if the director had no reasonable cause to
believe his or her conduct was unlawful. Our Board, our shareholders or our
independent legal counsel determines whether the applicable standard of conduct
has been met in each specific case.
Our Bylaws also provide that the indemnification rights are not
exclusive of other indemnification rights to which a director may be entitled
under any bylaw, resolution or agreement, either specifically or in general
terms approved by the affirmative vote of the holders of a majority of the
shares entitled to vote. We can also provide for greater indemnification than
that described in our Bylaws if we choose to do so, subject to our shareholders'
approval. We may not, however, indemnify a director for liability arising out of
circumstances that constitute exceptions to limitation of a director's liability
for monetary damages.
The indemnification provisions of our Bylaws specifically provide that
we may purchase and maintain insurance on behalf of any director against any
liability asserted against such person and incurred by him in any such capacity,
whether or not we would have had the power to indemnify against such liability.
We are not aware of any pending or threatened action, suit or
proceeding involving any of our directors or officers for which such directors
or officers may seek indemnification from us.
We have been advised that in the opinion of the Securities and Exchange
Commission, indemnification of directors, officers and controlling persons for
violations of the Securities Act of 1933 is against public policy and is
therefore unenforceable. In the event that a claim for indemnification against
such liabilities other than our payment of expenses incurred or paid by our
director, officer or controlling person in the successful defense of any action,
suit or proceeding is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
indemnification is against public policy as expressed in the Securities Act of
1933 and will be governed by the final adjudication of such issue.
55
<PAGE> 58
LEGAL MATTERS
Womble Carlyle Sandridge & Rice, PLLC, Atlanta, Georgia will pass upon
the validity of our common stock being offered by this prospectus.
EXPERTS
Our financial statements at and for the years ended December 31, 1998
and December 31, 1999, set forth herein have been so included in reliance on the
report of Mauldin & Jenkins, LLC independent certified public accountants, given
on the authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a
Registration Statement under the Securities Act of 1933, as amended, with
respect to the common stock offered hereby. This prospectus does not contain all
of the information set forth in the Registration Statement. For further
information with respect us and our common stock, reference is made to the
Registration Statement and the exhibits. The Registration Statement may be
examined at, and copies of the Registration Statement may be obtained at
prescribed rates from the Public Reference Section of the Securities and
Exchange Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Securities and Exchange Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Securities and Exchange Commission.
The address of such site is http://www.sec.gov.
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<PAGE> 59
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Consolidated Balance Sheet as of September 30, 2000 (unaudited).......................................... F-2
Consolidated Statements of Income and Comprehensive Income for the three months ended
September 30, 2000 and 1999 and for the nine months ended September 30, 2000 and 1999
(unaudited)..................................................................................... F-3
Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999 (unaudited).. F-4
Notes to Consolidated Financial Statements (unaudited)................................................... F-5
Independent Auditor's Report............................................................................. F-6
Consolidated Balance Sheets as of December 31, 1999, and December 31, 1998............................... F-7
Consolidated Statements of Operations for the years ended December 31, 1999 and December 31, 1998........ F-8
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31,
1999 and December 31, 1998...................................................................... F-9
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1999 and
December 31, 1998............................................................................... F-10
Consolidated Statements of Cash Flows for the years ended December 31, 1999 and December 31, 1998........ F-11
Notes to Consolidated Financial Statements............................................................... F-12
</TABLE>
F-1
<PAGE> 60
FINANCIAL STATEMENTS
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
Cash and due from banks $ 338,308
Federal funds sold 18,020,000
Securities available-for-sale, at fair value 8,890,425
Loans 65,951,808
Less allowance for loan losses 998,129
------------
Loans, net 64,953,679
Premises and equipment 465,905
Other assets 1,842,759
------------
TOTAL ASSETS $ 94,511,076
============
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS
Demand $ 11,539,954
Interest-bearing demand 9,034,800
Savings 7,201,246
Time 57,001,659
------------
TOTAL DEPOSITS 84,777,659
Other liabilities 660,563
------------
TOTAL LIABILITIES 85,438,222
------------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock, par value $1; 3,000,000 shares authorized;
951,580 shares issued and outstanding 951,580
Capital surplus 8,540,327
Accumulated deficit (262,529)
Accumulated other comprehensive loss (156,524)
------------
TOTAL STOCKHOLDERS' EQUITY 9,072,854
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 94,511,076
============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-2
<PAGE> 61
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 AND
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
2000 1999 2000 1999
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans $1,848,929 $ 1,070,573 $4,863,258 $ 2,811,722
Taxable securities 147,758 99,564 433,743 224,559
Federal funds sold 284,230 61,803 421,915 145,403
---------- ----------- ---------- -----------
TOTAL INTEREST INCOME 2,280,917 1,231,940 5,718,916 3,181,684
---------- ----------- ---------- -----------
INTEREST EXPENSE
Deposits 1,106,975 405,371 2,512,669 978,801
Federal funds purchased -- -- 4,692 --
---------- ----------- ---------- -----------
TOTAL INTEREST EXPENSE 1,106,975 405,371 2,517,361 978,801
---------- ----------- ---------- -----------
NET INTEREST INCOME 1,173,942 826,569 3,201,555 2,202,883
PROVISION FOR LOAN LOSSES 117,582 63,200 375,651 187,621
---------- ----------- ---------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,056,360 763,369 2,825,904 2,015,262
---------- ----------- ---------- -----------
OTHER INCOME
Service charges on deposit accounts 31,084 16,808 87,019 45,461
Other income 20,781 19,999 125,887 90,405
---------- ----------- ---------- -----------
51,865 36,807 212,906 135,866
---------- ----------- ---------- -----------
OTHER EXPENSES
Salaries and employee benefits 443,255 323,621 1,293,761 972,189
Equipment and occupancy expenses 185,702 149,160 536,457 436,973
Other operating expenses 167,775 136,524 481,911 403,099
---------- ----------- ---------- -----------
796,732 609,305 2,312,129 1,812,261
---------- ----------- ---------- -----------
NET INCOME BEFORE INCOME TAXES 311,493 190,871 726,681 338,867
INCOME TAX EXPENSE -- -- -- --
---------- ----------- ---------- -----------
NET INCOME 311,493 190,871 726,681 338,867
---------- ----------- ---------- -----------
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gains (losses) on securities
available-for-sale arising during period 138,205 (55,152) 102,266 (200,747)
---------- ----------- ---------- -----------
COMPREHENSIVE INCOME $ 449,698 $ 135,719 $ 828,947 $ 138,120
========== =========== ========== ===========
BASIC AND DILUTED EARNINGS PER COMMON SHARE $ 0.33 $ 0.20 $ 0.76 $ 0.36
========== =========== ========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
(BASIC AND DILUTED) 951,580 950,080 951,580 950,080
========== =========== ========== ===========
CASH DIVIDENDS PER SHARE OF COMMON STOCK $ -- $ -- $ -- $ --
========== =========== ========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE> 62
GBC BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 726,681 $ 338,867
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 181,050 158,023
Provision for loan losses 375,651 187,621
Gain on sales of other real estate owned (12,387) --
Increase in interest receivable (242,534) (98,269)
Increase in interest payable 296,852 9,638
Other operating activities 50,318 (74,668)
------------ ------------
Net cash provided by operating activities 1,375,631 521,212
------------ ------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (1,951,166) (6,598,532)
Proceeds from maturities of securities available-for-sale -- 3,500,000
Net increase Federal funds sold (11,370,000) (4,470,000)
Net increase in loans (22,839,590) (11,934,721)
Proceeds from sales of other real estate owned 1,092,296 --
Purchase of premises and equipment (155,327) (75,302)
------------ ------------
Net cash used in investing activities (35,223,787) (19,578,555)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 30,993,817 19,649,929
------------ ------------
Net cash provided by financing activities 30,993,817 19,649,929
------------ ------------
Net increase (decrease) in cash and due from banks (2,854,339) 592,586
Cash and due from banks at beginning of period 3,192,647 1,600,046
------------ ------------
Cash and due from banks at end of period $ 338,308 $ 2,192,632
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 2,220,509 $ 969,163
NONCASH TRANSACTIONS
Unrealized (gains) losses on securities available-for-sale $ (102,266) $ 200,747
Principal balances of loans transferred to other real estate $ 1,121,909 $ --
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE> 63
GBC BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
The consolidated financial information for GBC Bancorp, Inc. (the
"Company") included herein is unaudited; however, such information
reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a
fair statement of results for the interim period.
The results of operations for the three and nine month periods ended
September 30, 2000 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
In June 1998, the 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
material 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.
F-5
<PAGE> 64
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
F-6
<PAGE> 65
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.
F-7
<PAGE> 66
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.
F-8
<PAGE> 67
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.
F-9
<PAGE> 68
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.
F-10
<PAGE> 69
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.
F-11
<PAGE> 70
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.
F-12
<PAGE> 71
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.
F-13
<PAGE> 72
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.
F-14
<PAGE> 73
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.
F-15
<PAGE> 74
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>
F-16
<PAGE> 75
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>
F-17
<PAGE> 76
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>
F-18
<PAGE> 77
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>
F-19
<PAGE> 78
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>
F-20
<PAGE> 79
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.
F-21
<PAGE> 80
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>
F-22
<PAGE> 81
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>
F-23
<PAGE> 82
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>
F-24
<PAGE> 83
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.
F-25
<PAGE> 84
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.
F-26
<PAGE> 85
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>
F-27
<PAGE> 86
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.
F-28
<PAGE> 87
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>
F-29
<PAGE> 88
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>
F-30
<PAGE> 89
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>
F-31
<PAGE> 90
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>
F-32
<PAGE> 91
[BACK COVER]
We reserve the right, in our sole discretion, to reject any and all
subscriptions, and no subscription will be effective until accepted by us.
No person has been authorized by us to give any information or to make
any representations not contained in this prospectus, and any information or
statement not contained herein must not be relied upon as having been authorized
by us. The delivery of this prospectus does not imply that the information
contained herein is correct as of any time subsequent to its date.
We have undertaken to update this prospectus to reflect any facts or
events arising after the date hereof, which individually or in the aggregate
represent a fundamental change in the information set forth herein and to
include any material information with respect to the plan of distribution not
previously disclosed in this prospectus or any material changes to such
information.
Each subscriber should consult his or her own counsel, accountants and
other professional advisors as to all matters concerning his or her investment
in shares of the common stock.
The shares of our common stock offered hereby are not deposits insured
by the Federal Deposit Insurance Corporation.
This prospectus does not constitute an offer to sell in any
jurisdiction or a solicitation of an offer to buy any of the shares of the
common stock to any person in any jurisdiction in which such offer or
solicitation is unlawful.
<PAGE> 92
EXHIBIT A
SUBSCRIPTION AGREEMENT
GBC Bancorp, Inc.
165 Nash Street
Lawrenceville, Georgia 30246
Gentlemen:
The undersigned hereby subscribes for and agrees to purchase the number
of shares of common stock, par value $1.00 per share (the "Common Stock"), of
GBC Bancorp, Inc., a Georgia corporation (the "Company"), indicated below. The
undersigned has executed and delivered this Subscription Agreement in connection
with the Company's offering of common stock described in its prospectus dated
_____________, 2001. (The prospectus, including any amendments and supplements
thereto, is herein called the "prospectus").
The undersigned agrees to purchase the shares of common stock
subscribed for herein for the purchase price of $14.50 per share. All checks
should be made payable to "Gwinnett Banking Company - Escrow Account for GBC
Bancorp, Inc." A check in an amount equal to the full subscription price is
enclosed with this Subscription Agreement.
The undersigned acknowledges receipt of a copy of the prospectus. The
undersigned further acknowledges that an investment in the common stock involves
significant risks, as set forth under "Risk Factors" in the prospectus. The
undersigned understands that no federal or state agency has made any findings or
determination regarding the fairness of the offering of the Common Stock, the
accuracy or adequacy of the Prospectus, or any recommendation or endorsement
concerning an investment in the common stock.
The undersigned agrees that this Subscription Agreement is binding on
the undersigned and is irrevocable by the undersigned until the expiration date
as defined in the prospectus. The undersigned acknowledges that this
Subscription Agreement shall not constitute a valid and binding obligation of
the Company until accepted by the Company in writing, and that the Company has
the right to reject this Subscription Agreement either in whole or in part, in
its sole discretion.
<TABLE>
<S> <C>
Number of Shares
(minimum 500 shares):
----------------------
-------------------------------------------
Please PRINT or TYPE exact names in which
undersigned desires shares to be registered
Total Subscription Price
(at $14.50 per share): $
-------------------------
</TABLE>
<PAGE> 93
SUBSTITUTE W-9
Under the penalties of perjury, I certify that: (1) the Social Security Number
or Taxpayer Identification Number given below is correct; and (2) I am not
subject to backup withholding. INSTRUCTION: YOU MUST CROSS OUT #2 ABOVE IF YOU
HAVE BEEN NOTIFIED BY THE INTERNAL REVENUE SERVICE THAT YOU ARE SUBJECT TO
BACKUP WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX
RETURN.
--------------------------------- -----------------------------------------
Date Signature(s)*
--------------------------------- -----------------------------------------
Area Code and Telephone No. Print Name
Please indicate form of ownership the
undersigned desires for the shares
(individual, joint tenants with right of
survivorship, tenants in common, trust,
corporation, partnership, custodian, etc.)
---------------------------------
Social Security or Federal
Taxpayer Identification No.
---------------------------------
Street Address
---------------------------------
City/State/Zip Code
TO BE COMPLETED BY THE COMPANY
Accepted as of __________________, 2001, as to ___________ shares.
GBC BANCORP, INC.
By:
---------------------------------------
Signature
---------------------------------------
Print Name
When signing as attorney, trustee, administrator, or guardian, please give your
full title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. In case of joint tenants, each joint
owner must sign.
<PAGE> 94
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Consistent with the pertinent provisions of the laws of Georgia, the
Registrant's Articles of Incorporation provide that the Registrant shall have
the power to indemnify its directors and officers against expenses (including
attorneys' fees) and liabilities arising from actual or threatened actions,
suits or proceedings, whether or not settled, to which they become subject by
reason of having served in such role if such director or officer acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the Registrant and, with respect to a criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Advances against expenses shall be made so long as the person seeking
indemnification agrees to refund the advances if it is ultimately determined
that he or she is not entitled to indemnification. A determination of whether
indemnification of a director or officer is proper because he or she met the
applicable standard of conduct shall be made (a) by the Board of Directors of
the Registrant, (b) in certain circumstances, by independent legal counsel in a
written opinion, or (c) by the affirmative vote of a majority of the shares
entitled to vote.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses of the sale of the Registrant's Common Stock, $1.00 par value,
are as follows:
<TABLE>
<S> <C>
Registration Fee................................................................... $ *
-------------
Legal Fees and Expenses (Estimate)................................................. *
-------------
Accounting Fees and Expenses (Estimate)............................................ *
-------------
Printing and Engraving Expenses (Estimate)......................................... *
-------------
Miscellaneous (Estimate)........................................................... $ *
-------------
TOTAL..................................................................... $ *
=============
</TABLE>
* To be provided by amendment
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
3.1 Articles of Incorporation, as amended (Incorporated by
reference from Exhibit 3.1 to the Registration Statement on
Form SB-2, as amended, Registration No. 333-19081).
3.2 Amended and Restated Bylaws (Incorporated by reference from
Exhibit 3.2 to the Registration Statement on Form SB-2, as
amended, Registration No. 333-19081).
4.1 Instruments Defining Rights of Security Holders (See
Articles of Incorporation at Exhibit 3.1 hereto and Bylaws
at Exhibit 3.2 hereto).
</TABLE>
<PAGE> 95
<TABLE>
<S> <C>
Exhibit
Number Description
------- -----------
4.2 Specimen Common Stock Certificate (Incorporated by
reference from Exhibit 4.2 to the Registration Statement on
Form SB-2, as amended, Registration No. 333-19081).
5.1 Legal Opinion of Womble Carlyle Sandridge & Rice, PLLC.
10.1 Escrow Agreement between the Registrant and Gwinnett Banking
Company. *
10.2 Real Estate Commercial Lease Contract dated as of January 1,
2000, by and between GBC Properties, LLC and Gwinnett Banking
Company (Incorporated by reference from Exhibit 10.4 of the
Registrant's Form 10-KSB filed on March 30, 2000).
21.1 Subsidiaries of the Registrant (Incorporated by reference
from Exhibit 21.1 to the Registration Statement on Form
SB-2, as amended, Registration No. 333-19081).
23.1 Consent of Mauldin & Jenkins, LLC.
23.2 Consent of Womble Carlyle Sandridge & Rice, PLLC (appears in
Legal Opinion at Exhibit 5.1 hereto).
24.1 Power of Attorney (appeared on the signature page to the
Registration Statement on Form SB-2, as amended,
Registration No. 333-19081).
* To be filed by amendment.
</TABLE>
----------------------------
ITEM 28. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
(a) (1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement.
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events which, individually or together, represent a
fundamental change in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the maximum
estimated offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any additional or changed
material information on the plan of distribution.
<PAGE> 96
(2) For determining liability under the Securities Act of
1933, to treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at the time to be the
initial bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities being registered which remain unsold at the
end of the offering.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the provisions
set forth in Item 24, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Lawrenceville, State of Georgia on December 18, 2000.
GBC Bancorp, Inc.
By: /s/ Larry D. Key
-------------------------------------
Larry D. Key, President and Principal
Executive Officer
<PAGE> 97
Power of Attorney
Know all men by these presents that each person whose signature appears
below constitutes and appoints each of Larry D. Key and John T. Hopkins III his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution, for such persons and in such persons' name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully and to all
interests and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue of the
powers herein granted.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME POSITION DATE
------------------------------------------ ---------------------------------------------- -----------------
<S> <C> <C>
/s/ Larry D. Key President and Chairman (Principal December 18, 2000
------------------------------------------ Executive Officer)
Larry D. Key
/s/ John T. Hopkins III Executive Vice President, Secretary and December 18, 2000
------------------------------------------ Treasurer, (Principal Financial and
John T. Hopkins III Accounting Officer)
/s/ James B. Ballard Director December 18, 2000
------------------------------------------
James B. Ballard
/s/ Jerry M. Boles Director December 18, 2000
------------------------------------------
Jerry M. Boles
/s/ W. H. Britt Director December 18, 2000
------------------------------------------
W. H. Britt
/s/ Norris J. Nash Director December 18, 2000
------------------------------------------
Norris J. Nash
/s/ Richard F. Combs Director December 18, 2000
------------------------------------------
Richard F. Combs
/s/ W. Grant Hayes Director December 18, 2000
------------------------------------------
W. Grant Hayes
/s/ Douglas A. Langley Director December 18, 2000
------------------------------------------
Douglas A. Langley
/s/ J. Joseph Powell Director December 18, 2000
------------------------------------------
J. Joseph Powell
</TABLE>
<PAGE> 98
<TABLE>
<CAPTION>
NAME POSITION DATE
------------------------------------------ ------------------------------------------ -----------------
<S> <C> <C>
/s/ William S. Stanton Director December 18, 2000
------------------------------------------
William S. Stanton
</TABLE>
