As filed with the Securities and Exchange Commission on
April 17, 1998 Registration No. 333-47291
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SOUTHERN HERITAGE BANCORP, INC.
(Name of Small Business Issuer in its Charter)
GEORGIA 6712 58-2352014
(State or other juris- (Primary Standard I.R.S. Employer
diction of incorporation Industrial Classifi- Identification
or organization cation Code Number) No.)
3461 Atlanta Highway
P. O. Box 907
Oakwood, Georgia 30566
(770) 532-4537
_________________________________________________________________
(Address and telephone number of principal executive offices
including zip code)
3461 Atlanta Highway
Flowery Branch, Georgia 30542
(770) 532-4537
________________________________________
(Address of principal place of business or
intended principal place of business)
Copy to:
Gary H. Anderson T. Treadwell Syfan
P. O. Box 907 Stewart, Melvin & Frost, LLP
Oakwood, Georgia 30566 200 Main Street
(770) 532-4537 P. O. Box 3280
Gainesville, Georgia 30503
(770) 536-0101
(Name, address and
telephone number, of
agent for service)
Approximate date of proposed sale to the public; As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
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 this 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:
<TABLE>
<S> <C> <C> <C> <C>
Title of Amount to Proposed Proposed Amount of
Each Class be Registered Maximum Maximum Registration
of Securities Offering Aggregate Fee
to be Price Per Offering
Registered Unit Price
Common Stock 1,000,000 $10.00 $10,000,000 $2,950.00
$5.00 par Shares
value
</TABLE>
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 become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
Exhibit Index on page ______ Page 1 of ______
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
CROSS-REFERENCE SHEET
Registration Statement Item Caption in Prospectus
Number and Heading
1. Front of the Registration Statement
and Outside Front Cover Page
of Prospectus....................... Cover page; Outside
Front Cover Page
of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................. Inside Front Cover
Page of Prospectus;
Additional
Information; Outside
Back Cover Page of
Prospectus
3. Summary Information and
Risk Factors........................ Summary; Risk Factors
4. Use of Proceeds..................... Use of Proceeds
5. Determination of Offering Price..... Risk Factors
6. Dilution............................ Not Applicable
7. Selling Security Holders............ Not Applicable
8. Plan of Distribution................ Terms of the Offering
9. Legal Proceedings................... Not Applicable
10. Directors, Executive Officers,
Promoters and Control Persons....... Management - Proposed
Directors and Officers
11. Securities Ownership of Certain
Beneficial Owners and Management.... Management - Proposed
Directors and Officers
12. Description of the Securities....... Dividends; Description
of Common Stock of the
Company; Certain
Provisions of the
Company's Articles of
Incorporation and
Bylaws
Registration Statement Item
and Heading Caption in Prospectus
13. Interests of Named Experts
and Counsel......................... Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities......................... Certain Provisions of
the Company's Articles
of Incorporation and
Bylaws-Indemnification
15. Organization Within Last
Five Years.......................... Management
16. Description of Business............. Summary; Business;
Supervision and
Regulation
17. Management's Discussion and Analysis
or Plan of Operation................ Business
18. Description of Property............. Business - Facilities
19. Certain Relationships and Related
Transactions........................ Management- Certain
Transactions
20. Market for Common Equity and
Related Stockholder Matters......... Description of Common
Stock of the Company
21. Executive Compensation.............. Management
22. Financial Statements................ Financial Statements
of Southern Heritage
Bancorp, Inc.
23. Changes in and Disagreement With
Accountants on Accounting and
Financial Disclosure................ Not Applicable
<PAGE>
PROSPECTUS
SOUTHERN HERITAGE BANCORP, INC.
A Proposed Bank Holding Company for
SOUTHERN HERITAGE BANK (In Organization)
1,000,000 Shares of Common Stock
(Par Value $5.00 Per Share)
(Minimum Purchase: 100 Shares)
This Prospectus relates to the offering by SOUTHERN HERITAGE
BANCORP, INC., a Georgia corporation (the "Company"), of a minimum
of 800,000 shares and a maximum of 1,000,000 shares of its Common
Stock, $5.00 par value per share (the "Common Stock"), at $10.00
per share. The Company has been organized to hold, upon receipt of
regulatory approvals, all of the common stock of Southern Heritage
Bank (In Organization) (the "Bank"), Oakwood, Hall County, Georgia.
The organizers (the directors) of the Company and the Bank intend
to subscribe for an aggregate of at least 86,500 shares of the
Common Stock sold in this offering (10.81% of the minimum and 8.65%
of the maximum number of shares to be sold). In the event that the
minimum number of shares in this offering are not sold, the
organizers may acquire additional shares of Common Stock, up to a
maximum aggregate number for all organizers of 400,000 shares (50%
of the minimum and 40% of the maximum number of shares to be sold).
The Company and the Bank have not conducted active business
operations. The commencement of business operations is contingent
upon various regulatory approvals by state and federal agencies and
the sale of a minimum of 800,000 shares of the Common Stock offered
hereby. All subscriptions are binding and irrevocable until the
"Expiration Date" as defined herein. In the event (a) that the
Company is unable to sell 800,000 shares of Common Stock or (b)
that the Company and the Bank do not satisfy, or do not make a
determination that they will satisfy the conditions included in
their respective regulatory approvals, the organizers of the
Company will pay all incurred expenses, and all escrowed
subscription proceeds will be returned to investors with interest.
See "THE OFFERING - Release from Escrow" - Page 7.
INVESTMENT IN THESE SECURITIES INVOLVES A SUBSTANTIAL DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS
PROSPECTUS. INVESTMENT IN THESE SECURITIES SHOULD BE
UNDERTAKEN ONLY BY PERSONS WHO CAN AFFORD AN INVESTMENT
INVOLVING SUCH RISKS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR
SAVINGS ACCOUNTS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) Company(3)
<S> <C> <C> <C>
Per Share $ 10.00 -0- $ 10.00
Total Minimum(4) $ 8,000,000.00 -0- $ 8,000,000.00
Total Maximum(5) $10,000,000.00 -0- $10,000,000.00
</TABLE>
(1) The offering price has been arbitrarily established by the
Company. See "RISK FACTORS - Offering Price."
(2) Offers and sales of the Common Stock will be made on behalf of
the Company on a best-efforts basis by its officers and
directors, who will receive no commissions or other remuneration
in connection with such activities, but they will be reimbursed
for their reasonable expenses incurred in the offering. In
reliance on Rule 3a4-1 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Company believes such
officers and directors will not be deemed to be brokers and/or
dealers under the Exchange Act.
(3) Before deduction of expenses payable by the Company estimated at
$35,000 for registration fees, legal and accounting fees,
printing costs and other offering expenses.
(4) Subscription proceeds will be deposited promptly in an escrow
account with The Bankers Bank, Atlanta, Georgia, pending receipt
of subscriptions for not less than 800,000 shares and completion
of certain other matters on or before ________, 1998, the
expiration date of the offering (unless the offering is
terminated sooner or extended). Subscription funds will be
released from escrow (a) upon the receipt of $8,000,000 of
subscription proceeds and (b) upon a determination by the
organizers that the remaining conditions set forth in the
preliminary approvals issued by the applicable regulatory
agencies will be satisfied. See "THE OFFERING - Terms of the
Offering." The Company will return to each subscriber, with
interest, the amount of any proceeds received in full with
respect to subscriptions that are not accepted.
(5) The Company reserves the right to issue up to 1,000,000 shares
at $10.00 per share. See "THE OFFERING - Terms of the
Offering."
The date of this Prospectus is ___________________
<PAGE>
REPORTS TO SHAREHOLDERS
The Company is not a reporting company as defined by the
Securities and Exchange Commission ("SEC"). The Company will
furnish its shareholders with annual reports containing audited
financial information for each fiscal year on or before the date of
the annual meeting of shareholders as required by Rule 80-6-1.05 of
the Georgia Department of Banking and Finance ("Department of
Banking"). The Company's fiscal year ends on December 31.
Additionally, the Company will also furnish such other reports as
it may determine to be appropriate or as otherwise may be required
by law.
Upon the effective date of the Registration Statement, the
Company will be subject to the reporting requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), which include
requirements to file annual reports on Form 10-K and quarterly
reports on Form 10-Q with the SEC. This reporting obligation will
exist for at least one year and will continue for fiscal years
thereafter, except that such reporting obligations may be suspended
for any subsequent fiscal year if at the beginning of such year the
Common Stock of the Company is held of record by less than three
hundred persons.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement
under the Securities Act of 1933, as amended, with respect to the
Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement. For
further information with respect to the Company and the Common
Stock, reference is made to the Registration Statement and the
exhibits thereto. The Registration Statement may be examined at,
and copies of the Registration Statement may be obtained at
prescribed rates from, the Public Reference Section of the SEC,
Room 1024, 450 Fifth Street, N.W., Washington, DC 20549.
The Company and the Organizers have filed various applications
with the Federal Deposit Insurance Corporation, the Federal Reserve
Bank of Atlanta and the Department of Banking. Prospective
investors should rely only on information contained in this
Prospectus and in the Company's related Registration Statement in
making an investment decision. To the extent that other available
information not presented in this Prospectus, including information
available from the Company and information in public files and
records maintained by the Federal Deposit Insurance Corporation,
the Federal Reserve Bank of Atlanta and the Department of Banking,
is inconsistent with information presented in this Prospectus or
provides additional information, such other information is
superseded by the information presented in this Prospectus and
should not be relied on. Projections appearing in the applications
are based on assumptions that the organizers believe are
reasonable, but as to which no assurances can be made. The Company
specifically disaffirms those projections for purposes of this
Prospectus and cautions prospective investors against placing
reliance on them for purposes of making an investment decision.
SUMMARY
The following Summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
The Company
The Company was incorporated under the laws of the State of
Georgia on February 13, 1998, primarily to serve as the holding
company for a state bank. The Company is in the process of filing
applications with the Federal Reserve Bank of Atlanta (the "Federal
Reserve") and the Department of Banking for prior approval to
become a bank holding company by using the proceeds of this
offering to acquire all of the capital stock of the Bank. The
organizers anticipate receiving such approvals during May, 1998.
Such approvals will require the Company to sell at least 800,000
shares of its Common Stock, but are not expected to contain other
material conditions. See "RISK FACTORS - Regulatory Approvals
Required." The Company initially will engage in no business other
than owning and managing the Bank. See "BUSINESS OF THE COMPANY AND
THE BANK."
The Bank
The Bank is in the process of being organized as a state-chartered
bank under Georgia law. It has filed an application with
the Department of Banking for this purpose and with the Federal
Deposit Insurance Corporation (the "FDIC") for deposit insurance,
and such applications were approved on October 31, 1997 and
March 19, 1998, respectively. The Bank will not be authorized to
conduct its banking business until it receives a permit to begin
business from the Department of Banking. The issuance of the
permit to begin business will depend, among other things, upon the
Bank's receiving $7,950,000 in capital from at least $8,000,000 in
capital raised by the Company and upon compliance with certain
standard conditions that have been imposed by the FDIC and the
Department of Banking which are generally designed to familiarize
the Bank with certain applicable operating requirements (e.g., no
directors' fees are payable until the Bank earns a cumulative
profit) and to prepare the Bank to commence business operations
(e.g., the adoption of loan, investment and other policies to
govern the Bank's operations). The Bank expects to satisfy all
conditions of each requirement for organizing the Bank and to open
for business during the third quarter of 1998, or as soon
thereafter as practicable. See "RISK FACTORS - Regulatory
Approvals Required" and "USE OF PROCEEDS." The Bank plans to open
for business in a temporary bank facility to be located on a
portion of the site for the permanent facility of the Bank.
Management expects the permanent bank facility to be constructed
and occupied by the end of March, 1999. The Bank intends to engage
in a general commercial banking business, emphasizing the banking
needs of individuals and small to medium-sized businesses in its
primary service area. See"USE OF PROCEEDS" and "BUSINESS OF THE
COMPANY AND THE BANK."
The philosophy of the management of the Bank with respect to its
initial operations will be to emphasize prompt and responsive
personal service to the residents of Oakwood, Georgia and the other
communities located in Hall County in order to attract customers
and acquire market share now controlled by other financial
institutions in the Bank's market area. The organizers believe
that the Bank offers the residents of Oakwood and the surrounding
areas the opportunity to have an ownership interest in a community
bank, while also receiving the benefits associated with a locally
owned and managed community bank. Through ownership in the
Company, the residents of the community will have a greater role in
the development of the Bank.
The offices of the Bank will be located at 3461 Atlanta Highway,
P. O. Box 907, Oakwood, Georgia 30566. The Company's current
principal executive office is located as follows: 3155 Frontage
Road, Oakwood, Georgia 30566 and its telephone number at that
address is (770) 535-2835 (Ext. 323).
The Offering
Security Common Stock, $5.00 par value, of
the Company
Offering Price $10.00 per share
Number of Shares Offered Minimum: 800,000
Maximum: 1,000,000
Use of Proceeds To purchase 100% of the Common Stock
of the Bank; the remaining proceeds
will be applied to working capital
and used to pay organizational
expenses of the Company and of this
offering. The Bank will use the
proceeds of this offering to pay
organizational and pre-opening
expenses; to build a building and
furnish it for the Bank's main
office; to provide working capital
to be used for business purposes,
including paying officers' and
employees' salaries, making loans
and other investments. See "USE OF
PROCEEDS."
Risk Factors
Investment in the Common Stock involves a significant degree of
risk. See "RISK FACTORS" beginning on page 4 of this Prospectus.
RISK FACTORS
Investment in the shares of the Common Stock offered hereby
involves a significant degree of risk. The shares of Common Stock
should be purchased by investors who can afford the loss of their
entire investment. In addition to considering factors set forth
elsewhere in this Prospectus, persons interested in purchasing
shares of the Common Stock should carefully consider the following
risks before making a decision to subscribe.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS
ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
Regulatory Approvals Required
The Company must receive the approval of the Federal Reserve and
the Department of Banking before it can become the holding company
of the Bank. Applications for such approvals have been filed with
such agencies and are pending. The organizers anticipate receiving
such approvals during May, 1998. Such approvals will require the
Company to sell at least 800,000 shares of its Common Stock but are
not expected to contain other material conditions.
The Bank's application to organize a new state bank and for
federal deposit insurance was filed with the Department of Banking
and the FDIC on June 16, 1997. The Department of Banking and the
FDIC issued their approvals on October 31, 1997 and March 19, 1998,
respectively. Both approvals are subject to the condition that at
least $8,000,000 of capital be raised by the Company and that such
amount, net of the expenses of this offering and organizational
expenses of the Company, be invested in the Bank by the Company.
Both approvals are also subject to a number of other standard
conditions which are regularly imposed by the Department of Banking
and the FDIC which are generally designed to familiarize the Bank
with certain applicable operating requirements (e.g., no directors'
fees are payable until the Bank earns a cumulative profit) and to
prepare the Bank to commence business operations (e.g., the
adoption of loan, investment and other policies to govern the
Bank's operations).
New Enterprise; Lack of Operating History
The Bank, which will be the sole subsidiary of the Company, is
in organization and has no operating history on which to base any
estimate of its future prospects. The Company's initial
profitability will depend entirely upon the Bank's operations. The
Bank's proposed operations are subject to risks inherent in the
establishment of a new business and, specifically, of a new bank.
While the Bank's pro forma financial statements project a profit by
the end of the second year of operations, unforeseen circumstances
could delay such profit. If the Bank is ultimately unsuccessful,
there is no assurance that shareholders will recover all or any
part of their investment in the Common Stock of the Company.
Competitive Industry; Intrastate Branching
The banking business is highly competitive. The Bank will
compete as a financial intermediary with other commercial banks,
savings and loan associations, credit unions, finance companies,
mutual funds, insurance companies, and brokerage and investment
banking firms soliciting business from residents of Hall County,
Georgia, many of which have greater resources than will be
available to the Bank or the Company. Recent federal legislation
permits commercial banks to establish operations nationwide,
further increasing competition from out-of-state financial
institutions. Furthermore, recently enacted Georgia legislation
greatly diminishes the historical legal restrictions on
establishing branch banks across county lines in Georgia, thus
creating further opportunities for other financial institutions to
compete with the Bank. Generally, from July 1, 1996 to July 1,
1998 any bank located in Georgia may branch into any three
additional Georgia counties regardless of the location of the
parent bank. After July 1, 1998, banks may establish banks
statewide in Georgia without limitation. In addition, on-line
computer banking via the Internet or otherwise may also become an
increasing source of competition for community financial
institutions such as the Bank. There is no assurance that the Bank
will achieve the market share necessary to become profitable in the
near future. See "BUSINESS OF THE COMPANY AND THE BANK - The Bank
- - Competition and Historical Deposit Trends."
Highly Regulated Industry
The potential success or failure of the Bank will depend not
only upon competitive factors, but also upon state and federal
regulations affecting banks and bank holding companies generally.
Regulations now affecting the Company and the Bank may be changed
at any time, and there is no assurance that such changes will not
adversely affect the business of the Company and the Bank. See
"SUPERVISION AND REGULATION."
Effect of Monetary Policies
The results of operations of the Bank will be affected by credit
policies of monetary authorities, particularly the Board of
Governors of the Federal Reserve System. There can be no assurance
that the effect of actions by monetary and fiscal authorities,
including the Federal Reserve, will not have an adverse effect on
the deposit levels, loan demand or the business and earnings of the
Bank. See "SUPERVISION AND REGULATION - Monetary Policies."
Success Depends on Economic Conditions
The success of the Bank will depend largely on the general
economic conditions in the Bank's primary service area of Hall
County, Georgia. Although the Bank expects favorable economic
development in this market area, there is no assurance that
favorable economic development will occur or that the Bank's
expectation of corresponding growth will be achieved. See
"BUSINESS OF THE COMPANY AND THE BANK."
Risk of Losses from Lending Activities
The Bank's principal sources of earnings will be interest
charged on loans and fees received in connection with the
origination of loans. The Bank will aggressively seek good loans
primarily within the limited geographic area of Hall County and
immediately adjacent counties. The Bank plans to make consumer
loans to individuals, commercial loans to small and medium-sized
businesses, and real estate-related loans, including construction
loans for residential and commercial properties and primary and
secondary mortgage loans for the acquisition or improvement of
personal residences. There is always some degree of risk regarding
non-payment of loans and resultant operating losses and capital
dilution as a result thereof. See "BUSINESS OF THE COMPANY AND THE
BANK - The Bank-Lending Policy; - The Bank-Real Estate Loans; The
Bank-Consumer Loans; and the Bank-Commercial Loans" beginning at
page ___ of this Prospectus.
Offering Price Arbitrarily Determined
Since the Company and the Bank are in the process of being
organized, the offering price of $10.00 per share has been
determined arbitrarily by the organizers without particular
reference to historical or projected earnings, book value or other
customary criteria. The organizers did not retain an independent
investment banking firm to assist in determining the offering
price. Should a market develop for the Common Stock of the
Company, there is no assurance that any of the Common Stock offered
hereby could be resold for the offering price or any other amount.
<PAGE>
No Dividends
Since the Company and the Bank are both start-up operations, it
will be the policy of the Board of Directors of the Company to
reinvest earnings for the period of time necessary to help ensure
the success of their operations. As a result, the Company has no
current plans to initiate the payment of cash dividends, and its
future dividend policy will depend on the Bank's earnings, capital
requirements, financial condition and other factors considered
relevant by the Board of Directors of the Company. See
"SUPERVISION AND REGULATION - Bank Regulation."
No Established Trading Market
There is no public trading market for the shares of the Common
Stock of the Company, and it is not anticipated that a market for
the shares will develop as a result of this offering. As a result,
investors who may wish or need to dispose of all or a part of their
investment in the Common Stock may not be able to do so except by
private direct negotiations with third parties assuming that third
parties are willing to purchase the Common Stock.
Dilution
Investors purchasing shares of Common Stock in this offering may
incur possible dilution of their interest in the Company to the
extent that officers, directors and key employees are issued
performance stock options and they exercise such options to
purchase common stock at a price below the market value of such
stock. See "MANAGEMENT - Stock Option Plan."
THE OFFERING
Terms of the Offering
Minimum/Maximum. The Company is offering a minimum of 800,000
shares and a maximum of 1,000,000 shares of its Common Stock for a
price of $10.00 per share, for an aggregate minimum price of
$8,000,000 and an aggregate maximum price of $10,000,000. The
minimum purchase for any investor (together with the investor's
affiliates) is 100 shares of Common Stock ($1,000) unless the
Company, in its sole discretion, accepts a subscription for a
lesser number of shares. The maximum purchase for any investor
(together with the investor's affiliates and relatives) is 80,000
shares ($800,000) of Common Stock, unless the Company, in its sole
discretion, accepts a subscription for a greater number of shares.
80,000 shares represents 10% of the minimum and 8% of the maximum
number of shares to be sold.
Organizer Subscriptions. The organizers (the directors) of the
Company intend to purchase an aggregate of 86,500 shares of Common
Stock sold in the offering (10.81% of the minimum and 8.65% of the
maximum number of shares to be sold). No organizer intends to
individually purchase more than 10% of shares sold in this
offering. In the event, however, that the minimum number of shares
in this offering are not sold, the organizers may acquire
additional shares of the Common Stock, up to a maximum aggregate
number for all organizers of 400,000 shares (50% of the minimum and
40% of the maximum number of shares to be sold).
Offering Period and Expiration Date. The offering period for
the shares will terminate at the earlier of the date all shares
offered hereby are sold or 5:00 p.m. Oakwood, Georgia time, on
________, 1998. [90 days from beginning of sale of securities]
This date may be extended at the discretion of the Company for
additional periods not exceeding an aggregate of 180 days (i.e.,
until __________, 1998). Written notice of any such extension will
be given to all persons who are already subscribers at the time of
the extension. The date on which this offering terminates plus any
extension thereof is referred to in this Prospectus as the
"Expiration Date."
Subscription. As indicated below under "How to Subscribe," upon
execution and delivery of a subscription agreement for shares of
the Common Stock, subscribers will be required to deliver to the
Company a check in the amount of $10.00 times the number of shares
subscribed. All subscriptions will be binding and irrevocable
until the Expiration Date.
Escrow. Subscription proceeds will be deposited in an escrow
account with The Bankers Bank, Atlanta, Georgia, as escrow agent
(the "Escrow Agent") for the Company pending completion of this
offering. Subscription proceeds held in the escrow account will be
invested in short-term United States Government securities or
interest bearing accounts insured by the FDIC or in such other
short-term investments as may be agreed upon by the Company and the
Escrow Agent from time to time. The Escrow Agent has not
investigated the desirability or advisability of an investment in
the Company, and has not approved, endorsed or passed upon the
merits of the Common Stock.
Company Discretion. The Company reserves the right, in its sole
discretion, to accept or reject any subscription in whole or in
part on or before the Expiration Date. Without limiting the
generality of the foregoing, the Company also reserves the right to
accept subscriptions on a prorated basis if it receives
subscriptions for more than 1,000,000 shares. The Company will
notify all subscribers no later than five business days after the
Expiration Date whether their subscriptions have been accepted.
With respect to any subscriptions which are not accepted, in whole
or in part, by the Company, the notification will be accompanied by
the unaccepted portion of the subscription funds, with interest
payable at a rate equal to the rate NationsBank, Atlanta, Georgia,
pays its passbook savings account holders (___% at _______________,
1998).
Termination. The Company reserves the right to terminate the
offering at any time after 800,000 shares have been subscribed for
if the Company determines that the total amount of subscriptions
will provide adequate capitalization for the Company after payment
of expenses.
Release from Escrow. Subscription proceeds will be released
from escrow to the Company upon the occurrence of all of the
following events: (a) the sale by the Company of at least 800,000
shares of its Common Stock, (b) receipt by the Company of approval
of the Federal Reserve and the Department of Banking to become a
bank holding company, (c) satisfaction by the Company of, or a
determination by the Company that it will satisfy, all of the
conditions that the Federal Reserve and the Department of Banking
may impose in their approvals to the Company, (d) receipt by the
Bank of approval from the Department of Banking and the FDIC of the
Bank's application to organize a new state bank and for deposit
insurance, and (e) satisfaction by the Bank of, or a determination
by the Bank that it will satisfy, all of the conditions that the
FDIC and the Department of Banking have imposed in their approvals
to the Bank.
If the above conditions are met, the Company may instruct the
Escrow Agent to release to the Company the amount of subscription
proceeds relating to subscriptions or portions thereof accepted by
the Company, together with any interest earned thereon. Any
subscription proceeds received after the above conditions are met
but before termination of this offering will not be deposited in
the escrow account, but will be available for immediate use by the
Company, to the extent accepted by the Company.
The Bank received approvals from the Department of Banking and
the FDIC on October 31, 1997 and March 19, 1998. The Company
expects to receive approvals from the Federal Reserve and the
Department of Banking during May, 1998. In the opinion of the
organizers, the only significant condition to all of the foregoing
approvals will be that a minimum of 800,000 shares of Common Stock
of the Company has to be sold in this offering. If the requisite
shares are not sold, or if the Company or the Bank determine that
they cannot satisfy the other conditions included in the approvals
by the Expiration Date, then the subscription agreements will be of
no further force or effect, and the full amount of all subscription
funds of the subscribers, with interest payable at a rate
comparable to the rate NationsBank, Atlanta, Georgia, pays its
passbook savings account holders, will be returned to the
subscribers (other than organizers) within five business days of
the Expiration Date.
It is possible that subsequent to the release of the
subscription funds from escrow (the requisite shares having been
sold and the determination having been made the other regulatory
conditions will be satisfied) events could occur which could have
the effect of preventing the Bank from commencing business. If
that were to occur, the Company intends to liquidate and would
return to the then shareholders of the Company the portion of their
investment which is equal to their total investment less their
prorata share of the expenses incurred by the Company and the Bank.
See "USE OF PROCEEDS" and "CAPITALIZATION." While no assurance can
be given that the foregoing will not take place, the organizers
cannot foresee any such events and believe it is highly unlikely
that such events will occur. After consulting with applicable
regulatory authorities, the organizers are not aware of any Georgia
state banks which failed to commence business after they or their
holding companies had raised the required capital. Additionally,
based on conversations with applicable regulatory authorities,
there are no indications that the Company and the Bank will have
any difficulty in satisfying the applicable regulatory conditions.
Plan of Distribution. Offers and sales of the Common Stock will
be made on behalf of the Company primarily by certain of its
officers and directors. The officers and directors will receive no
commissions or other remuneration in connection with such
activities, but they will be reimbursed for their reasonable
expenses incurred in the offering. In reliance on Rule 3a4-1 of
the Exchange Act, the Company believes such officers and directors
will not be deemed to be brokers and/or dealers under the Exchange
Act.
The Company has no present arrangements or agreements with any
brokers and/or dealers with respect to this offering. The Company
presently anticipates that no sales of Common Stock will require
the use of brokers and/or dealers. In the event that
broker/dealers are used, all such funds will be promptly
transmitted to the Escrow Agent under the terms of the escrow
agreement.
It is expected that the organizers (the directors of the
Company) will purchase a total of 86,500 shares of Common Stock
offered hereby; however, the organizers may, subject to regulatory
approval, purchase up to 50% of the minimum number of shares
offered hereby if necessary to complete the offering. Any shares
purchased by the organizers in excess of their original commitment
will be purchased for investment and not with a view to the resale
of such shares, and any such purchases will be subject to
regulatory approval.
Founders Club. Each investor shall be deemed to be a member of
the "Founders Club" of the Bank, which will entitle the investor to
a personal checking account with no service charge for as long as
the investor owns a minimum of 100 shares of Company Common Stock.
The initial order of checks for such account will be complimentary,
and the check design will identify the account holder as a member
of the Founders Club.
How to Subscribe
Each prospective investor who (together with the investor's
affiliates) desires to purchase 100 or more shares must:
1. Complete, date and execute the Subscription Agreement,
which is attached as Exhibit A to this Prospectus.
2. Make a check payable to "The Bankers Bank - Escrow
Account for Southern Heritage Bancorp, Inc." in an amount
equal to the full subscription price of $10.00 times the
number of shares subscribed for.
3. Return the completed Subscription Agreement and check as
follows:
HAND OR MAIL DELIVERY
Southern Heritage Bancorp, Inc.
3461 Atlanta Highway
P. O. Box 907
Oakwood, Georgia 30566
Attn: Gary H. Anderson
USE OF PROCEEDS
The net proceeds from the sale of the shares offered hereby
after deducting estimated offering expenses of $35,000 will be
between $7,965,000 if the minimum of 800,000 shares are sold and
$9,965,000 if the maximum of 1,000,000 shares are sold. Offering
expenses will be paid by the Company through draws on the
organization loan described below and repaid from the gross
proceeds of this offering.
The organizers also expect the Company and the Bank to incur
approximately $55,000 of organizational expenses and pre-opening
expenses of approximately $196,500 (assuming the minimum offering
is completed on July 1, 1998 and the Bank begins operation on
August 1, 1998), which would be offset in part by estimated pre-opening
investment income on offering proceeds of approximately
$7,500. Offering, organizational and pre-opening expenses incurred
prior to the conclusion of the offering will be paid through draws
by the Company on the organization loan (which has been guaranteed
by the organizers). To the extent such amounts and accrued
interest thereon exceeds $286,500, additional offering,
organizational and pre-opening expenses will be paid through draws
on the organization loan established for the Company by the
organizers, with all of such amounts to be repaid by the Company
together with accrued interest from net offering proceeds.
The Company will use a portion of the net offering proceeds to
the organization loan, which monies were and will be used to pay
organizational, pre-opening, and offering expenses for the Company
and the Bank. In addition, the Bank will use a portion of the
proceeds it receives from the sale of its stock to the Company to
reimburse the Company for amounts advanced by the Company to pay
organizational and pre-opening expenses of the Bank.
To facilitate the Company's formation and the Bank's formation,
the organizers (all directors of the Company) arranged a line of
credit (the "organization loan") from The Bankers Bank, Atlanta,
Georgia, in the aggregate amount of $500,000 to pay organizational
and pre-opening expenses for the Bank and the Company. The
organization loan bears interest at the lender's prime rate
(presently 8.5% per annum) and has a 360-day term. The organizers
have personally guaranteed the organization loan. The organization
loan and interest costs will be repaid from the offering proceeds
when the conditions to the offering have been satisfied.
The Company will capitalize the Bank with a minimum of
$8,000,000 (net of offering and Company organizational expenses) of
the net offering proceeds by purchasing approximately 795,000
shares of the Bank's stock at a price of $10.00 per share. After
the anticipated expenditure of approximately $1,838,770 in the
aggregate for organizational and pre-opening operation expenses and
the costs of the Bank's proposed facility, the Bank will have
remaining working capital of approximately $6,111,230 to be used
for the purposes of making loans and investments in the course of
the Bank's operations and to pay operating expenses (to the extent
such expenses are not met by operating income).
The remaining balance of the net proceeds of the offering of not
in excess of approximately $2,000,000 (depending on the number of
shares sold) will be retained to establish the Company's working
capital and for general corporate purposes, including supporting
the Bank's growth and engaging in other permitted activities.
The following table sets forth in tabular form the estimated use
by the Company and the Bank of the gross proceeds of the minimum
and maximum offerings based on the estimate of management at this
time and assuming that the offering is concluded as of July 1, 1998
and that the Bank commences operations on August 1, 1998, for
purposes of projecting offering, organizational and pre-opening
expenses and for computing interest payable. Pre-opening expenses
will increase, with a corresponding reduction in working capital
available to the Company and Bank, in the event completing the
offering is delayed for any reason. Management believes that the
Bank will commence operations by August 1, 1998 since all
regulatory approvals should be received several months before that
date as set forth herein and based on the installation of a
temporary bank facility in June, 1998 on a portion of the land
which will be the site of the permanent bank building to be built
by the Bank. The Bank has received permission from the Department
of Banking to begin operations in the temporary bank facility,
assuming the other conditions required by the Department of Banking
are met. The proposed permanent bank building will be built in
approximately eight months and construction is projected to begin
in July, 1998. The site of the bank building is a 1.3359 acre
tract of land which the Company has leased from one of its
directors under a 40-year ground lease. See "MANAGEMENT - Certain
Transactions and Relationships."
<PAGE>
Use of Proceeds
<TABLE>
<CAPTION>
Minimum Maximum
<S> <C> <C>
Gross Proceeds From
This Offering(1) $8,000,000 $10,000,000
Anticipated Use of Proceeds
by the Company:
Offering Expenses 35,000 35,000
Organizational Expenses(2) 15,000 15,000
Working Capital 0 2,000,000
Capitalization of Bank
through Purchase of Common
Stock of the Bank 7,950,000 7,950,000
Total $ 8,000,000 $10,000,000
Anticipated Use of Capital
by the Bank:
Organization Expenses(2) $ 40,000 $ 40,000
Pre-opening Operating
Expenses(2)(3) 189,000 189,000
Land and Bank Premises 1,250,270 1,250,270
Furniture, Fixtures &
Equipment 359,500 359,500
Working Capital 6,111,230 6,111,230
Total $7,950,000 $ 7,950,000
</TABLE>
_______________________
(1) Assuming sale of 800,000 shares and 1,000,000 shares,
respectively, at $10.00 per share.
(2) Organizational expenses consist primarily of consulting fees for
market analysis and feasibility studies, filing fees,
accounting, appraisal and legal fees and expenses. Pre-opening
expenses consist primarily of salaries and benefits, printing,
promotion, supplies, rent and occupancy expense, and interest
expense. Such expenses have been estimated through July, 1998.
All of such expenses as well as those for premises and leasehold
improvements, and for furniture, fixtures and equipment are
expected to be incurred provided that the offering proceeds are
released from escrow.
(3) Assuming $189,000 of expenses, net of anticipated preopening
income of $7,500.
CAPITALIZATION
The following table sets forth the capitalization of the Company
as of December 31, 1997, and as adjusted to give pro forma effect
to the sale by the Company of the minimum offering of 800,000
shares and the maximum offering of 1,000,000 shares (as of the
completion of the offering) and the receipt of the net proceeds
anticipated by the Company from such sale, which will result in
initial compliance with all regulatory capital requirements. All
offering proceeds, with interest, will be returned to subscribers
in the event the minimum offering is not completed.
<TABLE>
<CAPTION>
PRESENTLY AS OF COMPLETION
OUTSTANDING OF THE OFFERING
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
ASSUME MINIMUM OFFERING:
Common Stock, $5 par value
10,000,000 shares authorized;
one share issued, 800,000 to be
issued as adjusted 1 $ 5 800,000 $4,000,000
Capital surplus 5 3,965,000
Accumulated deficit $(56,344) $ ( 56,344)3
Total equity $(56,334) $7,908,656
ASSUME MAXIMUM OFFERING:
Common stock, $5 par value;
10,000,000 shares authorized;
one shares issued, 1,200,000
to be issued as adjusted 1 $ 5 1,000,000 $5,000,000
Capital surplus 5 4,965,0002
Accumulated deficit (56,344) (56,344)3
Total equity $(56,334) $9,908,656
</TABLE>
___________________________
1 In February, 1998, the Company issued one share of Common Stock to
Mr. Cagle for $10 in connection with the organization of the Company.
2 Expenses related to this offering are estimated to be $35,000 and
will be charged to the capital surplus upon completion of the offering.
3 Accumulated deficit represents organizational and pre-opening
expenses incurred as of December 31, 1997, which were funded by the
organization loan from The Bankers Bank.
DIVIDENDS
Since the Company and the Bank are both start-up operations, it
will be the policy of the Board of Directors of the Company to
reinvest earnings for the period of time necessary to help ensure
the success of their operations. As a result, the Company has no
current plans to initiate the payment of cash dividends, and its
future dividend policy will depend on the Bank's earnings, capital
requirements, financial condition and other factors considered
relevant by the Board of Directors of the Company. See
"SUPERVISION AND REGULATION - Bank Regulation."
BUSINESS OF THE COMPANY
AND THE BANK
The Company
The Company was incorporated as a Georgia business corporation
on February 13, 1998 to become a bank holding company by acquiring
all the common stock of the Bank upon its formation. Initially,
the Bank will be the sole operating subsidiary of the Company. The
Company has applied to the Federal Reserve and the Department of
Banking for prior approval to use $7,950,000 of the proceeds of
this offering to acquire the Bank. If such approvals are granted,
upon its acquisition of the common stock of the Bank, the Company
will become a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended, and the Georgia Bank
Holding Company Act. See "SUPERVISION AND REGULATION."
The Company has been organized to facilitate the Bank's ability
to serve its future customers' requirements for financial services.
The holding company structure will provide flexibility for
expansion of the Company's banking business through the possible
acquisition of other financial institutions and the provision of
additional banking-related services which the traditional
commercial bank may not provide under present laws. For example,
banking regulations require that the Bank maintain a minimum ratio
of capital to assets. In the event that the Bank's growth is such
that this minimum ratio is not maintained, the Company may borrow
funds, subject to capital adequacy guidelines of the Federal
Reserve, and contribute them to the capital of the Bank and
otherwise raise capital in a manner which is unavailable to the
Bank under existing banking regulations.
The Company has no present plans to acquire any operating
subsidiaries other than the Bank. It is expected, however, that
the Company may make additional acquisitions in the future in the
event that the Company becomes profitable and such acquisitions are
deemed to be in the best interest of the Company and its
shareholders. Such acquisitions, if any, will be subject to
certain regulatory approvals and requirements. See "SUPERVISION
AND REGULATION."
The Bank
General. The organizers filed an application with the Department
of Banking and with the FDIC on June 16, 1997, for authority to
organize as a state bank, the deposits of which will be federally
insured (generally, up to $100,000 per depositor, subject to
aggregation rules), and to conduct a commercial banking business
from Oakwood, Georgia. The organizers received approvals from the
Department of Banking on October 31, 1997 and the FDIC on March 19,
1998.
The Bank intends to be a full service commercial bank. The Bank
plans to offer personal and business checking accounts, interest-bearing
checking accounts, savings accounts, money market funds and
various types of certificates of deposit. The Bank also plans to
offer installment loans, real estate loans, second mortgage loans,
commercial loans and home equity lines of credit. In addition, the
Bank intends to provide such services as official bank checks and
money orders, Mastercard and Visa credit cards, safe deposit box,
traveler's checks, bank by mail, direct deposit of payroll and
social security checks, and US Savings Bonds.
Philosophy. The philosophy of the management of the Bank with
respect to its initial operations will be to emphasize prompt and
responsive personal service to the residents of Oakwood, Georgia
and the other communities located in Hall County in order to
attract customers and acquire market share now controlled by other
financial institutions in the Bank's market area. The organizers
believe that the Bank offers the residents of Oakwood and the
surrounding areas the opportunity to have an ownership interest in
a community bank, while also receiving the benefits associated with
a locally owned and managed community bank. Through ownership in
the Company, the residents of the community will have a greater
role in the development of the Bank.
Management of the Bank intends to implement an active officer and
director call program to promote these efforts. The purpose of
this call program will be to describe the products, services and
philosophy of the Bank to both existing and new business prospects.
In addition, the President of the Bank has substantial banking
experience in Hall County, which will be an asset in providing both
products and services designed to meet the needs of the Bank's
customer base. All of the organizers are active members of the
business community in Oakwood and the areas located around Hall
County, and their continued active community involvement will
provide an opportunity to promote the Bank and its products and
services. The organizers intend to utilize effective advertising
and aggressive selling efforts through the officer and director
call program in order to build a distinct institutional image for
the Bank and to capture a customer base.
The Company and the Bank presently maintain a key man life
insurance policy in the amount of $500,000 on the life of Gary
Anderson, President of the Company and the Bank.
Bank Location and Facilities. The Bank will be located at 3461
Atlanta Highway, P. O. Box 907, Oakwood, Georgia 30566 in Hall
County. The Bank plans to provide services to Hall County
residents, as well as to residents from the adjacent counties of
Jackson and Gwinnett.
On February 4, 1998, the Company entered into a ground lease with
M. Milton Robson, one of the Company's directors, for a 40-year
ground lease of a 1.3359 acre tract of land located at 3461 Atlanta
Highway in the City of Oakwood, Georgia. The tract of land is the
site where the Company and the Bank intend to construct the main
office of the Bank. The terms of the ground lease are set out in
more detail under the section entitled "MANAGEMENT - Certain
Transactions and Relationships" below. Upon termination of the
lease due to certain defaults by the lessees or normal expiration,
the real property improvements (the building) will revert to and
become the property of the lessor. Final termination is expected
to occur in Summer, 2038, but could occur earlier if lessees
default in the payment of rent for three consecutive months or fail
to exercise the extension options.
<PAGE>
The directors of the Company have obtained two appraisals of the
proposed site of the bank building and of the ground lease. Both
appraisals determined that the rental under the ground lease was
reasonable and at market rental rate for comparable ground leases.
Copies of the appraisals, together with the ground lease agreement,
were filed with the Department of Banking and the FDIC.
The Company and the Bank plan to have a 10,000 square foot,
two-story building constructed on the property for the Bank. There
will be four teller stations inside and four drive through
stations. There will also be a stand-alone automatic teller
machine accessible by automobile. The directors estimate that the
cost of construction of the building will be approximately
$1,250,270. The furniture, fixtures and equipment necessary for
operation of the Bank are projected to cost approximately $359,500.
Construction, equipping and occupancy of the bank building is
projected to occur by March, 1999. As set forth above, the
directors anticipate that the Bank will open for business by August
1, 1998, in a temporary building to be located on a portion of the
site of the permanent bank building.
Management believes the capital to be raised in this offering by
the Company will enable the Company and the Bank to satisfy their
future cash requirements indefinitely and that the Company and the
Bank will not have to raise additional capital during 1998 or 1999
or in the forseeable future.
Primary Service Area. The Bank's Primary Service Area ("PSA")
is defined as south Hall County. The Bank has defined its local
community as Oakwood and Hall County, Georgia and portions of the
surrounding counties of Jackson and Gwinnett.
Economic and Demographic Factors. According to the Georgia
Economic Profile (April, 1997), Hall County has grown during each
census since 1950. From 1980 to 1990, Hall County grew by 26.1%.
The adjacent counties of Jackson and Gwinnett Counties have also
experienced significant positive population growth. The projected
population of Hall County in 2000 is 120,000 persons. According to
Georgia Economic Profile, 26% of the employment base of Hall County
are employed in manufacturing. Manufacturing jobs provide 29% of
the employment earnings for the county. Service employment is the
next largest contributor to employment in the county, providing 22%
of the jobs employment earnings. Retail trade employment is also
important to the county's economy, providing 16% of the jobs and
11% of employment earnings. Hall County's annual unemployment rate
for 1996 was lower than the State of Georgia's mark, averaging 3.3%
compared with the State's average of 4.6%. Nationwide,
unemployment for the same period averaged 5.4%. The per capita
income in the county in 1995 was $21,165, which ranked 14th among
Georgia's 159 counties. The City of Gainesville, the county seat
and largest municipality in the county, issued 525 building permits
in 1997, with an estimated total cost of construction of
$79,115,750. Hall County issued 2,806 building permits in 1997,
with an estimated total cost of construction of $191,408,010.
Competition and Historical Deposit Trends. Hall County has ten
commercial banks and three Federal credit unions with a total of 36
offices. Five of the banks are regional banks. They are SunTrust
Bank, Regions Bank, Wachovia Bank, NationsBank, and First Market
Bank of Tennessee. The other banks operating in Hall County are
Gainesville Bank & Trust, Lanier National Bank, Georgia First Bank,
Community Bank & Trust, and Central and Southern Bank. Total
deposits in Hall County for these 13 financial institutions as of
January 1, 1997 are estimated to exceed $1,500,000,000.
Deposits in Hall County among the banks have grown from 1993 to
1997, and the growth in deposits in Hall County for 1996 was 9.49%.
The organizers believe that this indicates a growing demand for
bank services within the county. Projections prepared for the Bank
and submitted to the Department of Banking indicate that the Bank
could grow to $10,800,000 in deposits in the first twelve months of
operation. There is no assurance, however, that the Bank's
projections will be realized.
Recent federal legislation permits commercial banks to establish
operations nationwide, further increasing competition from out-of-state
financial institutions. Furthermore, recently enacted
Georgia legislation greatly diminishes the historical legal
restrictions on establishing branch banks across county lines in
Georgia, thus creating further opportunities for other financial
institutions to compete with the Bank. Generally, from July 1,
1996 to July 1, 1998, any bank located in Georgia may branch into
any three additional Georgia counties regardless of the location of
the parent bank. After July 1, 1998, banks may establish branch
banks statewide without limitation. In addition, on-line computer
banking via the Internet or otherwise may also become an increasing
source of competition for community financial institutions such as
the Bank. As a result of these competitive factors, the Bank may
have to pay higher rates of interest to attract deposits. The
organizers believe that the Bank will be able to compete
effectively with these institutions in the Bank's proposed markets,
but no assurances can be given in this regard.
The organizers believe that a locally owned bank where decisions
are made within Hall County will be more cognizant of the
community's needs and more responsive in meeting those needs and
local expectations. The Bank will operate from a modern facility
offering convenient hours and competitive services delivered in a
friendly manner. In addition, management believes that having a
local board of directors and wide community ownership of the
Company's Common Stock will enable the Bank to be successful.
Lending Policy. The Bank is being established to support Hall
County and the immediately-surrounding counties of Jackson and
Gwinnett. Consequently, the Bank will aggressively seek good loans
within a limited geographic area. The Bank's primary commercial
lending function will be to make consumer loans to individuals and
commercial loans to small and medium-sized businesses and
professional concerns. In addition, the Bank plans to make real
estate-related loans, including construction loans for residential
and commercial properties, and primary and secondary mortgage loans
for the acquisition or improvement of personal residences. The
Bank plans to avoid concentrations of loans to a single industry or
based on a single type of collateral.
Real Estate Loans. The Bank will make and hold real estate
loans, consisting primarily of single-family residential
construction loans for one-to-four unit family structures. The
Bank will require a first lien position on the land associated with
the construction project and will offer these loans to professional
building contractors and homeowners. Loan disbursements will
require on-site inspections to assure the project is on budget and
that the loan proceeds are being used for the construction project
and not being diverted to another project. The loan-to-value ratio
for such loans will be predominantly 75% of the lower of the as-built
appraised value or project cost, and will be a maximum of 80%
if the loan is amortized. Loans for construction can present a
high degree of risk to the lender, depending upon, among other
things, whether the builder can sell the home to a buyer, whether
the buyer can obtain permanent financing, whether the transaction
produces income in the interim and the nature of changing economic
conditions.
Consumer Loans. The Bank plans to make consumer loans,
consisting primarily of installment loans to individuals for
personal, family and household purposes, including loans for
automobiles, home improvements and investments. Risks associated
with consumer loans include, but are not limited to, fraud,
deteriorated or non-existing collateral, general economic downturn
and customer financial problems.
Commercial Loans. Commercial lending will be directed
principally toward small to mid-size businesses whose demand for
funds fall within the legal lending limits of the Bank. This
category of loans includes loans made to individual, partnership or
corporate borrowers, and obtained for a variety of business
purposes. Risks associated with these loans can be significant and
include, but are not limited to, fraud, bankruptcy, economic
downturn, deteriorated or non-existing collateral and changes in
interest rates.
Investments. In addition to loans, the Bank will make other
investments primarily in obligations of the United States or
obligations guaranteed as to principal and interest by the United
States and other taxable securities. No investment in any of those
instruments will exceed any applicable limitation imposed by law or
regulation.
Deposits. The Bank plans to establish solid core deposits,
including checking accounts, money market accounts, a variety of
certificates of deposit, and IRA accounts. The primary means used
to attract deposits will be an aggressive marketing plan in the
overall service area, a broad product line, and competitive
services. The primary sources of deposits will be residents of,
and businesses and their employees located in, Hall County, and to
a lesser extent, Jackson County and Gwinnett County, obtained
through personal solicitation by the Bank's officers and directors,
direct mail solicitations and advertisements published in the local
media. Deposits will be generated by offering a broad array of
competitively priced deposit services, including demand deposits,
regular savings accounts, money market deposits (transaction and
investment), certificates of deposit, retirement accounts, and
other deposit or funds transfer services which may be permitted by
law or regulation and which may be offered to remain competitive in
the market.
Asset and Liability Management. The Bank intends to manage its
assets and liabilities to provide an optimum and stable net
interest margin, a profitable after-tax return on assets and return
on equity, and adequate liquidity. These management functions will
be conducted within the framework of written loan and investment
policies which the Bank will adopt. The Bank will attempt to
maintain a balanced position between rate sensitive assets and rate
sensitive liabilities. Specifically, it will chart assets and
liabilities on a matrix by maturity, effective duration, and
interest adjustment period, and endeavor to manage any gaps in
maturity ranges.
Employees. Upon commencement of operations, the Bank is expected
to have approximately 12 full-time employees. The Company is not
expected to have any employees who are not also employees of the
Bank.
Year 2000 Issue. Like many financial institutions, the Company
and the Bank will rely upon computers for the daily conduct of
their business and for data processing generally. There is concern
among industry experts that commencing on January 1, 2000,
computers will be unable to "read" the new year and that there may
be widespread computer malfunctions. Management of the Company has
assessed the proposed electronic systems, programs, applications,
and other electronic components to be used in the operations of the
Bank and believes that the Bank's hardware and software when
purchased will be programmed to be able to accurately recognize the
year 2000, and that significant additional costs will not be
incurred by the Bank in connection with the year 2000 issue,
although there can be no assurances in this regard. Management is
formulating a policy and plan for dealing with the year 2000 issue,
which plan will be approved by the Board of Directors. Management
and the Board of Directors will direct and monitor the plan
regarding the year 2000 issue.
MANAGEMENT
Proposed Officers and Directors
On February 19, 1998, the Board of Directors of the Company
elected the following persons as officers of the Company:
Lowell S. Cagle Chairman of the Board
Gary H. Anderson President, Chief Executive Officer
James E. Palmour III Secretary
Jeanie Bridges Treasurer, C.A.O. and C.F.O.
The following table sets forth for the initial members of the
Board of Directors of the Company, (a) their names, addresses and
ages, (b) the positions they will hold in the Bank, (c) the number
of shares of Common Stock for which they intend to subscribe, and
(d) the percentage of outstanding shares such number will represent
if the minimum number of shares are sold in this offering and if
the maximum number of shares are sold in this offering. The Board
of Directors is divided into three classes, with each class being
as nearly equal in number as possible, and the directors serve for
staggered three-year terms. The present term of office of each
director in Class One will expire at the annual shareholders
meeting of the Company to be held in April, 1999; the present term
of office of each director in Class Two will expire at the annual
shareholders meeting of the Company to be held in April, 2000; and
the present term of office of each director in Class Three will
expire at the annual shareholders meeting of the Company to be held
in April, 2001. These persons will also serve as directors of the
Bank for the same staggered terms. The Class in which each
director belongs is indicated below.
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER % OF %OF
ADDRESS (AGE)[CLASS] TO BE HELD OF SHARES(1)MINIMUM1 MAXIMUM(1)
<S> <C> <C> <C> <C>
Gary H. Anderson (46) Director/ 6,0002 .750% .600%
4006 Covey Trail [3] President
Oakwood, GA 30566 and C.E.O.
Lowell S. (Casey) Director/ 5,000 .625 .500
Cagle (32)[3] Chairman
4615 Hunters Court
Gainesville, GA 30507
Earl Gilleland (52)[2] Director 20,000 2.50 2.00
3997 Sloan Mill Road
Gainesville, GA 30507
Terry Hayes (43)[2] Director 2,500 .312 .250
Highway 323
P. O. Box 357
Hoschton, GA 30548
Wm. David Merritt (48) Director 10,000 1.25 1.00
6620 Stringer Road [2]
Clermont, GA 30527
Harold Nichols (55)[1] Director 2,000 .250 .200
4431 Benefield Road
Braselton, GA 30502
James E. Palmour Director/ 6,000 .750 .600
III (61)[3] Secretary
255 Sorrento Circle,
N.W.
Gainesville, GA 30506
Dr. Edward Quillian (42) Director 1,000 .125 .100
4207 Bob White Lane [1]
Oakwood, GA 30566
Milton Robson (55)[1] Director 25,000 3.125 2.50
3509 Tanners Mill Circle
Gainesville, GA 30507
Donald W. Smith (43)[3] Director/Vice 5,000 .625 .500
4129 Cherokee Trail Chairman
Gainesville, GA 30504
Jeanie Bridges (50) Treasurer, 5,0003 .625 .500
100 Sang Road C.A.O. and
Cleveland, GA 30528 C.F.O.
All Proposed Directors 87,500 10.94 8.75
and Officers, as a
Group4
</TABLE>
________________________________
1 In the event that the minimum number of shares in this offering
are not sold, the organizers may purchase additional shares of
Common Stock for an aggregate of 400,000 shares of Common Stock
(50% of the minimum and 40% of the maximum number of shares to be
sold).
2 Under his employment agreement, Mr. Anderson also has stock
options to purchase 15,000 shares of Common Stock of the Company.
See "MANAGEMENT - Cash Compensation" below. The options were
granted to him at no cost to him for the grant of options. The
number of shares shown above for Mr. Anderson does not include the
15,000 shares subject to stock options.
3 Under her employment agreement, Ms. Bridges also has stock
options to purchase 5,000 shares of Common Stock of the Company.
The number of shares shown above for Ms. Bridges does not include
the 5,000 shares subject to stock options.
4 These figures are different from the sum of the individual
percentages because of rounding.
Biographical information concerning the directors (the
organizers) and executive officers and their business experience
during at least the last five years is set forth below. None of
the directors and officers are related.
Gary H. Anderson - Gary H. Anderson has been a resident of
Oakwood, Hall County, Georgia since 1963. Mr. Anderson was born in
Clarkesville, Georgia in 1951. Mr. Anderson has over 23 years
banking experience in Hall County, Georgia. Mr. Anderson served as
City Vice-President for SunTrust Bank of Northeast Georgia,
Gainesville, Georgia from 1981 through 1996. Mr. Anderson is a
graduate of Gainesville College and C&S Commercial Lending School.
Mr. Anderson has also attended the Georgia Banking School at the
University of Georgia. He is a member of the Oakwood Rotary Club,
Councilman of the City of Oakwood, and a member of the Greater Hall
Camber of Commerce. Mr. Anderson has previously served on many
civic, social and community organizations, including Hall County
Boys Club Board of Directors, Gainesville College Foundation,
United Way of Hall County, Oakwood Development Authority.
Lowell S. (Casey) Cagle - Mr. Cagle is a native of Hall County,
Georgia, a seventh generation resident. Mr. Cagle graduated from
Johnson High School and attended Gainesville College and Georgia
Southern University. A self-employed businessman, Mr. Cagle is
President and co-owner of Strateia Group Atlanta, Inc., a
management and business consulting firm, which he co-founded in
July, 1996. He is also co-owner of Jean's Bridal and Tux of Class,
which he has operated for at least the last five years. Mr. Cagle
is a member of Westside Baptist Church, Gainesville, Georgia. Mr.
Cagle is a Georgia State Senator for the 49th District, which
includes Hall County and portions of Forsyth County. In November,
1994, Mr. Cagle was elected to a four year term in the Georgia
Senate.
Earl Gilleland - Mr. Gilleland is a native Hall Countian, having
lived his entire life in South Hall County. His entire business
career has been with Gilleland Concrete Company and in 1968 he
became sole owner and President of the company. In 1997, Mr.
Gilleland sold Gilleland Concrete to a Florida company, and he
remains as manager of the local company. He is a member of Poplar
Springs Baptist Church.
Terry Hayes - Mr. Hayes has been a resident of Jackson County,
Georgia for over 12 years. Mr. Hayes was born in DeKalb County.
He is Manager of Hayes Chrysler-Plymouth-Dodge-Jeep in Oakwood,
Georgia. Mr. Hayes has worked in the family business of Hayes
Chrysler-Plymouth-Dodge-Jeep in Gwinnett County and Hall County for
over 25 years. Mr. Hayes is a member of the South Hall Rotary Club
and the Georgia Cattlemen's Association.
William David Merritt - Mr. Merritt is a long-time (40 year)
resident of Hall County, Georgia. Mr. Merritt is President/Owner
of Merritt Contracting, Inc. since 1982; President/Owner of
Southern Curb, Inc. since 1987; President of MCI Management Company
since 1989. Mr. Merritt is also Vice-President of Gilleland &
Merritt, Inc., a real estate development company, and a partner in
The Windmill Partnership, a real estate development company in
north Hall County. Mr. Merritt is a member of the Georgia Utility
Contractors Association and the Georgia Highway Contractors
Association. He is a member of the Greater Hall Chamber of
Commerce and the Rocky Mountain Elk Association.
Harold Nichols - Mr. Nichols is a 35-year resident of Hall
County, Georgia. He has been the Engineer Products Sales Manager
of Macklanburg-Duncan, Gainesville, Georgia since 1969. He is a
member of Gainesville Masonic Lodge #219 and is an active member of
the Johnson High School Booster Club.
James E. Palmour III - Mr. Palmour was born in and is a resident
of Gainesville, Hall County, Georgia, and has been a resident for
all but four years of his life. He graduated from Gainesville High
School, University of Georgia and Atlanta Law School. Mr. Palmour
has been an attorney at law since 1964 and has practiced general
law since that time with the exception of the period of 1976
through 1984 during which he was Judge of the Superior Court of the
Northeastern Judicial Circuit. Mr. Palmour's major field of law is
government law and he is attorney for the City of Gainesville,
Georgia, White County, Georgia, and the Barrow County Airport
Authority. He is a member of the Rotary Club of Gainesville, State
Bar of Georgia, Gainesville-Northeastern Bar Association, and has
previously served as a member of the Lanier Area Technical School
Board.
Dr. Edward Quillian - Dr. Quillian is a native of Hall County,
Georgia and is a graduate of the University of Georgia School of
Veterinary Medicine in 1983. Dr. Quillian was a partner in the
Cumming Veterinary Clinic from 1983 to 1987. He has been CEO/Owner
of Quillian Family Pet Clinic in Oakwood, Georgia since 1987. He
is a Trustee of the Gainesville College Foundation. He is also a
member of the American Animal Hospital Association, Georgia
Veterinary Medical Association, American Veterinary Medical
Association, and the Georgia Academy of Veterinary Practice.
Milton Robson - Mr. Robson has been a resident of Hall County,
Georgia for over 50 years. He has resided in south Hall County for
over 25 years. Mr. Robson founded Milton's Institutional Foods in
1962, which he sold in 1995 to Progressive Food Services. Mr.
Robson is the owner of Mule Camp Springs, a commercial retail
center, in Gainesville, Georgia and is the owner/developer of
Robson Crossing Shopping Center in Oakwood, Georgia. He is Vice-
President of Prime Pak Foods, Inc., a wholesale frozen meat
distributor, which he founded in 1975.
Donald W. Smith - Mr. Smith is a native of Hall County, Georgia.
He is a 1975 graduate of West Georgia College. Mr. Smith is
President and Owner of Arrow Auto Sales, and he has over 19 years
experience in retail auto sales. He is President of Arrow
Mitsubishi in Gainesville, Georgia, and he also has served as
President of Oakwood Arrow Auto Auction since 1990. Mr. Smith is
a past President and serves on the Board of Directors of the
Georgia Automobile Dealers Association. Mr. Smith is a member of
the Gainesville Jaycees and the Greater Hall Chamber of Commerce.
Jeanie Bridges - Ms. Bridges serves as Treasurer, Chief
Accounting Officer and Chief Financial Officer of the Company and
will serve as Senior Vice President/Chief Operations Officer of the
Bank. Ms. Bridges, age 50, was born in Guilford County, North
Carolina, but has lived in Georgia since her teens. She resided in
the metro Atlanta area for 20 years, Hall County for 10 years and
has lived in White County for the past 3 years. Until resigning to
take her position with the Company, Ms. Bridges was employed with
SunTrust Bank, Northeast Georgia, N.A. since March, 1986 in many
capacities, from lender of consumer and mortgage loans to Branch
Administrator. Prior to her resignation, she was First Vice
President, Security Officer, and Compliance Officer. Ms. Bridges
is a member of the First Baptist Church of Cleveland and the Truth
Seekers Sunday School Class. She is also a member of the Georgia
Department of Labor Advisory Council and is involved in Financial
Women International (formerly NABW) and the White County League of
Women Voters.
Christopher D. England - Mr. England will serve as Senior Vice
President and Chief Lending Officer of the Bank. Mr. England is a
native of South Hall County, born in Gainesville in 1958. He has
over 13 years of banking and lending experience in Hall County,
Georgia. Mr. England has served as Vice President of Lanier
National Bank since February, 1992. His lending experience
includes both commercial and consumer loans. Before joining Lanier
National Bank, he was employed by The Citizens Bank, Gainesville,
Georgia, from 1984 to 1992. He progressed through management
serving initially as a collector before being promoted into
lending. His last duties there were Vice President and Branch
Manager of the Main Office. Mr. England is a 1980 graduate of
Georgia Tech, receiving his Bachelor of Science degree. He is also
a graduate of the C&S Consumer Lending School, the Georgia Banker's
School at the University of Georgia, and the Graduate School of
Banking of the South at LSU. His civic and community involvement
include serving or having served on the boards of the Gainesville
College Foundation, the Gainesville-Hall County Neighborhood
Revitalization, Inc., the Gainesville-Hall County Board of
Realtors, the Greens Committee of Chicopee Woods Golf Course, and
the Hall County March of Dimes. He has also served as McEver
Elementary School PTO Treasurer and is a member of the Gainesville
Lions Club.
Cash Compensation
Gary H. Anderson has an employment agreement with the Company and
the Bank under which he will serve as President and Chief Executive
Officer of the Company and of the Bank. All of the material terms
of Mr. Anderson's employment agreement are summarized below.
The employment agreement provides for an initial term of three
years and can be extended annually by the Company and the Bank at
the end of each year of the term for an additional year, so that
the remaining term shall continue to be three years. Mr. Anderson
will be paid an initial annual salary of $105,000. Once the Bank
begins operations he will also be entitled to certain performance
bonuses. The criteria for earning performance bonuses will be
established by the Board of Directors.
Under Mr. Anderson's employment agreement, he also has been
granted, at no cost to him for the option grant, the option to
purchase 15,000 shares of Common Stock of the Company at the price
of the lesser of $10.00 or book value of the stock during the first
five (5) years of operation of the Bank.
Mr. Anderson will also receive health insurance with dependents
coverage and disability insurance paid in full by the Bank. The
Company will maintain a term life insurance policy on Mr. Anderson
providing for death benefits in the amount of $500,000 payable to
the Company and $500,000 payable to Mr. Anderson's family. He will
receive a mid-size automobile to be used primarily for business
purposes, and the Bank will pay operating, maintenance and
insurance expenses for the automobile. The Bank will pay monthly
membership dues for Mr. Anderson at all service organizations and
professional associations.
If the Company terminates Mr. Anderson's employment, the Company
will be obligated to pay him severance pay equal to one year's base
salary and insurance benefits. If Mr. Anderson's employment is
terminated due to a sale, merger or other change of control of the
Company or the Bank, the Company will be obligated to pay him
severance pay equal to two times his then existing annual base
salary. Furthermore, the Company must remove any restrictions on
outstanding incentive awards so that all such awards vest
immediately.
In addition, Mr. Anderson's employment agreement provides that
following termination of his employment with the Bank and for a
period of twelve months thereafter if terminated without cause and
for a period of six months thereafter if terminated for cause, Mr.
Anderson may not: (i) be employed in the banking business or any
related field thereto in Oakwood, Georgia or Hall County, Georgia,
(ii) solicit customers of the Bank for the purpose of providing
financial services; (ii) solicit employees of the Bank for
employment; (iv) furnish anyone or use any list of customers of the
Bank for banking purposes; or (v) furnish, use or divulge to anyone
any information acquired by him from the Bank relating to the
Bank's methods of doing business.
Mr. Anderson will also receive other employment benefits under
his employment agreement with the Company and the Bank as spelled
out in his employment agreement.
Officers and directors of the Company will not be separately
compensated for their services to the Company until the Company
earns a cumulative profit.
Directors will not be compensated for their services as directors
until the Bank earns a cumulative profit.
Certain Transactions and Relationships
It is possible that the Company and the Bank will have banking
and other business transactions in the ordinary course of business
with directors and officers of the Company and the Bank, including
members of their families or corporations, partnerships or other
organizations in which such directors and officers have a
controlling interest. If such transactions occur, they will be on
substantially the same terms (including price, or interest rate and
collateral) as those prevailing at the time for comparable
transactions with unrelated parties, and any banking transactions
will not be expected to involve more than the normal risk of
collectibility or present other unfavorable features to the Company
and the Bank.
To facilitate the Bank's formation, three of the organizers (all
directors of the Company) arranged a line of credit from Citizens
Bank, Cumming, Georgia, in the aggregate amount of $50,000 to pay
organizational and pre-opening expenses for the Company and the
Bank. The line of credit interest rate was the lender's prime rate
(8.50% per annum) plus .5% and had a 180-day term. The three
organizers personally guaranteed the line of credit. The line of
credit and interest costs were repaid from proceeds of the
organization loan described in the following paragraph.
To facilitate the Company's formation and the Bank's formation,
the organizers (all director's of the Company) arranged a line of
credit (the "organization loan") from The Bankers Bank, Atlanta,
Georgia, in the aggregate amount of $500,000 to pay organizational
and pre-opening expenses for the Bank and the Company. Proceeds
from the organization loan were also used to repay the line of
credit from Citizens Bank, Cumming, Georgia. The organization loan
bears interest at the lender's prime rate (presently 8.5% per
annum) and has a 360-day term. The organizers have personally
guaranteed the organization loan. The organization loan and
interest costs will be repaid from the offering proceeds when the
conditions to the offering have been satisfied. See "USE OF
PROCEEDS."
The Company and the Bank have entered into a ground lease, dated
February 4, 1998, with Milton Robson, as lessor. Mr. Robson serves
as a director of the Company and will serve as a director of the
Bank. The ground lease provides for the lease of a 1.3359 acre
tract of land located at 3461 Atlanta Highway in the City of
Oakwood, Georgia. The lease is for a term of 20 years, with four
options to extend the term for five years upon each extension. The
lease provides for annual rent of $40,000, payable in monthly
installments of $3,333.33, beginning once the Company's temporary
office facility is located on the site and placed in use by the
Company. After the third lease year, the rent increases annually
by the amount of increase in the Consumer Price Index during the
prior year times the prior year's annual rent, but not in excess of
a 5% increase. In addition, the Bank and the Company are required
to pay the ad valorem taxes on the land and improvements built on
the site and to keep the land and improvements insured against
normal casualties and for general liability. The Bank intends to
build and equip a 10,000 square foot, two-story bank building on
the 1.3359 acre site at its expense. Upon termination of the lease
due to certain defaults by the lessees or normal expiration, the
real property improvements (the building) will revert to and become
the property of the lessor. Final termination is expected to occur
in Summer, 2038, but could occur earlier if lessees default in the
payment of rent for three consecutive months or fail to exercise
the extension options. The directors of the Company have obtained
two appraisals of the proposed site of the bank building and of the
ground lease. Both appraisals determined that the rental under the
ground lease was reasonable and at market rental rate for
comparable ground leases. Copies of the appraisals, together with
the ground lease agreement, were filed with the Department of
Banking and the FDIC.
Stock Option Plan
Although the Company has no specific plans, the Company may adopt
a stock option plan pursuant to which officers, directors, and key
employees of the Company and the Bank may be granted options to
purchase shares of the Company's stock as compensation for past
services or as incentive for services to be rendered. The plan has
not yet been adopted, and if adopted by the Board of Directors,
will be submitted to the shareholders of the Company for approval
or ratification. The organizers contemplate that the number of
shares of the Company's Common Stock authorized to be issued
pursuant to any stock option plan will not exceed 20% of the shares
to be issued by the Company if this offering (160,000 shares if the
minimum number of shares are sold in the offering and 200,000 if
the maximum number are sold). Exercise of any such options could
have a dilutive effect on the shareholders' interest in the
Company's earnings and book value. In the future, it is possible
that the Company could issue additional shares of its Common Stock.
Any such stock offering by its nature could be dilutive to the
holdings of purchasers in this offering.
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
There is currently no market for the shares of Common Stock and
it is not likely that an active trading market will develop for the
shares in the future. There are no present plans for the Company's
Common Stock to be traded on any stock exchange or over-the-counter
market. As a result, investors who need or wish to dispose of all
or part of their shares may be unable to do so except in private,
directly negotiated sales.
<PAGE>
DESCRIPTION OF COMMON STOCK OF THE COMPANY
General
The Company's Articles of Incorporation authorize the Company to
issue up to 10,000,000 shares of Common Stock, par value $5.00 per
share, of which a minimum of 800,000 shares and a maximum of
1,000,000 shares will be issued pursuant to this offering.
All shares of Common Stock of the Company will be entitled to
share equally in dividends from funds legally available therefor,
when, as and if declared by the Board of Directors, and upon
liquidation or dissolution of the Company, whether voluntary or
involuntary, to share equally in all assets of the Company
available for distribution to the shareholders. It is not
anticipated that the Company will pay any cash dividends on the
Common Stock in the near future. See "DIVIDENDS." Each holder of
Common Stock will be entitled to one vote for each share on all
matters submitted to the shareholders. Holders of Common Stock
will not have any preemptive right to acquire authorized but
unissued capital stock of the Company. There is no cumulative
voting, redemption right, sinking fund provision, or right of
conversion in existence with respect to the Common Stock. All
shares of the Common Stock issued in accordance with the terms of
this offering as described in this Prospectus will be fully-paid
and non-assessable.
Shares Held by Affiliates
Upon completion of this offering, the Company will have a minimum
of 800,000 shares and a maximum of 1,000,000 shares outstanding.
All of these shares will be freely tradeable without restriction or
registration under the Securities Act of 1933, as amended (the
"1933 Act"), except for shares purchased in this offering by the
organizers.
The organizers (the directors of the Company) are "affiliates"
of the Company (as that term is defined in Rule 144 adopted under
the 1933 Act), and, as a result, their shares will be subject to
certain resale restrictions.
Rule 144 generally provides that a person (including an affiliate
of the Company) who has beneficially owned shares for at least two
years would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the then
outstanding shares of the Common Stock or the average weekly
trading volume of the Common Stock during the four calendar weeks
preceding such sale, whichever is greater. While affiliates may
generally sell non-restricted shares under Rule 144 without regard
to the length of their holding period, all shares purchased by the
organizers will be purchased for investment purposes and not with
a present intention of redistribution.
There can be no assurance that a public market for the Common
Stock will exist at any time subsequent to this offering. As a
result, investors who may wish or who need to dispose of all or a
part of their investment in the Common Stock may not be able to do
so except for private direct negotiations with third parties,
assuming that third parties are willing to purchase the Common
Stock.
CERTAIN PROVISIONS OF THE COMPANY'S
ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation of the Company contain certain
provisions which would have the effect of impeding an attempt to
change or remove management of the Company or to gain control of
the Company in a transaction not supported by its Board of
Directors. The Articles of Incorporation of the Company also
contain a provision which eliminates the potential personal
liability of directors for monetary damages. The Bylaws of the
Company contain certain provisions which provide indemnification
for directors of the Company. Each of these provisions is
discussed more fully below.
The Bylaws of the Company provide that the Company's Board of
Directors is divided into three classes, with each class to be as
nearly equal in number as possible. The directors in each class
serve three-year terms of office. The effect of the Company's
having a classified Board of Directors is that only approximately
one-third of the members of the Board are elected each year, which
effectively requires two annual meetings for the Company's
shareholders to change a majority of the members of the Board.
Change in Number of Directors
Article 7 of the Articles of Incorporation of the Company
provides that any change in the number of directors of the Company,
as set forth in its Bylaws, would have to be made by the
affirmative vote of 2/3 of the entire Board of Directors or by the
affirmative vote of the holders of at least 2/3 of the outstanding
shares of Common Stock.
Under Georgia law, the number of directors may be increased or
decreased from time to time by amendment to the Bylaws, unless the
Articles of Incorporation provide otherwise or unless the number of
directors is otherwise fixed by the shareholders.
Removal of Directors
Article 8 of the Articles of Incorporation of the Company
provides that directors of the Company may be removed during their
terms with cause by the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock or without cause
by the affirmative vote of the holders of at least 2/3 of the
outstanding shares of Common Stock. "Cause" for this purpose is
defined as final conviction of a felony, request or demand for
removal by any bank regulatory authority having jurisdiction over
the Company, or determination by at least 2/3 of the incumbent
directors of the Company that the conduct of the director to be
removed has been inimical to the best interests of the Company.
Under Georgia law, any or all of the directors of a corporation
may be removed with or without cause by the affirmative vote of a
majority of the shares represented at a meeting at which a quorum
is represented and entitled to vote thereon, unless the Articles of
Incorporation provide otherwise.
Limitation of Liability
Article 10 of the Company's Article of Incorporation, subject
to certain exceptions, eliminates the potential personal liability
of a director for monetary damages to the Company and to the
shareholders of the Company for breach of a duty as a director.
There is no elimination of liability for (a) a breach of duty
involving appropriation of a business opportunity of the Company,
(b) an act or omission not in good faith or involving intentional
misconduct or a knowing violation of law, (c) a transaction from
which the director derives an improper material tangible personal
benefit, or (d) as to any payment of a dividend or approval of a
stock repurchase that is illegal under the Georgia Business
Corporation Code. Article 10 does not eliminate or limit the right
of the Company or its shareholders to seek injunctive or other
equitable relief not involving monetary damages.
Article 10 was adopted by the Company pursuant to the Georgia
Business Corporation Code which allows Georgia corporations, with
the approval of their shareholders, to include in their Articles of
Incorporation a provision eliminating or limiting the liability of
directors, except in the circumstances described above. Article 10
was included in the Company's Articles of Incorporation to
encourage qualified individuals to serve and remain as directors of
the Company. While the Company has not experienced any problems in
locating directors, it could experience difficulty in the future as
the Company's business activities increase and diversify. Article
10 was also included to enhance the Company's ability to secure
liability insurance for its directors at a reasonable cost. While
the Company intends to obtain liability insurance covering actions
taken by its directors in their capacities as directors, the Board
of Directors believes that the current director's liability
insurance environment, and the environment for the foreseeable
future, is characterized by increasing premiums, reduced coverage
and an increasing risk of litigation and liability. The Board of
Directors believes that Article 10 will enable the Company to
secure such insurance on terms more favorable than if such a
provision were not included in the Articles of Incorporation.
Supermajority Voting on Certain Transactions
Under Article 12 of the Articles of Incorporation of the Company,
with certain exceptions, any merger or consolidation involving the
Company or any sale or other disposition of all or substantially
all of its assets will require the affirmative vote of the holders
of at least 2/3 of the outstanding shares of Common Stock.
However, if the Board of Directors of the Company has approved the
particular transaction by the affirmative vote of 2/3 of the entire
Board, then the applicable provisions of Georgia law would govern
and shareholder approval of the transaction would require the
affirmative vote of the holders of only a majority of the
outstanding shares of Common Stock entitled to vote thereon.
The primary purpose of this Article is to discourage any party
from attempting to acquire control of the Company through the
acquisition of a substantial number of shares of Common Stock
followed by a forced merger or sale of assets without negotiation
with management. Such a merger or sale might not be in the best
interests of the Company or its shareholders. This provision may
also serve to reduce the risk of a potential conflict of interest
between a substantial shareholder on the one hand and the Company
and its other shareholders on the other.
The foregoing provision could enable a minority of the Company
shareholders to prevent a transaction favored by the majority of
the shareholders. Also, in some, circumstances, the directors
could cause a 2/3 vote to be required to approve the transaction by
withholding their consent to such a transaction, thereby enhancing
their positions with the Company and the Bank. However, of the ten
persons who are directors of the Company, only one will be
affiliated with the Company and the Bank in a full-time management
position.
Evaluation of an Acquisition Proposal
Article 13 of the Company's Articles of Incorporation provides
that the response of the Company to any acquisition proposal made
by another party will be based on the Board's evaluation of the
best interests of the Company and its shareholders. As used
herein, the term "acquisition proposal" refers to any offer of
another party (a) to make a tender offer or exchange offer for any
equity security of the Company, (b) to merge or consolidate the
Company with another corporation, or (c) to purchase or otherwise
acquire all or substantially all of the properties and assets owned
by the Company.
Article 13 charges the Board, in evaluating an acquisition
proposal, to consider all relevant factors, including (a) the
expected social and economic effects of the transaction on the
employees, customers and other constituents (e.g., suppliers of
goods and services) of the Company and the Bank, (b) the expected
social and economic effects on the communities within which the
Company and the Bank operate, and (c) the consideration being
offered by the other corporation in relation (i) to the then
current value of the Company as determined by a freely negotiated
transaction and (ii) to the Board of Directors' then estimate of
the Company's future value as an independent entity. The
enumerated factors are not exclusive, and the Board may consider
other relevant factors.
This Article has been included in the Company's Articles of
Incorporation because the Bank is charged with providing support to
and being involved with the communities it serves, and the Board
believes its obligations in evaluating an acquisition proposal
extend beyond evaluating merely the consideration being offered in
relation to the then market or book value of the Common Stock. No
provisions of Georgia law specifically enumerate the factors a
corporation's board of directors should consider in the event the
corporation is presented with an acquisition proposal.
While the value of the consideration offered to shareholders is
the main factor when weighing the benefits of an acquisition
proposal, the Board believes it appropriate also to consider all
other relevant factors. For example, this Article directs the
Board to evaluate the consideration being offered in relation to
the then current value of the Company determined in a freely
negotiated transaction and in relation to the Board's then estimate
of the future value of the Company as an independent concern. A
takeover bid often places the target corporation virtually in the
position of making a forced sale, sometimes when the market price
of its stock may be depressed. The Board believes that frequently
the consideration offered in such a situation, even though it may
be in excess of the then market value (i.e., the value at which
shares are then currently trading), it is less than that which
could be obtained in a freely negotiated transaction. In a freely
negotiated transaction, management would have the opportunity to
seek a suitable partner at a time of its choosing and to negotiate
for the most favorable price and terms which reflect not only the
current value, but also the future value of the Company.
One effect of this Article may be to discourage a tender offer
in advance. Often an offeror consults the Board of a target
corporation prior to or after commencing a tender offer in an
attempt to prevent a contest from developing. In the opinion of
the Board, this provision will strengthen its position in dealing
with any potential offeror which might attempt to acquire the
Company through a hostile tender offer. Another effect of this
Article may be to dissuade shareholders who might be displeased
with the Board's response to an acquisition proposal from engaging
the company in costly litigation. This provision, however, does
not affect the right of a shareholder displeased with the Board's
response to an acquisition proposal to institute litigation against
the Company and to allege that the Board breached an obligation to
shareholders by not limiting its evaluation of an acquisition
proposal to the value of the consideration being offered in
relation to the then market or book value of the Common Stock.
Article 13 would not make an acquisition proposal regarded by the
Board as being in the best interests of the Company more difficult
to accomplish. It would, however, permit the Board to determine
that an acquisition proposal was not in the best interests of the
Company (and thus to oppose it) on the basis of the various factors
deemed relevant. In some cases, such opposition by the Board might
have the effect of maintaining the positions of incumbent
management.
Amendment of Provisions
Any amendment of Articles 7, 8, 10, 12, and 13 of the Company's
Articles of Incorporation requires the affirmative vote of the
holders of at least 2/3 of the outstanding shares of Common Stock,
unless 2/3 of the entire Board of Directors approves the amendment.
If 2/3 of the Board approves the amendment, the applicable
provisions of Georgia law would govern, and the approval of only a
majority of the outstanding shares of Common Stock would be
required.
Indemnification
The Bylaws of the Company contain certain indemnification
provisions which provide that directors, officers, employees or
agents of the Company will be indemnified against expenses actually
and reasonably incurred by them if they are successful on the
merits of a claim or proceedings.
When a case or dispute is not ultimately determined on its merits
(i.e., it is settled), the indemnification provisions provide that
the Company will indemnify directors when they meet the applicable
standard of conduct. The applicable standard of conduct is met if
the director acted in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Company and, with
respect to any criminal action or proceeding, if the director had
no reasonable cause to believe his or her conduct was unlawful.
Whether the applicable standard of conduct has been met is
determined by the Board of Directors, the shareholders or
independent legal counsel in each specific case.
The Bylaws of the Company also provide that the indemnification
rights set forth therein are not exclusive of other indemnification
rights to which a director may be entitled under any bylaw,
resolution or agreement either specifically or in general terms
approved by the affirmative vote of the holders of a majority of
the shares entitled to vote thereon. The Company can also provide
for greater indemnification than that set forth in the Bylaws if it
chooses to do so, subject to approval by the Company's
shareholders. The Company may not, however, indemnify a director
for liability arising out of circumstances which constitute
exceptions to limitation of a director's liability for monetary
damages. See "CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES AND
BYLAWS - Limitation of Liability."
The indemnification provisions of the Bylaws specifically provide
that the Company may purchase and maintain insurance on behalf of
any director against any liability asserted against such person and
incurred by him in any such capacity, whether or not the Company
would have had the power to indemnify against such liability.
The Company is not aware of any pending or threatened action,
suit or proceeding involving any of its directors or officers for
which indemnification from the Company may be sought.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "1933 Act") may be permitted to
directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities other than the payment by
the Company of expenses incurred or paid by the director, officer
or controlling person of the Company in the successful defense of
any action, suit or proceedings is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of such
issue.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under
both federal and state law. The following is a brief summary of
certain statutes, rules and regulations affecting the Company and
the Bank. This summary is qualified in its entirety by reference
to the particular statutory and regulatory provision referred to
below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the business of the Company
and the Bank. Supervision regulation and examination of the
Company and the Bank by the bank regulatory agencies are intended
primarily for the protection of depositors rather than shareholders
of the Company.
Bank Holding Company Regulation
The Company will be a registered holding company under the Bank
Holding Company act of 1956 (the "BHC Act") and the Georgia Bank
Holding Company Act (the "Georgia BHC Act") and will be regulated
under such acts by the Board of Governors of the Federal Reserve
System (the "Federal Reserve") and by the Department of Banking,
respectively.
As a bank holding company, the Company is required to file annual
reports with the Federal Reserve and the Department of Banking and
such additional information as the applicable regulator may require
pursuant to the BHC Act and the Georgia BHC Act. The Federal
Reserve and the Department of Banking may also conduct examinations
of the Company to determine whether it is in compliance with both
BHC Acts and the regulations promulgated thereunder.
The BHC Act also requires every bank holding company to obtain
prior approval from the Federal Reserve before acquiring direct or
indirect ownership or control of more than 5% of the voting shares
of any bank which is not already majority owned or controlled by
that bank holding company. Acquisition of any additional banks
would also require prior approval from the Department of Banking.
On September 29, 1994, President Clinton signed the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the
"Interstate Act") which amends federal law to permit bank holding
companies to acquire existing banks in any state effective
September 29, 1995, and any interstate bank holding company is
permitted to merge its various bank subsidiaries into a single bank
with interstate branches effective June 1, 1997. States have the
authority to authorize interstate branching prior to June 1, 1997
or alternatively, to opt out of interstate branching prior to that
date.
In response to the Interstate Act, recently enacted Georgia
legislation permits interstate branching where the branch banks are
acquired by merger or acquisition between an out-of-state bank and
a Georgia bank. Furthermore, recent Georgia legislation greatly
diminishes the historical legal restrictions on establishing branch
banks across county lines in Georgia. Generally, from July 1, 1996
to July 1, 1998, any bank located in Georgia may branch into any
three additional Georgia counties regardless of the location of the
parent bank. After July 1, 1998, banks may establish branch banks
statewide without limitation.
In addition to having the right to acquire ownership or control
of other banks, a bank holding company is authorized to acquire
ownership or control of nonbanking companies, provided the
activities of such companies are so closely related to banking or
managing or controlling banks that the Federal Reserve considers
such activities to be proper to the operation and control of banks.
Regulation Y, promulgated by the Federal Reserve, sets forth those
activities which are regarded as closely related to banking or
managing or controlling banks and, thus, are permissible activities
for bank holding companies, subject to approval by the Federal
Reserve in individual cases.
Federal Reserve policy requires a bank holding company to act as
a source of financial strength and to take measures to preserve and
protect bank subsidiaries in situations where additional
investments in a troubled bank may not be warranted. Under these
provisions, a bank holding company may be required to loan money to
its subsidiaries in the form of capital notes or other instruments
which qualify for capital under regulatory rules. Any loans by the
holding company to such subsidiary banks are likely to be unsecured
and subordinated to such bank's depositors and perhaps to its other
creditors.
Bank Regulation
The Company will initially have one subsidiary bank. The Bank
will be a state bank chartered under the laws of the State of
Georgia and will be subject to examination by the Department of
Banking. The Department of Banking regulates or monitors all areas
of a bank's operations and activities, including reserves, loans,
mergers, issuance of securities, payment of dividends, interest
rates and establishment of branches.
The Bank will also be insured and regulated by the Federal
Deposit Insurance Corporation (the "FDIC"). The major functions of
the FDIC with respect to insured banks include paying depositors to
the extent provided by law in the event an insured bank is closed
without adequately providing for payment of the claims of
depositors, acting as a receiver of state banks placed in
receivership when so appointed by state authorities, and preventing
the continuance or development of unsound and unsafe banking
practices. In addition, the FDIC is authorized to examine insured
state banks which are not members of the Federal Reserve to
determine the condition of such banks for insurance purposes. The
FDIC also approves conversions, mergers consolidations and
assumption of deposit liability transactions between insured banks
and noninsured banks or institutions to prevent capital or surplus
diminution in such transactions where the resulting, continued or
assuming bank is an insured non-member state bank.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the BHC Act on any extension of credit to
the bank holding company or any of its subsidiaries, on investment
in the stock or other securities of the bank holding company or its
subsidiaries, and on the taking of such stock or securities as
collateral for loans to any borrower. In addition, a bank holding
company and its subsidiaries are prohibited for engaging in certain
tying arrangements in connection with any extension of credit or
provision of any property or services.
Capital Requirements
Regulatory agencies measure capital adequacy with a framework
that makes capital requirements sensitive to the risk profile of
the individual banking institution. The guidelines define capital
as either Tier 1 capital (primary shareholders equity) or Tier 2
capital (certain debt instruments and a portion of the reserve for
loan losses). There are two measures of capital adequacy for bank
holding companies and their subsidiary banks: the Tier 1 leverage
ratio and the risk-based capital requirements. Bank holding
companies and their subsidiary banks must maintain a minimum Tier
1 leverage ratio of 4%. In addition, Tier 1 capital must equal 4%
of risk-weighted assets, and total capital (Tier 1 plus Tier 2)
must equal 8% of risk-weighted assets. These are minimum
requirements, however, and institutions experiencing internal
growth (which will initially be the case for the Bank) or making
acquisitions, as well as institutions with supervisory or
operational weaknesses, will be expected to maintain capital
positions well above these minimum levels.
The federal banking agencies have proposed amending the capital
adequacy standards to provide for the consideration of interest
rate risk in the overall determination of a bank's capital ratio
and to require banks with greater interest rate risk to maintain
adequate capital for the risk. It is uncertain what effect these
regulations, when implemented, would have on the Company and the
Bank.
The Federal Deposit Insurance Corporation Improvements Act of
1991 (the "1991 Act") imposes a regulatory matrix which requires
the federal banking agencies to take prompt corrective action to
deal with depository institutions that fail to meet their minimum
capital requirements or are otherwise in a troubled condition. The
prompt corrective action provisions require undercapitalized
institutions to become subject to an increasingly stringent array
of restrictions, requirements and prohibitions, as their capital
levels deteriorate and supervisory problems mount. Should these
corrective measures provide unsuccessful in recapitalizing the
institution and correcting its problems, the 1991 Act mandates that
the institution be placed in receivership.
Pursuant to regulations promulgated under the 1991 Act, the
corrective actions that the banking agencies either must or may
take are tied primarily to an institution's capital levels. In
accordance with the framework adopted by the 1991 Act, the banking
agencies have developed a classification system, pursuant to which
all banks and thrifts are placed into one of five categories:
well-capitalized institutions, adequately capitalized institutions,
undercapitalized institutions, significantly undercapitalized
institutions and critically undercapitalized institutions. The
capital thresholds established for each of the categories are as
follows:
<TABLE>
<CAPTION>
Capital Tier 1 Total Risk Tier 1 Risk
Category Capital Based Capital Based Capital Other
<S> <C> <C> <C> <C>
Well 5% or more 10% or more 6% or more Not
Capitalized Subject to
a capital
directive
Adequately 4% or more 8% or more 4% of more -
Capitalized
Undercapit- less than 4% less than 8% less than 4% -
alized
Significantly less than 3% less than 6% less than 3% -
Undercapitalized
Critically 2% or less - - -
Undercapit- tangible equity
alized
</TABLE>
The capital guidelines can affect the Company in several ways.
After completion of this offering, the Company's capital levels
will initially be more than adequate. However, rapid growth, poor
loan portfolio performance, poor earnings performance, or a
combination of these factors, could change the Company's capital
position in a relatively short period of time, making an additional
capital infusion necessary.
The Department of Banking will require the Bank to maintain a
ratio (the "primary capital ratio") of total capital (which is
essentially Tier 1 capital plus the allowance for loan losses) to
total assets (defined as balance sheet assets plus the allowance
for loan losses) of at least 8%. In addition, the Bank expects
that, in accordance with the Department of Banking policy, the Bank
will be required to maintain a primary capital ratio of 8% during
its first three years of operation.
CRA and Fair Lending
On April 19, 1995, the federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the Community
Reinvestment At (the "CRA"), which are intended to set distinct
assessment standard for financial institutions. The revised
regulation contains three evaluation tests: (a) a lending test
which will compare the institution's market share of loans in low-
and moderate-income areas to its market share of loans in its
entire service area and the percentage of a bank's outstanding
loans to low- and moderate-income areas or individuals, (b) a
services test which will evaluate the provision of services that
promote the availability of credit to low- and moderate-income
areas, and (c) an investment test, which will evaluate an
institution's record of investments in organizations designed to
foster community development, small- and minority-owned businesses
and affordable housing lending, including state and local
government housing or revenue bonds. The regulation is designed to
reduce the paperwork requirements of the current regulations and
provide regulators, institutions and community groups with a more
objective and predictable manner with which to evaluate the CRA
performance of financial institutions. The rule became effective
on January 1, 1996, at which time evaluation under streamlined
procedures began for institutions with assets of less than $250
million that are owned by a holding company with total assets of
less than $1 billion.
Congress and various federal agencies (including, in addition
to the bank regulatory agencies, the Department of Housing and
Urban Development, the Federal Trade Commission and the Department
of Justice) (collectively the "Federal Agencies") responsible for
implementing the nation's fair lending laws have been increasingly
concerned that prospective home buyers and other borrowers are
experiencing discrimination in their efforts to obtain loans. In
recent years, the Department of Justice has filed suit against
financial institutions which it determined had discriminated,
seeking fines and restitution for borrowers who allegedly suffered
from discriminatory practices. Most, if not all, of these suits
have been settled (some for substantial sums) without a full
adjudication on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify
what constitutes lending discrimination and to specify the factors
the agencies will consider in determining if lending discrimination
exists, announced a joint policy statement detailing specific
discriminatory practices prohibited under the Equal Credit
Opportunity Act and the Fair Housing Act. In the policy statement,
three methods of proving lending discrimination were identified:
(a) overt evidence of discrimination, when a lender blatantly
discriminates on a prohibited basis, (b) evidence of disparate
treatment, when a lender treats applicants differently based on a
prohibited factor even where there is no showing that the treatment
was motivated by prejudice or a conscious intention to discriminate
against a person, and (c) evidence of disparate impact, when a
lender applies a practice uniformly to all applicants, but the
practice has a discriminatory effect, even where such practices are
neutral on their face and are applied equally, unless the practice
can be justified on the basis of business necessity.
FDIC Insurance Assessments
The Bank will be subject to FDIC deposit insurance assessments
for the Bank Insurance Fund. The FDIC has implemented a risk-based
assessment system whereby banks are assessed on a sliding scale
depending on their placement in nine separate supervisory
categories. The highest-rated institutions pay the statutory
annual minimum of $2,000 for FDIC insurance. Rates for all other
institutions are reduced by four cents per $100 as well, leaving a
premium range of 3 cents to 27 cents per $100 of deposits. For
FDIC deposit insurance, the Bank will initially pay an annual FDIC
deposit insurance assessment of .43 cents per $100 of deposits.
Future Requirements
Statutes and regulations are regularly proposed which contain
wide-ranging proposals for altering the structures, regulations and
competitive relationship of the nation's financial institutions.
It cannot be predicted whether or what form any proposed statute or
regulation will be adopted or the extent to which the business of
the Company and the Bank may be affected by such statute or
regulation.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed
upon for the Company by James E. Palmour III, Esquire, Gainesville,
Georgia. Mr. Palmour is one of the organizers and serves as a
director of the Company. He will also serve as a director of the
Bank. He has provided legal services to the Company during 1997,
and it is anticipated that he will provide legal services to the
Company and the Bank during 1998. Mr. Palmour also intends to
purchase 6,000 shares of Common Stock of the Company in the
offering.
EXPERTS
The financial statements of the Company at December 31, 1997
and for the period from February 24, 1997 (inception) until
December 31, 1997, set forth herein have been so included in
reliance on the report of Henry & Company, LLP, independent
certified public accountants, given on the authority of that firm
as experts in accounting and auditing.
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Corporation)
FINANCIAL STATEMENTS
For the Period from February 24, 1997 (inception)
to December 31, 1997
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Corporation)
For the Period from February 24, 1997 (inception)
to December 31, 1997
TABLE OF CONTENTS
Page
Independent Accountants' Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to the Financial Statements 6 - 10
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Southern Heritage Bancorp, Inc.
We have audited the accompanying balance sheet of Southern Heritage
Bancorp, Inc. (a development stage corporation) as of December 31,
1997, and the related statements of operations, changes in
shareholders' equity and cash flows for the period from February
24, 1997 (inception) to December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Southern Heritage Bancorp, Inc. as of December 31, 1997 and the
results of operations and its cash flows from February 24, 1997
(inception) to December 31, 1997 in conformity with generally
accepted accounting principles.
HENRY & COMPANY, LLP
Gainesville, Georgia
February 27, 1998<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Company)
BALANCE SHEET
December 31, 1997
Assets
<TABLE>
<CAPTION>
Current assets:
<S> <C>
Cash $ 12,643
Prepaid expenses (Note 3) 46,141
Total current assets 58,784
Property and equipment (Note 5):
Furniture and fixtures 1,000
Vehicles 18,909
Accumulated depreciation (315)
Total property and equipment 19,594
Other assets:
Deferred stock offering costs (Note 2) 2,245
Organization costs (Note 2) 63,175
Construction in progress (Note 4) 48,413
Total other assets 113,833
Total assets $ 192,211
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 20,268
Accrued liabilities 872
Total current liabilities 21,140
Noncurrent liabilities:
Line of credit (Note 6) 227,415
Total noncurrent liabilities 227,415
Total liabilities 248,555
Commitments and Contingencies
Stockholders' deficit:
Common stock, $5.00 par value; 10,000,000
shares authorized; no shares issued and
outstanding -
Deficit accumulated during the development stage (56,344)
Total liabilities and stockholders' deficit $ 192,211
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Period from February 24, 1997 (inception) to December 31, 1997
<TABLE>
<S> <C>
Income: $ -
Expenses:
Consulting expense 21,000
Salaries expense 17,500
Legal and accounting expenses 4,000
Interest expense 4,593
Other pre-opening expenses 9,251
Total expenses 56,344
Net Loss $ (56,344)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the Period from February 24, 1997 (inception) to December 31, 1997
<TABLE>
<CAPTION>
Deficit
Accumulated
During
Common Development
Stock Stage Total
<S> <C> <C> <C>
February 24, 1997 $ - $ - $ -
Net loss - Inception to
December 31, 1997 - (56,344) (56,344)
December 31, 1997 $ - $(56,344) $ (56,344)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period from February 24, 1997 (inception) to December 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (56,344)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 315
Increase in prepaid expenses (46,141)
Increase in accounts payable 20,268
Increase in accrued liabilities 872
Net Cash Used by Operating Activities (81,030)
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs, capitalized (63,175)
Capital expenditures (68,322)
Net Cash Used by Investing Activities (131,497)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from organizers 85,000
Repayment to organizers (85,000)
Draws on line of credit 225,000
Interest capitalized to line of credit 2,415
Increase in deferred stock offering costs (2,245)
Net Cash Provided by Financing Activities 225,170
NET INCREASE IN CASH 12,643
Cash, at beginning of period -
Cash, at end of period $ 12,643
Supplemental information:
Cash paid for interest during the period $ 2,178
Interest capitalized during the period $ 2,415
The accompanying notes are an integral part of these financial statements.
<PAGE>
SOUTHERN HERITAGE BANCORP, INC.
(A Development Stage Corporation)
NOTES TO FINANCIAL STATEMENTS
For the Period from February 24, 1997 (inception) to December 31, 1997
NOTE 1 ORGANIZATION
Southern Heritage Bancorp, Inc. ("the Company") was formed on
February 13, 1998 for the purpose of becoming a bank holding
company. The Company intends to acquire 100% of the
outstanding common stock of Southern Heritage Bank ("the
Bank") which will operate as a full service community bank in
Oakwood, Georgia. The organizers of the Bank have received
preliminary regulatory approval to charter the Bank with the
Department of Banking and Finance and the Federal Deposit
Insurance Corporation.
Prior to the filing of the Company's Articles of Incorporation
with the Georgia Secretary of State on February 13, 1998,
organizational and pre-opening activities were conducted by
the organizers. The FDIC is expected to approve the Company's
application to operate as a federally insured banking company.
Provided that the application is approved timely and necessary
capital is raised, it is expected that the operations of the
Company through the Bank will commence in 1998.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Pre-opening and Organization Costs
Pre-opening costs such as salaries and other operating
expenses are initial expenses incurred to prepare the Company
to commence business as a financial institution. These costs
are included in the current period's operating results as
expense items in the Statement of Operations.
Costs incurred for the organization of the Company (consisting
principally of legal, accounting, consulting, and
incorporation fees) are being capitalized and will be
amortized over five years. Amortization of the organization
costs will begin when banking operations commence.
Stock offering costs, consisting of direct, incremental costs
of the offering, have been deferred and will be charged to
additional paid-in capital when the stock offering is
completed.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Property and Equipment
Property and equipment is stated at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets for financial reporting purposes
and on an accelerated method for tax reporting purposes.
Income Taxes
The Company is subject to federal and state income taxes.
No taxes have been accrued or paid because of operating
losses incurred during the pre-opening stage. During the
development stage, the Company has recognized a valuation
allowance equal to 100% of the tax benefit arising from the
operating loss carryforwards.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from those estimates.
Advertising Costs
Advertising costs are expensed when incurred by the Company.
NOTE 3 PREPAID EXPENSES
Prepaid expenses of $46,141 at December 31, 1997 consists of
prepaid rent of $45,600 and prepaid insurance of $541. The
prepaid rent represents payment for the lease of a temporary
building for one year. See Note 7 for more details.
NOTE 4 CONSTRUCTION IN PROGRESS
The Company plans to build a permanent facility upon final
regulatory approval. Expenses have been incurred related to
architectural fees for the design of this building and have
been capitalized as construction in progress. Upon final
completion of the building, the amounts will be reported as
fixed assets and will be depreciated over the estimated useful
life of the building.
NOTE 5 PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at
December 31, 1997:
Furniture and fixtures $ 1,000
Vehicles 18,909
19,909
Less: accumulated
depreciation (315)
Total property and
equipment $ 19,594
Depreciation expense charged to operations was $315 in 1997.
NOTE 6 DEBT
Organization and pre-opening expenses have been funded with
borrowings under two $50,000 lines of credit at another
financial institution. These lines were in the name of the
organizers of the Company, but all proceeds were used for
organization and pre-opening expenses. The first line of
credit originated on May 3, 1997 and carried an interest rate
of 9% and a maturity date of October 30, 1997. The second
line originated on September 10, 1997 and also carried a 9%
interest rate and a maturity date of October 30, 1997. Both
were repaid in full on their due date with proceeds from a
line of credit with The Banker's Bank.
The line of credit with The Banker's Bank originated on
October 23, 1997 in the amount of $500,000 and carries an
interest rate of the Prime rate published in the Wall Street
Journal or 8.5% at December 31, 1997. The outstanding balance
is due in full on October 23, 1998. As of December 31, 1997,
the outstanding balance totaled $227,415 of which 2,415 is
capitalized interest. The line is guaranteed by the
organizers of the Company. It is the intent of the Company's
organizers to repay the debt with proceeds from the stock
sale.
NOTE 7 COMMITMENTS AND RELATED PARTY TRANSACTIONS
Organization costs and pre-opening expenses have been funded
with a loan acquired by the organizers of the Company, as
described in Note 5.
The Bank entered into an employment agreement with the
President\Chief Executive Officer on November 5, 1997. The
employment agreement provides for a three year term and is
annually renewable thereafter. The President will be paid an
initial base annual salary of $105,000. Once the Bank begins
operations, he will also be entitled to certain
performance bonuses based on regulatory ratings of the Bank
and deposit growth, return on average assets ("ROA"), and
return on average equity ("ROE") of the
Bank for the year. Based on these factors, the calculated
bonus may range from 0 to 50% of the base salary.
Further, the employment agreement requires the President to
purchase 6,000 shares of the initial offering of Common Stock
of the Company at the same time as the other initial
directors. The President will also have the right to purchase
an additional 15,000 shares at book value or $10.00 per share,
whichever is less, during the first five years of operation of
the Bank.
The Bank also entered into an employment agreement with the
Senior Vice President\Chief Lending Officer of the Bank on
January 1, 1998; however, this employee's actual start date
has not yet been determined. The employment agreement
provides for a two year term and is annually renewable
thereafter. The Senior Vice President\Chief Lending Officer
will be paid an initial base annual salary of $63,500. Once
the Bank begins operations, the employee will also be entitled
to certain performance bonuses based upon mutually agreed upon
goals such as a pre-determined formula consisting of
regulatory compliance, deposit growth, and other factors.
Based on these factors, the calculated bonus may range from 0
to 15% of the base salary. Further, the contract gives the
Senior Vice President\Chief Lending Officer the right and
option to purchase 5,000 shares of the Company's common stock
at book value or $10.00 per share, whichever is less, for the
first five years of employment and if extended by the board
not to exceed ten years.
NOTE 7 COMMITMENTS AND RELATED PARTY TRANSACTIONS
(Continued)
On January 7, 1998, the Bank entered into an employment
agreement with the Senior Vice President\Chief Operations
Officer of the Bank. The agreements provides for a three year
term and is annually renewable thereafter. The Senior Vice
President\Chief Operations Officer will receive an annual
salary of $65,000 for the first twelve months. Thereafter,
annual performance reviews will determine the amount of
increase in the initial base salary. Once the Bank begins
operations, the employee will be entitled to performance
bonuses ranging from 0% to 15% of the annual base salary. In
addition, the employee shall have the right and option to
purchase 5,000 shares of the Company's common stock at book
value or $10.00 per share, whichever is less, for the first
five years of employment and if extended by the board not to
exceed ten years.
On June 1, 1997, the Bank entered into a lease agreement with
Bank and Business Systems, Inc. for a temporary office
facility. The entire agreement is contingent upon the receipt
of final government regulatory approvals. The lease calls for
monthly rent in the amount of $3,800 per month for a twelve
month term payable in advance ($45,600). This
amount was paid by the Company in 1997 and is shown as prepaid
rent on the balance sheet at December 31, 1997. In addition,
the lease requires the Company to maintain insurance on the
temporary facility and well as on its contents.
On November 21, 1997, the Bank entered into an architectural
contract with Hussey, Gay, Bell & Deyoung International, Inc.,
Jacobs-Hlavenka Division to design the Company's permanent
facility in Oakwood, Georgia. The total construction cost of
the building is estimated to be $1 million. The contract
calls for a base fee of 6% of the estimated total construction
cost, payable in progress payments as the work is completed,
as well as extra charges for increases from executed change
orders and extra services. As of December 31, 1997, the
Company has made $40,500 in payments to Jacobs-Hlavenka which
are shown as a component of construction in progress on the
balance sheet.
NOTE 7 COMMITMENTS AND RELATED PARTY TRANSACTIONS
(Continued)
On February 4, 1998, the Company entered into a lease with a
related party (an organizer and a director of the Company) for
the land which will be the site of the permanent facility.
The lease calls for a twenty year term (beginning on the rent
commencement date) which can be extended for four additional
periods of five years each. The base annual rent is $40,000,
payable in monthly installments of $3333.33 each. The rent
commencement date shall be the earlier of the day the Company
locates its temporary office facility of the premises and said
facility is placed in use by the Company's employees or 120
days after the date of the lease.
<PAGE>
SUBSCRIPTION AGREEMENT EXHIBIT "A"
Southern Heritage Bancorp, Inc.
3461 Atlanta Highway
P. O. Box 907
Oakwood, Georgia 30566
Attn: Gary H. Anderson
Gentlemen:
The undersigned hereby subscribes for and agrees to purchase
the number of shares of Common Stock, par value $5.00 per share
(the "Common Stock"), of Southern Heritage 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 ______, 1998. (Such Prospectus, including any
amendments and supplements thereto, is herein called the
"Prospectus").
The undersigned agree to purchase the shares of Common Stock
subscribed for herein for the purchase price of $10.00 per share.
All checks should be made payable to "The Bankers Bank - Escrow
Account for Southern Heritage 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 the Company
has not yet begun operations and 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 finding or determination regarding the
fairness of the offering of the Common Stock, the accuracy or
adequacy of the Prospectus, or any recommendations or endorsement
concerning an investment in the Common Stock.
The undersigned agrees that this subscription 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.
Number of Shares
(minimum 100 shares): ________ ____________________________
Please PRINT or TYPE exact
name(s) in which undersigned
desires to be registered
Total Subscription
Price (at $10.00 per
share): $_______
<PAGE>
SUBSTITUTE W-9
Under the penalties of perjury, I certify that: (a) 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 UNDER-REPORTING INTEREST OR DIVIDENDS ON
YOUR TAX RETURN.
_____________________________ ____________________________
Date Signature(s)*
_____________________________ ____________________________
Area Code and Telephone No. 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 __________________, 1998, as to ____________ shares.
SOUTHERN HERITAGE 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>
______________________________________________
The Company reserves the right, in its sole
discretion to reject any and all
subscriptions, and no subscription will be
effective until accepted by the Company.
No person has been authorized by the Company
to give any information or to make any
representations not contained in this
Prospectus, and any information or statement
not contained herein must not be relied upon
as having been authorized by the Company. The
delivery of this Prospectus does not imply
that the information contained herein is
correct as of any time subsequent to its date.
The Company has undertaken to update this
Prospectus to reflect any facts or events
arising after the date hereof, which
individually or in the aggregate represent a
fundamental change in the information set
forth herein and to include any material
information with respect to the plan of
distribution not previously disclosed in the
Prospectus or any material changes to such
information.
Subscribers should not construe the contents
of this Prospectus or any communication from
the Company, whether written or oral, as
legal, tax accounting, or other expert advice.
Each subscriber should consult his or her own
counsel, accountants and other professional
advisors as to all matters concerning his or
her investment in shares of the Common Stock.
The shares of Common Stock of the Company
offered hereby are not deposits insured by the
Federal Deposit Insurance Corporation.
This Prospectus does not constitute an offer
to sell in any jurisdiction or a solicitation
of an offer to buy any of the shares of the
Common Stock to any person in any jurisdiction
in which such offer or solicitation is
unlawful.
TABLE OF CONTENTS
Page
Summary...................................
Risk Factors..............................
The Offering..............................
Use of Proceeds...........................
Capitalization............................
Dividends.................................
Business of the Company and the Bank......
Management................................
Market for Common Stock and Related
Shareholder Matters.......................
Description of Common Stock of the
Company.................................
Certain Provisions of the Company's
Articles of Incorporation and
ByLaws..................................
Supervision and Regulation................
Legal Matters.............................
Experts...................................
Financial Statements...................... F-1
Subscription Agreement................. Exhibit "A"
_____________________________________________________
<PAGE>
_____________________________________________________
SOUTHERN HERITAGE BANCORP, INC.
A Proposed Bank Holding Company
for
SOUTHERN HERITAGE BANK
A Proposed State Bank
1,000,000
Shares of
Common Stock
PROSPECTUS
______________________________
<PAGE>
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 attorney's 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, $5.00 par
value, are as follows:
Registration Fee $ 2,950
Legal Fees and Expenses (Estimate) 20,000
Accounting Fees and Expenses (Estimate) 4,000
Printing and Engraving Expenses (Estimate) 2,500
Miscellaneous (Estimate) 6,050
Total $ 35,000
Item 26. Recent Sales of Unregistered Securities.
On February 19, 1998, the Registrant issued to Lowell S. Cagle,
in a private placement one share of the Registrant's Common Stock,
$5.00 par value per share, for an aggregate purchase price of $10
in connection with the organization of the Company. The sale to
Mr. Cagle was exempt from registration under the Securities Act of
1933 pursuant to Section 4(2) of such Act because it was a
transaction by an issuer which did not involve a public offering.
<PAGE>
Item 27. Exhibits.
Exhibit Description
Number
5.1 Legal Opinion of James E. Palmour, III
23.1 Consent of Henry & Company, LLP
23.2 Consent of James E. Palmour, III
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 information set forth in the Registration
Statement, and notwithstanding the foregoing, any
increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated offering rate
may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in column 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 the plan of distribution.
(2) For the purpose of determining any 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 shall be deemed 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 termination of this 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.
<PAGE>
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 Amendment No. 1 to be signed on its behalf
by the undersigned, in the City of Oakwood, State of Georgia, on
April 16, 1998.
SOUTHERN HERITAGE BANCORP, INC.
By: s/Gary H. Anderson
Name: Gary H. Anderson
Title: President and Chief
Executive Officer
Pursuant to the requirements to the Securities Act of 1933, this
Amendment No. 1 has been signed by the following persons in the
capacities and on the date indicated.
Name Position Date
s/Gary H. Anderson Director; President 4/16/98
Gary H. Anderson and C.E.O.
s/Jeanie Bridges Corporate Treasurer, 4/16/98
Jeanie Bridges C.A.O. and C.F.O.
s/Lowell S. Cagle Director; Chairman 4/16/98
Lowell S. Cagle of the Board
s/James E. Palmour, III Director; Corporate 4/16/98
James E. Palmour, III Secretary
___________________________ Director ______
Earl Gilleland
s/Terry Hayes Director 4/16/98
Terry Hayes
s/David Merritt Director 4/16/98
David Merritt
s/Harold Nichols Director 4/16/98
Harold Nichols
<PAGE>
s/Edward Quillian Director 4/16/98
Edward Quillian
s/M. Milton Robson Director 4/16/98
M. Milton Robson
s/Donald W. Smith Director 4/16/98
Donald W. Smith
<PAGE>
INDEX OF EXHIBITS
Exhibit Sequential
Number Description Page
5.1 Legal Opinion of James E. Palmour, III ______
23.1 Consent of Henry & Company, LLP ______
23.2 Consent of James E. Palmour, III ______
<PAGE>
EXHIBIT 5.1
JAMES E. PALMOUR, III
Attorney at Law
April 16, 1998
Southern Heritage Bancorp, Inc.
3461 Atlanta Highway
P. O. Box 907
Oakwood, Georgia 30566
Ladies and Gentlemen:
I am acting as counsel to Southern Heritage Bancorp, Inc., a
Georgia corporation (the "Company"), Oakwood, Georgia. In such
capacity, I have supervised certain proceedings taken by the
Company in connection with the registration under the Securities
Act of 1933, as amended, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder
(collectively, the "Act"), of the offer and sale of a minimum of
800,000 shares and a maximum of 1,000,000 shares (the "Shares") of
common stock, $5.00 par value, of the Company.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of the documents and corporate
records relating to the authorization, issuance of sale of the
Shares and have made such other investigation as I have deemed
appropriate and relevant in order to furnish the opinion set forth
below.
In my examination, I have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as
original documents, and the conformity to original documents of all
documents submitted to me as certified or photostatic copies. As
to questions of fact material and relevant to my opinion, where
such facts were not independently verified by me, I have relied,
to the extent I deemed such reliance proper, upon certificates or
representations of officers and representatives of the Company and
appropriate federal, state and local officials.
Based upon the foregoing, I am of the opinion that the Shares
have been duly authorized and when sold, will be validly issued,
fully paid and nonassessable.
This letter is furnished solely to you and may not be relied upon
by any third party, except offerees and purchasers of the Company's
stock in the offering.
Very truly yours,
s/James E. Palmour, III
James E. Palmour, III
EXHIBIT 23.1
Independent Auditors' Consent
We consent to the inclusion in this Registration Statement on Form
SB-2 of our report dated February 27, 1998 on our examination of
the financial statements of Southern Heritage Bancorp, Inc. as of
and for the period ended December 31, 1998. We also consent to the
reference to our firm under the heading "Experts" in the
prospectus.
/s/ HENRY & COMPANY, LLP
Gainesville, Georgia
April 16, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF COUNSEL
To the Board of Directors
Southern Heritage Bancorp, Inc.
I hereby consent to the filing of my opinion regarding validity
of shares as an exhibit to the Registration Statement to which this
consent is attached and further consent to the use of my name under
the heading "Legal Matters" in the Registration Statement and the
Prospectus which is a part thereof.
Very truly yours,
s/James E. Palmour, III
James E. Palmour, III
Date: April 16, 1998
</TABLE>
