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As filed with the SEC on October 26, 1999
Registration No. 333-83851
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
AMENDMENT NO. 3
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------------
GREENVILLE FIRST BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
South Carolina 6021 58-2459561
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
1805 Laurens Road
Greenville, South Carolina 29607
(864) 241-7806
(Address and Telephone Number of Intended Principal Place of Business)
----------------------------
R. Arthur Seaver, Jr.
Chief Executive Officer
1805 Laurens Road
Greenville, South Carolina 29607
(864) 241-7806
(Name, Address, and Telephone Number of Agent For Service)
----------------------------
Copies of all communications, including copies of
all communications sent to agent for
service, should be sent to:
<TABLE>
<S> <C>
Neil E. Grayson, Esq. Boyd C. Campbell, Jr., Esq.
C. Russell Pickering, Esq. Smith Helms Mulliss & Moore, L.L.P.
J. Brennan Ryan, Esq. 201 North Tryon Street
Nelson Mullins Riley & Scarborough, L.L.P. 30th Floor
999 Peachtree Street, N.E., Suite 1400 Charlotte, North Carolina 28202
Atlanta, Georgia 30309 (704) 343-2000
(404) 817-6000 (704) 334-8467 (Fax)
(404) 817-6225 (Fax)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT 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 of 1933, check the
following box and list the Securities Act of 1933 registration statement number
of the earlier effective registration statement for the same
offering. [ ] ___________________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [ ] ___________________
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act of 1933, check the following box and list the
Securities Act of 1933 registration statement number of the earlier effective
registration statement for the same offering. [ ] ___________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
--------------------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value.... 1,519,950 $10.00 $15,199,500 $4,226*
Warrants........................ 139,950 $0 $0 $0
</TABLE>
* We previously paid $3,836 with our initial filing. We are registering an
additional 139,950 shares with this filing, and pursuant to Rule 457(a) we are
paying an additional $390 in connection therewith.
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The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
<PAGE> 2
This information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the SEC is
effective. This prospectus is not an offer to buy these securities in any state
where the offer or sale is not permitted.
THIS IS A PRELIMINARY PROSPECTUS AND IS NOT YET COMPLETE. OCTOBER 26, 1999
GREENVILLE FIRST BANCSHARES, INC.
A proposed bank holding company for
[BANK LOGO HERE]
GREENVILLE FIRST BANK, N.A. (IN ORGANIZATION)
1,100,000 Shares of Common Stock
$10.00 per share
-------------------------------
We are offering shares of common stock of Greenville First Bancshares,
Inc. to fund the start-up of a new community bank, Greenville First Bank, N.A.,
in organization. Greenville First Bancshares, Inc. will be the holding company
and sole owner of the bank. The bank will be headquartered in Greenville
County, South Carolina, and we expect to open the bank in the fourth quarter of
1999 or the first quarter of 2000. This is our first offering of stock to the
public, and there is no public market for our shares. This is a firm commitment
underwriting. The maximum purchase is 5% of the offering, although we may at
our discretion accept subscriptions for more. Quotations for the common shares
will be reported on the Nasdaq OTC Bulletin Board under the symbol "GVBK".
Our organizers will receive warrants to purchase one share of common
stock for every two shares they purchase in the offering. We describe the
warrants in more detail in the "Management - Stock Warrants" section on page
34.
THIS IS A NEW BUSINESS. AS WITH ALL NEW BUSINESSES, AN INVESTMENT WILL
INVOLVE RISKS. IT IS NOT A DEPOSIT OR AN ACCOUNT AND IS NOT INSURED BY THE FDIC
OR ANY OTHER GOVERNMENT AGENCY. YOU SHOULD NOT INVEST IN THIS OFFERING UNLESS
YOU CAN AFFORD TO LOSE SOME OR ALL OF YOUR INVESTMENT. SOME OF THE RISKS OF
THIS INVESTMENT ARE DESCRIBED UNDER THE HEADING "RISK FACTORS" BEGINNING ON
PAGE 6.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price ....... $10.00 $11,000,000
Underwriter's Discount ...... $ .61 $ 673,000
Proceeds to Greenville First
Bancshares .................. $ 9.39 $10,327,000
</TABLE>
We will pay an underwriter's discount of $.35 on shares sold to our
officers and directors and other investors which we have identified, up to
380,000 shares, and $.75 on all other shares sold. The underwriter's discount
shown in the table reflects a blended rate based on the assumption that 380,000
of the shares will have the lower discount. Wachovia Securities has the right
to purchase up to an additional 165,000 shares at $10.00 per share, less the
underwriter's discount of $.75 per share, within 30 days from the date of this
prospectus to cover over-allotments.
THE UNDERWRITER EXPECTS TO DELIVER THE SHARES OF COMMON STOCK ON
OCTOBER 29, 1999.
[WACHOVIA LOGO HERE]
OCTOBER 26, 1999
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GREENVILLE FIRST BANCSHARES, INC.
GREENVILLE FIRST BANK, N.A. (IN ORGANIZATION)
PROPOSED MARKET AREA
[INSERT MAP OF SOUTH CAROLINA AND GREENVILLE COUNTY SHOWING MARKET AREA]
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SUMMARY
We encourage you to read the entire prospectus carefully before
investing. Unless otherwise stated, all information in this prospectus assumes
that the underwriter will not exercise its over-allotment option.
GREENVILLE FIRST BANCSHARES AND GREENVILLE FIRST BANK
We incorporated Greenville First Bancshares, Inc. in March 1999 to
organize and serve as the holding company for Greenville First Bank, a new
national bank proposed to be located in Greenville County. The bank will focus
on the local community, emphasizing personal service to individuals and
businesses in Greenville County. On September 21, 1999, we received preliminary
approval from the Office of the Comptroller of the Currency to open the new
bank. Final approval is conditioned upon our raising the required minimum
capital, receipt of FDIC approval, and the implementation of proper bank
regulatory policies and procedures. We have also filed for deposit insurance
for the bank with the FDIC, and we have filed for approval of the Federal
Reserve Board to become a bank holding company and acquire all of the stock of
the new bank. We expect to receive all final regulatory approvals and open the
bank for business in the fourth quarter of 1999 or the first quarter of 2000.
WHY WE ARE ORGANIZING A NEW BANK IN GREENVILLE COUNTY
Greenville County has a growing and dynamic economic environment that
we believe will support Greenville First Bank. It is South Carolina's most
populous county with over 340,000 residents, and its growth in median household
income and population have consistently outpaced that of the rest of South
Carolina. The county and surrounding area is home to several large
manufacturing and engineering concerns which provide a stable business
foundation and a skilled labor force. In February 1999, the unemployment rate
was approximately 3%. One factor in this growth is Greenville County's
strategic location on I-85 between Atlanta and Charlotte. Within 12 months, the
Southern Connector toll road should be completed. That road will connect I-85
and I-385 through the bank's service area, which we expect to promote
additional growth and commercial development.
We believe that there is an opportunity in Greenville County for a new
locally managed bank focused on the community and personalized service to
individuals and local businesses. The county's bank and thrift deposits grew
over the last five years at an average annual rate of 6.8%, and should continue
to grow with the community and its economy. The current trend of consolidation
in the banking industry has led to the acquisition of several locally owned
community banks in the Greenville County area by large regional and
super-regional banks, and caused a decrease over the last two years in the
number of financial institutions in the area. Despite the consolidation trend
and growth of deposits in the area, excluding the effect of recent
acquisitions, deposits at the large banks actually fell from 1997 to 1998. We
believe that this indicates many residents in the area prefer the community
bank experience to that provided by the larger and more impersonal regional and
super-regional banks. We believe that the combination of fewer financial
institutions, positive deposit growth rate, good economic conditions, and the
consolidation of existing community banks into larger banks creates an
excellent environment for a new community oriented bank.
Taking advantage of this opportunity, Greenville First Bank will be
the first independent bank organized in the City of Greenville in over ten
years. We will emphasize personal service and the client relationship. We will
foster client relationships by establishing "relationship teams" composed of
senior officers who will work directly with individual clients to match
specific loan and deposit specialties with their needs. We will emphasize our
local ownership and management and our strong ties to the Greenville County
community. Our target market will be primarily individuals and small- to
medium-sized businesses who desire a consistent and professional relationship
with a local banker. We believe our client oriented approach will appeal to the
individuals and small businesses in Greenville County and will stand in
contrast to the "one size fits all" philosophies of our larger competitors.
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OUR BOARD OF DIRECTORS AND MANAGEMENT
Greenville First Bancshares was founded by ten local business leaders
who have lived in Greenville for many years. They are also community leaders
and serve on numerous charitable and service organizations throughout
Greenville County. We believe our directors' long-standing ties to the
community and their significant business experience will provide Greenville
First Bank with the ability to effectively assess and address the needs of our
proposed market area.
Our Board of Directors consists of the following:
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<S> <C>
- Andrew B. Cajka, Jr. - Rudolph G. Johnstone, III
- Mark A. Cothran - Keith J. Marrero
- Leighton M. Cubbage - James B. Orders, III
- Fred Gilmer, Jr. - R. Arthur "Art" Seaver, Jr.
- Tecumseh Hooper, Jr. - William B. Sturgis
</TABLE>
We have attracted a strong management team with many years of banking
experience and service to the Greenville area. Our management team currently
consists of the following individuals:
- Art Seaver will serve as the president and chief executive
officer for the holding company and the bank. He has over 13
years of banking experience in the Greenville area. Until he
began preparations to open Greenville First Bank, he served
as an executive officer at Greenville National Bank, which
was acquired by Regions Bank in 1998.
- Fred Gilmer, Jr. will serve as our senior vice president. Mr.
Gilmer has over 40 years of experience in the financial
services industry in the Greenville area. He was most
recently the executive officer in charge of client relations
for Greenville National Bank.
- Jim Austin will serve as our senior vice president and chief
financial officer. Mr. Austin has 20 years of experience in
the financial services industry in the Greenville area,
including 12 years as senior vice president and controller of
American Federal Bank.
We are in the process of assembling our management team. We are
looking for individuals who reside in the Greenville area and have significant
local banking experience and a history of service to the community. Because of
the recent merger and acquisition activity in the market, we believe there is
an abundance of local experienced banking executives who would be interested in
joining our community banking effort.
PRODUCTS AND SERVICES
We plan to offer most of the products and services offered by larger
banks by utilizing modern delivery systems coupled with personalized service.
Our lending services will include consumer loans and lines of credit,
commercial and business loans and lines of credit, residential and commercial
real estate loans, and construction loans. We will competitively price our
deposit products which will include checking accounts, savings accounts, money
market accounts, certificates of deposit, commercial checking accounts, and
IRAs. We will also provide cashier's checks, credit cards, cash management
services, safe deposit boxes, travelers checks, direct deposit, automatic
drafts, and U.S. Savings Bonds. We intend to deliver our services though a
variety of methods, including ATMs, banking by mail, telephone banking,
internet banking, drive through banking, and courier services for commercial
customers throughout Greenville County.
THE OFFERING AND OWNERSHIP BY MANAGEMENT
We are offering 1,100,000 shares of our common stock for $10.00 per
share. Our directors and executive officers intend to purchase 265,900 shares,
which represents 24.2% of the shares outstanding after the offering. To
compensate them for their financial risk and efforts in organizing the bank,
our organizers will
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receive warrants to purchase one share of common stock for $10.00 per share for
every two shares they purchase in this offering. For more detailed information
see "Management - Stock Warrants" on page 34. We hope to sell the remaining
shares to individuals and businesses in Greenville County who share our desire
to support a new local community bank. The number of shares of common stock
offered does not include the exercise of the underwriter's over-allotment
option to purchase up to 165,000 shares of our common stock or the exercise of
the warrants by the organizers.
USE OF PROCEEDS
We will use the first $8,500,000 we raise in this offering to
capitalize Greenville First Bank. This is the minimum amount of capital our
banking regulators will require for us to open the bank. We will use the
remaining net proceeds of the offering to pay our expenses of this offering and
of organizing the holding company and the bank, and to provide general working
capital for the holding company. The bank will use the funds it receives from
Greenville First Bancshares to pay expenses, lease and furnish its offices, and
provide working capital to operate the bank. For more detailed information see
"Use of Proceeds" on page 10.
WE DO NOT INITIALLY PLAN TO PAY DIVIDENDS
Because we are a new business, we will not pay dividends in the
foreseeable future. We intend to use all available earnings to fund the
continued operation and growth of the bank.
LOCATION OF OFFICES
Our temporary executive offices are located at 1805 Laurens Road,
Greenville, South Carolina 29607. Our telephone number is (864) 679-9000. Our
permanent office will be located at the corner of Haywood Road and Halton Road
in Greenville, South Carolina. During construction of our main office, we will
utilize a modular bank facility located on the same site. We plan to open for
business in this temporary modular office in the fourth quarter of 1999 or the
first quarter of 2000. Within the first four years of operation, we also plan
to open two "service centers" located strategically in our primary service
area. These service centers will perform limited bank functions including
deposit and ATM services. We believe these service centers will expand our
market presence and provide additional convenience to our customers. We will
need to obtain regulatory approval before we can open these centers. We believe
that these facilities will adequately serve the bank's needs for its first four
years of operation.
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RISK FACTORS
The following is a summary of some of the risks which we will
encounter in starting and operating the new bank. We may face other risks as
well, which we have not anticipated. An investment in our common stock involves
a significant degree of risk and you should not invest in the offering unless
you can afford to lose some or all of your investment. Please read the entire
prospectus for a more thorough discussion of the risks of an investment in our
common stock.
SOUTH CAROLINA STATE LAW AND ANTI-TAKEOVER DEVICES WE HAVE ADOPTED WILL
SIGNIFICANTLY LIMIT THE ABILITY OF OTHERS TO ACQUIRE US.
In many cases, shareholders receive a premium for their shares when a
company is purchased by another. However, under South Carolina law no other
financial institution may acquire control of Greenville First Bancshares until
we have been in existence for five years. In addition, state and federal law
and our articles of incorporation and bylaws make it difficult for anyone to
purchase Greenville First Bancshares without approval of our board of
directors. For a discussion of some of these provisions, please see
"Description of Capital Stock - Anti-takeover Effects" on page 36.
WE ARE A NEW BUSINESS AND CANNOT BE SURE WHETHER WE WILL BE SUCCESSFUL.
Neither Greenville First Bancshares nor Greenville First Bank has any
operating history. The operations of new businesses are always risky. Because
Greenville First Bank has not yet opened, we do not have historical financial
data and similar information which would be available for a financial
institution that has been operating for several years.
WE EXPECT TO INCUR CUMULATIVE LOSSES FOR AT LEAST TWO YEARS AND THERE IS A RISK
WE MAY NEVER BECOME PROFITABLE.
In order for us to become profitable, we will need to attract a large
number of customers to deposit and borrow money. This will take time. We expect
to incur large initial expenses and may not be profitable for several years.
Although we expect to become profitable in our second year, there is a risk
that we may never become profitable and that you will lose part or all of your
investment.
WE CANNOT OPEN THE BANK FOR BUSINESS UNTIL WE RECEIVE REGULATORY APPROVALS,
WHICH ARE AT THE DISCRETION OF OUR REGULATORY AGENCIES.
We cannot begin operations until we receive all required regulatory
approvals. Although we have received preliminary approval from the Office of
the Comptroller of the Currency to open the bank, and have filed an application
with the FDIC for deposit insurance and with the Federal Reserve to become a
bank holding company and acquire the stock of the bank, we will not receive all
required final approvals until we satisfy all requirements for new banks
imposed by state and federal regulatory agencies. We expect to receive final
approvals by the fourth quarter of 1999 or the first quarter of 2000, but it
may take longer. If we ultimately do not open, we anticipate that we will
dissolve the company, and return to our investors all funds remaining after
paying the expenses incurred through such time.
ANY DELAY IN OPENING GREENVILLE FIRST BANK WILL RESULT IN ADDITIONAL LOSSES.
We intend to open the bank in the fourth quarter of 1999 or the first
quarter of 2000. If we do not receive all necessary regulatory approvals as
planned, the bank's opening will be delayed or may not occur at all. If the
bank's opening is delayed, our organizational and pre-opening expenses will
increase. Because the bank would not be open and generating revenue, these
additional expenses would cause our accumulated losses to increase.
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WE WILL DEPEND HEAVILY ON ART SEAVER, AND OUR BUSINESS WOULD SUFFER IF
SOMETHING WERE TO HAPPEN TO HIM OR IF HE WERE TO LEAVE.
Art Seaver will be our president and chief executive officer. He will
provide valuable services to us, and he would be difficult to replace. We have
an employment agreement with Mr. Seaver and carry $600,000 of insurance on his
life payable to the bank. Nevertheless, if he were to leave, our business would
suffer.
THE OFFERING PRICE OF $10.00 WAS DETERMINED ARBITRARILY AND IT WILL FLUCTUATE
ONCE THE SHARES BECOME FREELY TRADED AFTER THE OFFERING.
Because we do not have any history of operations, we determined the
price arbitrarily. The offering price is essentially the book value of the
shares prior to deduction for expenses of the offering and the organization of
the bank. The offering price may not be indicative of the present or future
value of the common stock. As a result, the market price of the stock after the
offering may be more susceptible to fluctuations than it otherwise might be.
The market price will be affected by our operating results, which could
fluctuate greatly. These fluctuations could result from expenses of operating
and expanding the bank, trends in the banking industry, economic conditions in
our market area, and other factors which are beyond our control. If our
operating results are below expectations, the market price of the common stock
would probably fall.
WE WILL NOT HAVE A LARGE NUMBER OF SHAREHOLDERS OR A LARGE NUMBER OF SHARES
OUTSTANDING AFTER THE OFFERING, WHICH MAY LIMIT YOUR ABILITY TO SELL OR TRADE
THE SHARES AFTER THE OFFERING.
Initially, there will be no established market for our common stock.
After the offering, we will encourage broker-dealers to match buy and sell
orders for our common stock on the Over-the-Counter Bulletin Board. However,
the trading markets on the OTC Bulletin Board lack the depth, liquidity, and
orderliness necessary to maintain a liquid market. We do not expect a liquid
market for our common stock to develop for several years, if at all. A public
market having depth and liquidity depends on having enough buyers and sellers
at any given time. Because this a relatively small offering, we do not expect
to have enough shareholders or outstanding shares to support an active trading
market. Accordingly, investors should consider the potential illiquid and
long-term nature of an investment in our common stock.
WE WILL FACE STRONG COMPETITION FOR CUSTOMERS FROM LARGER AND MORE ESTABLISHED
BANKS WHICH COULD PREVENT US FROM OBTAINING CUSTOMERS AND MAY CAUSE US TO HAVE
TO PAY HIGHER INTEREST RATES TO ATTRACT CUSTOMERS.
We will encounter strong competition from existing banks and other
types of financial institutions operating in the Greenville County area and
elsewhere. Some of these competitors have been in business for a long time and
have already established their customer base and name recognition. Most are
larger than we will be and have greater financial and personnel resources than
we will have. Some are large super-regional and regional banks, like First
Union Bank, BB&T, Carolina First, Bank of America, and Wachovia. These
institutions offer services, such as extensive and established branch networks
and trust services, that we either do not expect to provide or will not provide
for some time. Due to this competition, we may have to pay higher rates of
interest to attract deposits. In addition, competitors that are not depository
institutions are generally not subject to the extensive regulations that will
apply to our bank. See "Proposed Business - Marketing Opportunities-
Competition" on page 16 and "Supervision and Regulation" starting on page 23.
AN ECONOMIC DOWNTURN, ESPECIALLY ONE AFFECTING GREENVILLE COUNTY, SOUTH
CAROLINA, COULD REDUCE OUR CUSTOMER BASE, OUR LEVEL OF DEPOSITS, AND DEMAND FOR
FINANCIAL PRODUCTS SUCH AS LOANS.
As a holding company for a community bank, our ultimate success will
be dependent on the economy of the community. We will operate in Greenville
County, South Carolina, and in particular the central area of the county, which
includes the City of Greenville. While the economy in this area has been strong
in recent years, an economic downturn in the area would hurt our business.
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AS A BANK, OUR PROFITABILITY DEPENDS ON THE INTEREST RATES WHICH WE PAY ON
DEPOSITS AND COLLECT ON LOANS. INTEREST RATES HAVE HISTORICALLY VARIED GREATLY
AND WE CANNOT PREDICT OR CONTROL THEM.
Our profitability depends, in large part, on the difference between
the income we earn on loans and other assets and the interest we pay on
deposits and other borrowings. This difference is largely determined by
interest rates. Interest rates will be affected by the local, national, and
international economies and by the credit policies of monetary authorities,
particularly the Federal Reserve Board of Governors. Interest rates have
historically varied widely and we cannot control or predict them. Large moves
in interest rates may decrease or eliminate our profitability.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
We will be limited in the amount we can loan a single borrower by the
amount of the bank's capital. The legal lending limit is 15% of the bank's
capital and surplus. We expect that our initial legal lending limit will be
approximately $1,275,000 immediately following the offering, but we intend to
impose an internal limit on the bank of 80% of this amount, or approximately
$1,000,000. Until the bank is profitable, our capital will continue to decline
and therefore our lending limit. Our lending limit will be significantly less
than the limit for most of our competitors and may affect our ability to seek
relationships with larger businesses in our market area. We intend to
accommodate larger loans by selling participations in those loans to other
financial institutions.
WE ARE AUTHORIZED TO ISSUE PREFERRED STOCK WHICH, IF ISSUED, MAY ADVERSELY
AFFECT YOUR VOTING RIGHTS AND REDUCE THE MARKET PRICE OF OUR COMMON STOCK.
We are authorized by our articles of incorporation to issue shares of
preferred stock without the consent of our shareholders. Preferred stock, when
issued, may rank senior to common stock with respect to voting rights, payment
of dividends, and amounts received by shareholders upon liquidation,
dissolution, or winding up. The existence of rights which are senior to common
stock may reduce the price of our shares. We do not have any plans to issue any
shares of preferred stock at this time.
GOVERNMENT REGULATION MAY HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY AND
GROWTH.
We will be subject to extensive federal and state government
supervision and regulation. Our ability to grow and achieve profitability may
be adversely affected by state and federal laws and regulations that limit a
bank's right to make loans, purchase securities, and pay dividends. These laws
are intended primarily to protect Greenville First Bank's depositors and are
not for the benefit of shareholders. In addition, the burdens and restrictions
imposed by federal and state banking regulations may place us at a competitive
disadvantage to competitors who are less regulated. Future legislation or
governmental policy could also adversely affect the banking industry and
Greenville First Bank's operations. See "Supervision and Regulation" on page
23.
THE EXERCISE OF WARRANTS AND STOCK OPTIONS WILL CAUSE STOCK DILUTION AND MAY
ADVERSELY AFFECT THE VALUE OF OUR COMMON STOCK.
The organizers and officers may exercise warrants and options to
purchase common stock, which would result in the dilution of your proportionate
interests in Greenville First Bancshares. Upon completion of the offering, we
will issue to the organizers warrants to purchase one share of common stock at
$10.00 per share for every two shares they purchase in the offering. If the
organizers purchase 259,900 shares in the offering, we will issue warrants to
purchase an additional 129,950 shares of common stock to them. In addition,
after the offering, we expect to adopt a stock option plan which will permit us
to grant options to our officers, directors, and employees. We anticipate that
we will initially authorize the issuance of a number of shares under the stock
option plan equal to 15% of the shares outstanding after the offering. We do
not intend to issue stock options with an exercise price less than the fair
market value of the common stock on the date of grant. See "Management - Stock
Warrants" on page 34.
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WE MAY NEED TO RAISE ADDITIONAL CAPITAL WHICH COULD DILUTE YOUR OWNERSHIP.
Although we do not believe we will need additional capital during the
next twelve months to start and maintain our planned business activities, we
may need additional capital in the future to support our business, expand our
operations, or maintain our minimum net capital requirements as set forth by
our applicable bank regulatory agencies. There is no assurance that we will be
able to sell additional shares to raise that capital. If we do sell additional
shares of common stock in the future to raise capital, the sale could
significantly dilute your ownership interest.
WE MAY NOT ALLOCATE ALL OF THE NET PROCEEDS IN THE MOST PROFITABLE MANNER.
After capitalizing Greenville First Bank with $8,500,000, we will have
broad discretion in allocating a total of approximately $1,696,000, or 15% of
the gross proceeds of the offering. Initially we plan to invest these proceeds
in United States government securities or deposit them with the bank, and in
the long term we intend to use them for general corporate purposes. We cannot
predict the extent we will allocate these funds to income-generating assets,
capital assets, or liquidity. Although we intend to utilize these funds to
serve Greenville First Bancshares' best interest, we cannot assure you that our
allocation will ultimately reflect the most profitable application of these
proceeds.
IT IS POSSIBLE THAT OUR COMPUTER SYSTEMS OR THOSE OF OUR PROCESSING VENDORS OR
LOAN CUSTOMERS COULD FAIL TO OPERATE ON JANUARY 1, 2000.
Like many financial institutions, we will rely upon computers for
conducting our business and for information systems processing. There is
concern among industry experts that on January 1, 2000, computers will be
unable to read or interpret the new year and there may be widespread computer
malfunctions. We will generally rely on software and hardware developed by
independent third parties to provide our information systems. We will request
warranties about Year 2000 compliance from the primary third party hardware and
software system providers we use. We believe that our other internal systems
and software, including our network connections, will be programmed to comply
with Year 2000 requirements, although there is a risk they may not comply.
Based on information currently available, we believe that we will not incur
significant expenses in connection with the Year 2000 issue.
The Year 2000 issue may also negatively affect the business of our
customers. We intend to include Year 2000 readiness in our lending criteria to
minimize this risk. However, we cannot be certain that this will eliminate the
issue, and any financial difficulties our customers experience as a result of
Year 2000 issues could impair their ability to repay loans to the bank.
There is a possibility that we may not open the bank until after
January 1, 2000, at which time we believe that most of the uncertainty
surrounding the Year 2000 issue should be resolved. In this event, our risks
associated with computer malfunctions should be greatly reduced, but we will
still seek to ensure that our computer systems and our major vendors' and
clients' computer systems are in compliance and functioning properly. For more
information on Year 2000 issues, please refer to page 14.
FORWARD-LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements"
concerning Greenville First Bancshares and Greenville First Bank and their
operations, performance, financial conditions, and likelihood of success. These
statements are based on many assumptions and estimates. Our actual results will
depend on many factors about which we are unsure, including those discussed
above. Many of these risks and factors are beyond our control. The words "may,"
"would," "could," "will," "expect," "anticipate," "believe," "intend," "plan,"
and "estimate," and similar expressions identify such forward-looking
statements. The most significant of these risks, uncertainties, and other
factors are discussed under the heading "Risk Factors" beginning on page 6 of
this prospectus. We urge you to carefully consider these factors prior to
making an investment.
9
<PAGE> 11
USE OF PROCEEDS
We estimate that we will receive net proceeds of $10,196,000 from the
sale of 1,100,000 shares of common stock in the offering, after deducting
underwriting discounts and commissions and estimated organizational and
offering expenses. If the underwriter exercises its over-allotment option in
full, we will receive $1,526,250 in additional proceeds. We have established a
line of credit in the amount of $600,000 at the prime rate to pay pre-opening
expenses of the holding company and the bank prior to the completion of the
offering. We intend to pay off this line of credit with proceeds that we
receive from this offering. The following two paragraphs describe our proposed
use of proceeds based on our present plans and business conditions.
USE OF PROCEEDS BY GREENVILLE FIRST BANCSHARES
The following table shows the anticipated use of the proceeds by
Greenville First Bancshares. We describe the bank's anticipated use of proceeds
in the following section. As shown, we will use $8,500,000 to capitalize the
bank. We will initially invest the remaining proceeds in United States
government securities or deposit them with Greenville First Bank. In the
long-term, we will use these funds for operational expenses and other general
corporate purposes, including the provision of additional capital to the bank,
if necessary. We may also use the proceeds to expand, for example by opening
additional facilities or acquiring other financial institutions. We currently
plan to open two limited operation "service centers" in the Greenville area in
the next four years. We do not have any other definitive plans for expansion.
<TABLE>
<CAPTION>
Total
-----
<S> <C>
Gross proceeds from offering.................................. $ 11,000,000
Underwriter's discount........................................ $ 673,000
Expense of organizing Greenville First Bancshares............. $ 25,000
Expense of offering........................................... $ 106,000
Investment in capital stock of the bank....................... $ 8,500,000
-------------
Remaining proceeds............................................ $ 1,696,000
=============
</TABLE>
10
<PAGE> 12
USE OF PROCEEDS BY GREENVILLE FIRST BANK
The following table shows the anticipated use of the proceeds by
Greenville First Bank. All proceeds received by the bank will be in the form of
an investment in the bank's capital stock by Greenville First Bancshares as
described above. During the 10 month period between the opening of the bank and
the completion of our permanent facilities, we will conduct operations from a
modular facility. This facility will require an initial payment of $13,050, a
monthly lease payment for the modular unit of $5,880, and a monthly lease
payment for the land of $500. When completed, we will then move into our
permanent facility at an initial base rent payment of $16,667 per month. We
expect our main office to be completed by August 2000. The table shows the cost
of the temporary and permanent facilities for a period of twelve months from the
completion of the offering. Furniture, fixtures, and equipment will be
capitalized and amortized over the life of the lease or over the estimated
useful life of the asset. The bank will use the remaining proceeds to make
loans, purchase securities, and otherwise conduct the business of the bank.
<TABLE>
<CAPTION>
Total
-----
<S> <C>
Investment by Greenville First Bancshares in the bank's capital stock.... $ 8,500,000
Organizational and pre-opening expenses of the bank...................... $ 500,000
Furniture, fixtures and equipment........................................ $ 247,000
Initial payment and lease of temporary facilities and land (10 months)... $ 76,850
Lease of permanent facilities (2 months)................................. $ 33,330
Construction of leasehold improvements................................... $ 65,000
-------------
Remaining proceeds....................................................... $ 7,577,820
=============
</TABLE>
11
<PAGE> 13
CAPITALIZATION
The following table shows Greenville First Bancshares' capitalization
as of June 30, 1999, and the pro forma consolidated capitalization of
Greenville First Bancshares' and the bank as adjusted to give effect to the
sale of 1,100,000 shares in this offering, after deducting the underwriter's
discount and expenses of the offering. Greenville First Bancshares'
capitalization as of June 30, 1999 reflects the purchase of ten shares by Art
Seaver for $10.00 per share. These shares will be redeemed after the offering.
After the offering, we will have 1,100,000 shares outstanding. The "As
Adjusted" column reflects the estimated cost of organizing Greenville First
Bancshares and organizing and preparing to open Greenville First Bank through
the expected opening date, which should be in the fourth quarter of 1999 or the
first quarter of 2000. See "Use of Proceeds" above.
<TABLE>
<CAPTION>
As Adjusted
For
June 30, 1999 The Offering
------------- ------------
<S> <C> <C>
SHAREHOLDERS' EQUITY:
Common Stock, par value $.01 per share; 10,000,000
shares authorized; 10 shares issued and
outstanding; 1,100,000 shares issued and
outstanding as adjusted ........................ $ 0.10 $ 11,000
Preferred Stock, par value $.01 per share; 10,000,000
shares authorized; no shares issued and outstanding . 0 0
Additional paid-in capital .......................... $ 99.90 $ 10,185,000
Deficit accumulated during the pre-opening stage .... $ (152,109) $ (500,000)
------------ ------------
Total shareholders' equity (deficit) ................ $ (152,009) $ 9,696,000
============ ============
Book value per share ................................ $ N/A $ 8.81
============ ============
</TABLE>
DIVIDEND POLICY
We expect initially to retain all earnings to operate and expand the
business. It is unlikely that we will pay any cash dividends in the near
future. Our ability to pay any cash dividends will depend primarily on
Greenville First Bank's ability to pay dividends to Greenville First
Bancshares, which depends on the profitability of the bank. In order to pay
dividends, the bank must comply with the requirements of all applicable laws
and regulations. See "Supervision and Regulation - The Bank - Dividends" on
page 26 and "Supervision and Regulation The Bank - Capital Regulations" on page
27. In addition to the availability of funds from the bank, our dividend policy
is subject to the discretion of our board of directors and will depend upon a
number of factors, including future earnings, financial condition, cash needs,
and general business conditions.
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION
GENERAL
Greenville First Bancshares was formed to organize and own all of the
capital stock of Greenville First Bank. On September 21, 1999, we received
preliminary approval from the Office of the Comptroller of the Currency to open
the new bank. We have also filed for deposit insurance for the bank with the
FDIC, and have filed with the Federal Reserve to become a bank holding company,
which must be approved before we can acquire the capital stock of the bank.
Whether the charter is issued and deposit insurance is granted will depend
upon, among other things, compliance with legal requirements imposed by the
Office of the Comptroller of the Currency and the FDIC, including
capitalization of the bank with at least $8,500,000 of capital. We expect to
receive all final regulatory approvals by the fourth quarter of 1999 or the
first quarter of 2000.
FINANCIAL RESULTS
As of June 30, 1999, Greenville First Bancshares had total assets of
$56,440, consisting primarily of cash and deferred organization and offering
costs. Greenville First Bancshares incurred a net loss of $152,109 for the
period from its inception in February of 1999 through June 30, 1999.
EXPENSES
On completion of the offering and opening of the bank, we expect we
will have incurred the following expenses:
- $673,000 in commissions to the underwriter, which will be
deducted from the proceeds of the offering.
- $106,000 in other expenses of the offering, which will be
subtracted from the proceeds of the offering.
- $25,000 in expenses of organizing Greenville First
Bancshares, which will be charged against the income of
Greenville First Bancshares.
- $500,000 in expenses to organize and prepare to open
Greenville First Bank, consisting principally of salaries,
overhead and other operating costs, which will be charged
against the income of Greenville First Bank.
Prior to our completion of this offering, these expenses will be
funded by a $600,000 line of credit at the prime rate. We will use the proceeds
of this offering to repay amounts due under our line of credit. We anticipate
that the proceeds of the offering will be sufficient to satisfy the
corporation's financial needs for at least the next 12 months.
OFFICES AND FACILITIES
Our main office will be located on a 1.3 acre site at the corner of
Haywood Road and Halton Road in Greenville, South Carolina. We intend to
construct a 14,000 square foot building there to serve as our main office.
Halton Properties, Inc., a company owned by one of the organizers and directors
of Greenville First Bancshares, will finance the purchase of the site and the
construction of the main building at a total expected cost of approximately
$1,623,000. Upon completion of the main office, which we expect to occur in the
third quarter of 2000, we will lease the land and building for 20 years at an
initial base rent of $16,667 per month. Prior to the completion of our main
office, we will utilize a temporary modular bank facility located on the same
site. During this period, we will lease the site from Halton Properties for
$500 per month and the modular facility from a third party lessor for $5,880
per month. We plan to open the temporary office in the fourth quarter of 1999
or the first quarter of 2000. Within the first four years of operation, we also
plan to open two "service centers" located strategically in our primary service
area. These service centers will perform limited bank functions. They will
expand our market presence and provide additional convenience to our customers.
We believe that these facilities will adequately serve the bank's needs for its
first four years of operation.
13
<PAGE> 15
LIQUIDITY AND INTEREST RATE SENSITIVITY
Greenville First Bank, like most banks, will depend on its net
interest income for its primary source of earnings. Net interest income is
roughly the difference between the interest we charge on our loans and receive
from our investments our assets, and the interest we pay on deposits, our
liabilities. Movements in interest rates will cause our earnings to fluctuate.
To lessen the impact of these margin swings, we intend to structure our balance
sheets so that we can reprice the rates applicable to our assets and
liabilities in roughly equal amounts at approximately the same time. We will
manage the bank's asset mix by regularly evaluating the yield, credit quality,
funding sources, and liquidity of its assets. We will manage the bank's
liability mix by expanding our deposit base and converting assets to cash as
necessary. If there is an imbalance in our ability to reprice assets and
liabilities at any point in time, our earnings may increase or decrease with
changes in the interest rate, creating interest rate sensitivity.
Liquidity refers to our ability to provide steady sources of funds for
loan commitments and investment activities, as well as to maintain sufficient
funds to cover deposit withdrawals and payment of debt and operating
obligations. We will manage our liquidity by actively monitoring the bank's
sources and uses of funds to meet cash flow requirements and maximize profits.
Other than this offering, we know of no trends, demands, commitments,
events, or uncertainties that should result in, or are reasonably likely to
result in, Greenville First Bancshares' or the bank's liquidity increasing or
decreasing in any material way in the foreseeable future. However, if the bank
is open before January 1, 2000, we expect to increase our cash on hand because
consumer uncertainty about the Year 2000 may cause a higher than normal rate of
deposit withdrawal.
CAPITAL ADEQUACY
Capital adequacy for banks and bank holding companies is regulated by
the Office of the Comptroller of the Currency, the Federal Reserve Board of
Governors, and the FDIC. The primary measures of capital adequacy are (i)
risk-based capital guidelines and (ii) the leverage ratio. Changes in these
guidelines or in our levels of capital can affect our ability to expand and pay
dividends. Please see "Capital Regulations" on page 27 for a more detailed
discussion.
YEAR 2000 ISSUES
Like most financial institutions, we will rely upon computers for the
daily conduct of our business and for information systems processing. There is
concern among industry experts that on January 1, 2000 some computers will be
unable to "read" the new year resulting in computer malfunctions.
We will be generally relying on independent third parties for our
information processing needs. We have entered into an agreement with The
InterCept Group, Inc. to process our daily account and transactional data; to
provide our teller, accounting, and internet computer systems; and to provide
our ATM switching and processing services. We plan to request and review Year
2000 testing protocols and results from The InterCept Group and each of our
primary vendors. We plan to receive Year 2000 warranties from each vendor
confirming their Year 2000 compliance, although the remedies available under
such agreements generally include standard disclaimers of and limitations of
liability and specifically exclude special, incidental, indirect, and
consequential damages. The InterCept Group is an established provider of bank
processing and software services to more than 100 financial institutions. The
products and services we will receive from The InterCept Group will not
materially differ from the products and services provided to these other
institutions. Most of these other institutions have or are in the process of
investigating the Year 2000 compliance of The InterCept Group in accordance
with regulatory mandates. Because of this scrutiny, we do not believe that The
InterCept Group will have any material Year 2000 issues related to the products
or services we will receive from them.
14
<PAGE> 16
Our customers may also have Year 2000 issues. We may incur losses if
these issues affect our loan customer's ability to repay their loans or if they
suffer material harm to their businesses as a result. Prior to January 1, 2000,
we intend to request certification from each commercial borrower that their
systems are Year 2000 compliant and that they do not expect to be adversely
affected by the year change. Although these certifications will be helpful, it
would be very difficult for us to accurately assess the Year 2000 readiness of
any borrower.
There is a possibility that we may not open the bank until after
January 1, 2000, at which time we believe that most of the uncertainty
surrounding the Year 2000 issue should be clarified. In this event, our risks
associated with computer malfunctions should be greatly reduced, but we will
still seek to ensure that our computer systems and our major vendors' and
clients' computer systems are in compliance and functioning properly.
15
<PAGE> 17
PROPOSED BUSINESS
GENERAL
We initiated activity to form Greenville First Bank in February 1999
and incorporated Greenville First Bancshares as a South Carolina corporation on
March 29, 1999, to function as a holding company to own and control all of the
capital stock of Greenville First Bank. We initially will engage in no business
other than owning and managing the bank.
We have chosen this holding company structure because we believe it
will provide flexibility that would not otherwise be available. Subject to
Federal Reserve Board debt guidelines, the holding company structure can assist
the bank in maintaining its required capital ratios by borrowing money and
contributing the proceeds to the bank as primary capital. Additionally, a
holding company may engage in certain non-banking activities that the Federal
Reserve Board has deemed to be closely related to banking. Although we do not
presently intend to engage in other activities, we will be able to do so with a
proper notice or filing to the Federal Reserve if we believe that there is a
need for these services in our market area and that such activities could be
profitable.
On September 21, 1999, we received preliminary approval from the
Office of the Comptroller of the Currency to open the new bank. Final approval
is conditioned upon our raising the required minimum capital, receipt of FDIC
approval, and the implementation of proper bank regulatory policies and
procedures. We have also filed for deposit insurance for the bank with the
FDIC, and have filed for approval of the Federal Reserve Board to become a bank
holding company and acquire all of the stock of the new bank. Subject to
receiving final regulatory approvals from these agencies, we plan to open the
bank in the fourth quarter of 1999 or the first quarter of 2000, and will
engage in a general commercial and consumer banking business as described
below.
MARKETING OPPORTUNITIES
Service Area. Our primary service area will consist of Greenville
County, South Carolina. We expect initially to draw a large percentage of our
business from the central portion of Greenville County, within a ten mile
radius of our main office. This principal service area is bounded by Rutherford
Road to the north, Poinsett Highway to the west, Mauldin Road and Butler Road
to the south, and Highway 14 and Batesville Road to the east. Included in this
area is the highest per capita income tract in the county. Our expansion plans
include the development of two "service centers" located along the periphery of
our service area. These service centers will extend the market reach of our
bank, and they will increase our personal service delivery capabilities to all
of our customers. This area will also benefit from the construction of the
Southern Connector, a toll road connecting I-85 and I-385 through southwestern
Greenville County, which is predicted to open within the next 12 months.
Completion of this road is expected to promote rapid commercial development
along the corridor. We plan to take advantage of existing contacts and
relationships with individuals and companies in this area to more effectively
market the services of the bank.
Economic and Demographic Factors. Greenville County's median household
income, household growth, and population growth trends have consistently
outpaced growth trends in the rest of South Carolina. Greenville County is
South Carolina's most populous county. Between 2000 and 2010, Greenville
County's population is expected to increase by 10.2% to almost 400,000 people.
The five county metropolitan area, which includes Greenville, Spartanburg,
Anderson, Cherokee, and Pickens counties, is a business and high technology
manufacturing center, and it boasts a large engineering firm presence. Major
employers in the metropolitan area include: BMW, Michelin, Bi-Lo, Kemet
Electronics, and Fluor Daniel, one of the largest engineering firms in the
world. Greenville County has more engineers per capita than any other county in
the United States. In February 1999, the unemployment rate in the area was
3.04%.
Competition. 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, and money market mutual
funds operating in the Greenville County area and elsewhere. In 1998, there
were more than 130 banking offices, representing 18 financial institutions,
operating in Greenville County and holding over
16
<PAGE> 18
$5 billion in deposits. Many of these competitors are well established in the
Greenville County area. Most of them have substantially greater resources and
lending limits than the bank will have and many of these competitors offer
services, such as extensive and established branch networks and trust services,
that we either do not expect to provide or will not provide initially. Our
competitors include large super-regional financial institutions like First
Union Bank, Bank of America, BB&T, and Wachovia, large regional financial
institutions like Carolina First Bank, and local community banks like Summit
National Bank, First Savers Bank, Palmetto Bank, and New Commerce Bank, a new
community bank which recently opened an office in Simpsonville, South Carolina
and plans to open another office in Mauldin in the third quarter of 1999. We
believe that the opportunity created by recent mergers, our management team,
and the economic and demographic dynamics of our service area combined with our
business strategy will allow us to gain a meaningful share of the area's $5
billion in deposits.
BUSINESS STRATEGY
Management Philosophy. Greenville First Bank will be the first
independent bank organized in the city of Greenville in over ten years. Because
there are few locally owned banks left in Greenville, we believe we can offer a
unique banking alternative for the market by offering a higher level of
customer service and a management team more focused on the needs of the
community than most of our competitors. We believe that this approach will be
enthusiastically supported by the community. The bank will use the theme
"Welcome to Hometown Banking," and it will actively promote it in our target
market. While the bank will have the ability to offer a breadth of products
similar to large banks, we will emphasize the client relationship. We believe
that the proposed community focus of the bank will succeed in this market, and
that the area will react favorably to the bank's emphasis on service to small
businesses, individuals, and professional concerns.
Operating Strategy. In order to achieve the level of prompt,
responsive service that we believe will be necessary to attract customers and
to develop Greenville First Bank's image as a local bank with an individual
focus, we will employ the following operating strategies:
- Experienced Senior Management. We have retained senior
management with many years of experience in the financial
services industry within our primary market area. Our senior
management team currently consists of the following individuals:
- Art Seaver will lead the management teams as the president
and chief executive officer for both Greenville First
Bancshares and Greenville First Bank. He has lived in
Greenville for over 25 years and has over 13 years of
banking experience in the Greenville area. Mr. Seaver began
his banking career in 1986 with C&S National Bank and in
1992 joined Greenville National Bank. As senior vice
president and executive officer, he was primarily
responsible for business development, deposit product
offerings, communication systems, and strategic planning.
Mr. Seaver left Greenville National Bank in February 1999
following its acquisition by Regions Bank.
- Fred Gilmer, Jr. will be a senior vice president for both
Greenville First Bancshares and Greenville First Bank. Mr.
Gilmer has over 40 years of experience in the financial
services industry in the Greenville area. Mr. Gilmer was
one of the original 13 employees of Southern Bank and Trust
Company in 1961. His career also includes management
positions with South Carolina Federal and First Savings
Bank. He was most recently the executive officer in charge
of client relations for Greenville National Bank.
- Jim Austin will be chief financial officer and senior vice
president for both Greenville First Bancshares and
Greenville First Bank. He has lived in Greenville for over
21 years and has over 20 years of experience in the
financial services industry in the Greenville area. Mr.
Austin was with KPMG Peat Marwick for 5 years specializing
in bank audits, then for 12 years with American Federal
Bank as Senior Vice President and Controller. His career
also
17
<PAGE> 19
includes management positions with Regional Management
Corporation and Homegold Financial, Inc.
- Other Executives. We are in the process of assembling a
management team with significant banking experience. We expect
these officers to be individuals who reside in the Greenville
area and have local banking experience and a history of service
to the community. Because of the recent merger and acquisition
activity in the market, we believe there is an abundance of
local experienced banking executives who would be interested in
joining our community banking effort.
- Community-Oriented Board of Directors. Our management team will
operate under the direction of our board of directors. As
described in the Management Section beginning on page 30, our
directors are long time residents and businessmen in the
Greenville area, with significant community involvement. These
directors are dedicated to the success of the bank, and will
play a key part in marketing the new bank in the community.
- Client Relationship Management. Greenville First Bank will use a
client-based philosophy. This philosophy is the basis of our
relationship management initiative. We will focus on the overall
relationship with each client as opposed to the general product
"push" approach used by larger banks. To implement this
strategy, we will establish "relationship teams" consisting of a
senior vice president team leader/primary lender, and another
senior officer who specializes in matching deposit specialties
with clients' needs. With administrative assistance, our
relationship teams will be able to provide clients with specific
and consistent bankers who are responsible for managing their
entire relationship. Executive officers' performance will be
measured in part by their ability to maintain and cultivate
client relationships. We believe this structure will ensure
effective responsiveness to our clients' financial needs, a
hallmark of the community approach to banking.
- Convenience Oriented Service Centers and ATMs. Within the first
four years of operation, we plan to open two non-traditional
"service centers" located strategically in our primary service
area. These "service centers" will provide limited bank
functions, including deposit and ATM services. Loan production
services will remain concentrated in our main office. We believe
these "service centers" will expand our market presence and
provide additional convenience to our customers. The bank will
provide additional convenience through strategically placed
ATMs.
- Local Services and Decision Making. Clients will enjoy a
professional bank environment with access to their specific bank
officer and relationship team. We will emphasize local
decision-making with experienced bankers, attention to lower
employee turnover, and professional and responsive service.
- Capitalize on Need for Community Banks. The current trend of
consolidation in the banking industry has led to the recent
acquisition of three locally owned community banks in the
Greenville County area of South Carolina by large national and
regional banks headquartered outside of Greenville County. In
1998, over 90% of the total deposits were controlled by
financial institutions headquartered outside of the area.
Despite the market-share dominance of larger super-regional and
regional banks, excluding the acquisition of local banks in the
area, total deposits for these large banks actually fell from
1997 to 1998, while total deposits during the same period
increased 3%. We believe these numbers reflect the desire of the
residents of this area for a community bank relationship, and
that they will support our new local bank as a result.
- Focus on Under-Serviced Market Sector. Although size gives
larger banks advantages in competing for business from large
corporations, including higher lending limits and the ability to
offer services in other areas of South Carolina and Greenville
County, we believe that there is a void in the community banking
market in the Greenville County area and that we can
successfully fill this void. We will not compete with large
institutions for the primary banking relationships of large
corporations, but will compete for niches in this business and
for the consumer business of their
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<PAGE> 20
employees. We will also focus on small- to medium-sized
businesses and their employees. This includes retail, service,
wholesale distribution, manufacturing, and international
businesses. We intend to attract such businesses based on
relationships and contacts which the bank's directors and
management have outside our core service area.
LENDING ACTIVITIES
General. We intend to emphasize a range of lending services, including
real estate, commercial, and equity-line and consumer loans to individuals and
small- to medium-sized businesses and professional concerns that are located in
or conduct a substantial portion of their business in the bank's market area.
We will compete for these loans with competitors who are well established in
the Greenville County area and have greater resources and lending limits. As a
result, we may have to charge lower interest rates to attract borrowers.
The well established banks in the Greenville County area will make
proportionately more loans to medium- to large-sized businesses than we will.
Many of the bank's anticipated commercial loans will likely be made to small-
to medium-sized businesses which may be less able to withstand competitive,
economic, and financial conditions than larger borrowers.
Loan Approval and Review. The bank's loan approval policies will
provide for various levels of officer lending authority. When the amount of
aggregate loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with
a higher lending limit or the officers' loan committee. The bank will establish
an officers' loan committee that has lending limits, and any loan in excess of
this lending limit will be approved by the directors' loan committee. The bank
will not make any loans to any director, officer, or employee of the bank
unless the loan is approved by the board of directors of the bank and is made
on terms not more favorable to such person than would be available to a person
not affiliated with the bank. The bank currently intends to adhere to Federal
National Mortgage Association and Federal Home Loan Mortgage Corporation
guidelines in its mortgage loan review process, but may choose to alter this
policy in the future. The bank expects to sell residential mortgage loans that
it originates on the secondary market.
Loan Distribution. We estimate that our initial percentage
distribution of our loans for the first year will be as follows:
<TABLE>
<S> <C>
Real Estate 50%
Commercial Loans 35%
Equity Line and Consumer Loans 15%
</TABLE>
These are estimates only. Our actual deposit and loan distribution will depend
on our customers and vary initially and over time.
Allowance for Loan Losses. We will maintain an allowance for loan
losses, which we will establish through a provision for loan losses charged
against income. We will charge loans against this allowance when we believe
that the collectibility of the principle is unlikely. The allowance will be an
estimated amount that we believe will be adequate to absorb losses inherent in
the loan portfolio based on evaluations of its collectibility. We anticipate
that initially our allowance for loan losses will equal approximately 1% of the
average outstanding balance of our loans. Over time, we will base the loan loss
reserves on our evaluation of factors such as changes in the nature and volume
of the loan portfolio, overall portfolio quality, specific problem loans and
commitments, and current anticipated economic conditions that may affect the
borrower's ability to pay.
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<PAGE> 21
Lending Limits. The bank's lending activities will be subject to a
variety of lending limits imposed by federal law. In general, the bank will be
subject to a legal limit on loans to a single borrower equal to 15% of the
bank's capital and unimpaired surplus. Different limits may apply in certain
circumstances based on the type of loan or the nature of the borrower,
including the borrower's relationship to the bank. These limits will increase
or decrease as the bank's capital increases or decreases. The bank will
initially have a self-imposed loan limit of $1,000,000, which represents
approximately 80% of our legal lending limit of $1,275,000. Unless the bank is
able to sell participations in its loans to other financial institutions, the
bank will not be able to meet all of the lending needs of loan customers
requiring aggregate extensions of credit above these limits.
Credit Risk. The principal credit risk associated with each category
of loans is the creditworthiness of the borrower. Borrower creditworthiness is
affected by general economic conditions and the strength of the manufacturing,
services, and retail market segments. General economic factors affecting a
borrower's ability to repay include interest, inflation, and employment rates
and the strength of local and national economy, as well as other factors
affecting a borrower's customers, suppliers, and employees.
Real Estate Loans. We expect that loans secured by first or second
mortgages on real estate will make up 50% of the bank's loan portfolio. These
loans will generally fall into one of three categories: commercial real estate
loans, construction and development loans, or residential real estate loans.
Each of these categories is discussed in more detail below, including their
specific risks. Home equity loans are not included because they are classified
as consumer loans, which are discussed below. Interest rates for all categories
may be fixed or adjustable, and will more likely be fixed for shorter-term
loans. The bank will generally charge an origination fee for each loan.
Real estate loans are subject to the same general risks as other
loans. They are particularly sensitive to fluctuations in the value of real
estate, which is generally the underlying security for real estate loans. On
first and second mortgage loans we would typically not advance more than 80% of
the lesser of the cost or appraised value of the property. We will require a
valid mortgage lien on all real property loans along with a title lien policy
which insures the validity and priority of the lien. We will also require
borrowers to obtain hazard insurance policies and flood insurance if
applicable.
We will have the ability to originate some real estate loans for sale
into the secondary market. We can limit our interest rate and credit risk on
these loans by locking the interest rate for each loan with the secondary
investor and receiving the investor's underwriting approval prior to
originating the loan.
- Commercial Real Estate Loans. Commercial real estate loans will
generally have terms of five years or less, although payments
may be structured on a longer amortization basis. We will
evaluate each borrower on an individual basis and attempt to
determine its business risks and credit profile. We will attempt
to reduce credit risk in the commercial real estate portfolio by
emphasizing loans on owner-occupied office and retail buildings
where the loan-to-value ratio, established by independent
appraisals, does not exceed 80%. We will also generally require
that debtor cash flow exceed 115% of monthly debt service
obligations. We will typically review all of the personal
financial statements of the principal owners and require their
personal guarantees. These reviews generally reveal secondary
sources of payment and liquidity to support a loan request.
- Construction and Development Real Estate Loans. We will offer
adjustable and fixed rate residential and commercial
construction loans to builders and developers and to consumers
who wish to build their own home. The term of construction and
development loans will generally be limited to eighteen months,
although payments may be structured on a longer amortization
basis. Most loans will mature and require payment in full upon
the sale of the property. Construction and development loans
generally carry a higher degree of risk than long term financing
of existing properties. Repayment depends on the ultimate
completion of the project and usually on the sale of the
property. Specific risks include:
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- cost overruns;
- mismanaged construction;
- inferior or improper construction techniques;
- economic changes or downturns during construction;
- a downturn in the real estate market;
- rising interest rates which may prevent sale of the
property; and
- failure to sell completed projects in a timely manner.
We will attempt to reduce risk by obtaining personal guarantees where
possible, and by keeping the loan-to-value ratio of the completed
project below specified percentages. We may also reduce risk by
selling participations in larger loans to other institutions when
possible.
- Residential Real Estate Loans. Residential real estate loans
will generally have longer terms up to 30 years. We will offer
fixed and adjustable rate mortgages, and we intend to sell some
or all of the residential real estate loans that we generate in
the secondary market. By selling these loans in the secondary
market, we can significantly reduce our exposure to credit risk
because the loans will be underwritten through a third party
agent without any recourse against the bank.
Commercial Loans. The bank will make loans for commercial purposes in
various lines of businesses. Equipment loans will typically be made for a term
of five years or less at fixed or variable rates, with the loan fully amortized
over the term and secured by the financed equipment and with a loan-to-value
ratio of 80% or less. We will focus our efforts on commercial loans of less
than $500,000. Working capital loans will typically have terms not exceeding
one year and will usually be secured by accounts receivable, inventory, or
personal guarantees of the principals of the business. For loans secured by
accounts receivable or inventory, principal will typically be repaid as the
assets securing the loan are converted into cash, and in other cases principal
will typically be due at maturity. Trade letters of credit, standby letters of
credit, and foreign exchange will be handled through a correspondent bank as
agent for the bank.
We expect to also offer small business loans utilizing government
enhancements such as the Small Business Administration's 7(a) program and SBA's
504 programs, and Appalachian Development Council. These loans will typically
be partially guaranteed by the government which may help to reduce the bank's
risk. Government guarantees of SBA loans will not exceed 80% of the loan value,
and will generally be less.
Consumer Loans. The bank will make a variety of loans to individuals
for personal and household purposes, including secured and unsecured
installment loans and revolving lines of credit such as credit cards.
Installment loans typically will carry balances of less than $50,000 and be
amortized over periods up to 60 months. Consumer loans may be offered on a
single maturity basis where a specific source of repayment is available.
Revolving loan products will typically require monthly payments of interest and
a portion of the principal. Consumer loans are generally considered to have
greater risk than first or second mortgages on real estate.
We will also offer home equity loans. Our underwriting criteria for
and the risks associated with home equity loans and lines of credit will
generally be the same as those for first mortgage loans. Home equity lines of
credit will typically have terms of 15 years or less, will typically carry
balances less than $125,000, and may extend up to 100% of the available equity
of each property.
DEPOSIT SERVICES
We intend to offer a full range of deposit services that are typically
available in most banks and savings and loan associations, including checking
accounts, commercial accounts, savings accounts, and other time deposits of
various types, ranging from daily money market accounts to longer-term
certificates of deposit. The transaction accounts and time certificates will be
tailored to our principal market area at rates competitive to those offered in
the Greenville County area. In addition, we intend to offer retirement account
services, such as IRAs. We intend to solicit these accounts from individuals,
businesses, and other organizations.
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Deposit Distribution. We estimate that our initial percentage
distribution of our deposits for the first year will be as follows:
<TABLE>
<S> <C>
Demand Deposit 12%
Savings & Money Market 32%
Time and Savings Deposits 5%
CD's under $100,000 34%
CD's over $100,000 17%
</TABLE>
OTHER BANKING SERVICES
We anticipate that the bank will offer other bank services including
cash management services such as sweep accounts for commercial businesses. In
addition, lines of credit, 24-hour telephone banking and PC/ internet delivery
are being developed. We will offer drive up ATMs, safe deposit boxes, direct
deposit of payroll and social security checks, U.S. Savings Bonds, travelers
checks, and automatic drafts for various accounts. We plan for the bank to
become associated with the Honor and Cirrus ATM networks that may be used by
the bank's customers throughout the country. We believe that by being
associated with a shared network of ATMs, we will be better able to serve our
clients and will be able to attract clients who are accustomed to the
convenience of using ATMs, although we do not believe that maintaining this
association will be critical to our success. We intend to begin offering these
services shortly after opening the bank. We also plan to offer a debit card and
VISA credit card services through a correspondent bank as an agent for the
bank. We do not expect the bank to exercise trust powers during its initial
years of operation.
MARKET SHARE
In 1998, deposits in Greenville County exceeded $5 billion. The
average annual growth rate in deposits in Greenville County over the last five
years was 6.8%. Based on a growth rate of 4%, the deposits in Greenville County
will grow to approximately $6.2 billion by 2004. Our plan over the next five
years is to reach a 1.7% market share with deposits in excess of $100 million.
Of course, there can be no assurances that we will accomplish these objectives.
EMPLOYEES
We anticipate that, upon commencement of operations, the bank will
have approximately 14 full time employees and one part time employee. By the
end of 2000, we anticipate that it will have approximately 22 full time
employees and one part time employee operating out of the bank's permanent
facility. Greenville First Bancshares, as the holding company for the bank,
will not have any employees other than its officers.
LEGAL PROCEEDINGS
Neither Greenville First Bancshares, Greenville First Bank, nor any of
their properties are subject to any material legal proceedings.
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SUPERVISION AND REGULATION
Both Greenville First Bancshares and Greenville First Bank are subject
to extensive state and federal banking laws and regulations which impose
specific requirements or restrictions on and provide for general regulatory
oversight of virtually all aspects of operations. These laws and regulations
are generally intended to protect depositors, not shareholders. The following
summary is qualified by reference to the statutory and regulatory provisions
discussed. Changes in applicable laws or regulations may have a material effect
on our business and prospects. Beginning with the enactment of the Financial
Institution Report Recovery and Enforcement Act in 1989 and following with the
FDIC Improvement Act in 1991, numerous additional regulatory requirements have
been placed on the banking industry in the past several years, and additional
changes have been proposed. Our operations may be affected by legislative
changes and the policies of various regulatory authorities. We cannot predict
the effect that fiscal or monetary policies, economic control, or new federal
or state legislation may have in the future on our business and earnings.
GREENVILLE FIRST BANCSHARES
Because it will own the outstanding capital stock of the bank,
Greenville First Bancshares will be a bank holding company under the federal
Bank Holding Company Act of 1956 and the South Carolina Banking and Branching
Efficiency Act. Our activities will also be governed by the Glass-Steagall Act
of 1933.
The Bank Holding Company Act. Under the Bank Holding Company Act,
Greenville First Bancshares will be subject to periodic examination by the
Federal Reserve and required to file periodic reports of its operations and any
additional information that the Federal Reserve may require. Our activities at
the bank and holding company level will be limited to:
- banking, and managing or controlling banks;
- furnishing services to or performing services for its
subsidiaries; and
- engaging in other activities that the Federal Reserve determines
to be so closely related to banking and managing or controlling
banks as to be a proper incident thereto.
Investments, Control, and Activities. With certain limited exceptions,
the Bank Holding Company Act requires every bank holding company to obtain the
prior approval of the Federal Reserve before:
- acquiring substantially all the assets of any bank;
- acquiring direct or indirect ownership or control of any voting
shares of any bank if after such acquisition it would own or
control more than 5% of the voting shares of such bank (unless
it already owns or controls the majority of such shares); or
- merging or consolidating with another bank holding company.
In addition, and subject to certain exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with regulations
thereunder, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of
voting securities of the bank holding company. Control is rebuttably presumed
to exist if a person acquires 10% or more, but less than 25%, of any class of
voting securities and either Greenville First Bancshares has registered
securities under Section 12 of the Securities Exchange Act of 1934 or no other
person owns a greater percentage of that class of voting securities immediately
after the transaction. We will register our common stock under the Securities
Exchange Act of 1934. The regulations provide a procedure for challenge of the
rebuttable control presumption.
Under the Bank Holding Company Act, a bank holding company is
generally prohibited from engaging in, or acquiring direct or indirect control
of more than 5% of the voting shares of any company engaged in nonbanking
activities unless the Federal Reserve Board, by order or regulation, has found
those activities to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. Some of the
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activities that the Federal Reserve Board has determined by regulation to be
proper incidents to the business of a bank holding company include:
- making or servicing loans and certain types of leases;
- engaging in certain insurance and discount brokerage activities;
- performing certain data processing services;
- acting in certain circumstances as a fiduciary or investment or
financial adviser;
- owning savings associations; and
- making investments in certain corporations or projects designed
primarily to promote community welfare.
The Federal Reserve Board imposes certain capital requirements on
Greenville First Bancshares under the Bank Holding Company Act, including a
minimum leverage ratio and a minimum ratio of "qualifying" capital to
risk-weighted assets. These requirements are described below under "Capital
Regulations." Subject to its capital requirements and other restrictions,
Greenville First Bancshares is able to borrow money to make a capital
contribution to the bank, and these loans may be repaid from dividends paid
from the bank to Greenville First Bancshares. Our ability to pay dividends will
be subject to regulatory restrictions as described below in "The Bank -
Dividends." Greenville First Bancshares is also able to raise capital for
contribution to the bank by issuing securities without having to receive
regulatory approval, subject to compliance with federal and state securities
laws.
Source of Strength; Cross-Guarantee. In accordance with Federal
Reserve Board policy, Greenville First Bancshares will be expected to act as a
source of financial strength to the bank and to commit resources to support the
bank in circumstances in which Greenville First Bancshares might not otherwise
do so. Under the Bank Holding Company Act, the Federal Reserve Board may
require a bank holding company to terminate any activity or relinquish control
of a nonbank subsidiary, other than a nonbank subsidiary of a bank, upon the
Federal Reserve Board's determination that such activity or control constitutes
a serious risk to the financial soundness or stability of any subsidiary
depository institution of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank holding
company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition.
Glass-Steagall Act. We will also be restricted by the provisions of
the Glass-Steagall Act, which prohibit Greenville First Bancshares from owning
subsidiaries that are engaged principally in the issue, flotation,
underwriting, public sale, or distribution of securities. The interpretation,
scope, and application of the provisions of the Glass-Steagall Act currently
are being considered and reviewed by regulators and legislators, and the
interpretation and application of those provisions have been challenged in the
federal courts.
South Carolina State Regulation. As a bank holding company registered
under the South Carolina Banking and Branching Efficiency Act, we are subject
to limitations on sale or merger and to regulation by the South Carolina Board
of Financial Institutions. Prior to acquiring the capital stock of a national
bank, we are not required to obtain the approval of the Board, but we must
notify them at least 15 days prior to doing so. Prior to engaging in the
acquisition of nonbanking institutions or state chartered banks, we must
receive the Board's approval, and we must file periodic reports with respect to
our financial condition and operations, management, and intercompany
relationships between Greenville First Bancshares and its subsidiaries.
THE BANK
The bank will operate as a national banking association incorporated
under the laws of the United States and subject to examination by the Office of
the Comptroller of the Currency. Deposits in the bank will be insured by the
FDIC up to a maximum amount, which is generally $100,000 per depositor subject
to aggregation rules.
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The Office of the Comptroller of the Currency and the FDIC will
regulate or monitor virtually all areas of the bank's operations, including:
- security devices and procedures;
- adequacy of capitalization and loss reserves;
- loans;
- investments;
- borrowings;
- deposits;
- mergers;
- issuances of securities;
- payment of dividends;
- interest rates payable on deposits;
- interest rates or fees chargeable on loans;
- establishment of branches;
- corporate reorganizations;
- maintenance of books and records; and
- adequacy of staff training to carry on safe lending and deposit
gathering practices.
The Office of the Comptroller of the Currency requires the bank to
maintain specified capital ratios and imposes limitations on the bank's
aggregate investment in real estate, bank premises, and furniture and fixtures.
The Office of the Comptroller of the Currency will also require the bank to
prepare quarterly reports on the bank's financial condition and to conduct an
annual audit of its financial affairs in compliance with its minimum standards
and procedures.
Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to
develop a method for insured depository institutions to provide supplemental
disclosure of the estimated fair market value of assets and liabilities, to the
extent feasible and practicable, in any balance sheet, financial statement,
report of condition or any other report of any insured depository institution.
The FDIC Improvement Act also requires the federal banking regulatory agencies
to prescribe, by regulation, standards for all insured depository institutions
and depository institution holding companies relating, among other things, to
the following:
- internal controls;
- information systems and audit systems;
- loan documentation;
- credit underwriting;
- interest rate risk exposure; and
- asset quality.
National banks and their holding companies which have been chartered
or registered or have undergone a change in control within the past two years
or which have been deemed by the Office of the Comptroller of the Currency or
the Federal Reserve Board to be troubled institutions must give the Office of
the Comptroller of the Currency or the Federal Reserve Board 30 days prior
notice of the appointment of any senior executive officer or director. Within
the 30 day period, the Office of the Comptroller of the Currency or the Federal
Reserve Board, as the case may be, may approve or disapprove any such
appointment.
Deposit Insurance. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund and Savings Association Insurance Fund are
maintained for commercial banks and savings associations with insurance
premiums from the industry used to
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offset losses from insurance payouts when banks and thrifts fail. In 1993, the
FDIC adopted a rule which establishes a risk-based deposit insurance premium
system for all insured depository institutions. Under this system, until
mid-1995 depository institutions paid to Bank Insurance Fund or Savings
Association Insurance Fund from $0.23 to $0.31 per $100 of insured deposits
depending on its capital levels and risk profile, as determined by its primary
federal regulator on a semiannual basis. Once the Bank Insurance Fund reached
its legally mandated reserve ratio in mid-1995, the FDIC lowered premiums for
well-capitalized banks, eventually eliminating premiums for well-capitalized
banks, with a minimum semiannual assessment of $1,000. However, in 1996
Congress enacted the Deposit Insurance Funds Act of 1996, which eliminated even
this minimum assessment. It also separated the Financial Corporation assessment
to service the interest on its bond obligations. The amount assessed on
individual institutions, including the bank, by Financial Corporation
assessment is in addition to the amount paid for deposit insurance according to
the risk-related assessment rate schedule. Increases in deposit insurance
premiums or changes in risk classification will increase the bank's cost of
funds, and we may not be able to pass these costs on to our customers.
Transactions With Affiliates and Insiders. The bank will be subject to
the provisions of Section 23A of the Federal Reserve Act, which places limits
on the amount of loans or extensions of credit to, or investments in, or
certain other transactions with, affiliates and on the amount of advances to
third parties collateralized by the securities or obligations of affiliates.
The aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of the bank's capital and surplus and, as to all affiliates
combined, to 20% of the bank's capital and surplus. Furthermore, within the
foregoing limitations as to amount, each covered transaction must meet
specified collateral requirements. Compliance is also required with certain
provisions designed to avoid the taking of low quality assets.
The bank will also be subject to the provisions of Section 23B of the
Federal Reserve Act which, among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the
transactions are on terms substantially the same, or at least as favorable to
such institution or its subsidiaries, as those prevailing at the time for
comparable transactions with nonaffiliated companies. The bank will be subject
to certain restrictions on extensions of credit to executive officers,
directors, certain principal shareholders, and their related interests. Such
extensions of credit (i) must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with third parties and (ii) must not involve more than
the normal risk of repayment or present other unfavorable features.
Dividends. A national bank may not pay dividends from its capital. All
dividends must be paid out of undivided profits then on hand, after deducting
expenses, including reserves for losses and bad debts. In addition, a national
bank is prohibited from declaring a dividend on its shares of common stock
until its surplus equals its stated capital, unless there has been transferred
to surplus no less than one-tenth of the bank's net profits of the preceding
two consecutive half-year periods (in the case of an annual dividend). The
approval of the Office of the Comptroller of the Currency is required if the
total of all dividends declared by a national bank in any calendar year exceeds
the total of its net profits for that year combined with its retained net
profits for the preceding two years, less any required transfers to surplus.
Branching. National banks are required by the National Bank Act to
adhere to branch office banking laws applicable to state banks in the states in
which they are located. Under current South Carolina law, the bank may open
branch offices throughout South Carolina with the prior approval of the Office
of the Comptroller of the Currency. In addition, with prior regulatory
approval, the bank will be able to acquire existing banking operations in South
Carolina. Furthermore, federal legislation has recently been passed which
permits interstate branching. The new law permits out-of-state acquisitions by
bank holding companies, interstate branching by banks if allowed by state law,
and interstate merging by banks.
Community Reinvestment Act. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the Office of the
Comptroller of the Currency, shall evaluate the record of each financial
institution in meeting the credit needs of its local community, including low
and moderate income neighborhoods. These factors are also considered in
evaluating mergers, acquisitions, and applications to open a branch or
facility. Failure to adequately meet these criteria could impose additional
requirements and limitations on the bank.
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Other Regulations. Interest and other charges collected or contracted
for by the bank are subject to state usury laws and federal laws concerning
interest rates. The bank's loan operations are also subject to federal laws
applicable to credit transactions, such as:
- the federal Truth-In-Lending Act, governing disclosures of
credit terms to consumer borrowers;
- the Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and
public officials to determine whether a financial institution is
fulfilling its obligation to help meet the housing needs of the
community it serves;
- the Equal Credit Opportunity Act, prohibiting discrimination on
the basis of race, creed or other prohibited factors in
extending credit;
- the Fair Credit Reporting Act of 1978, governing the use and
provision of information to credit reporting agencies;
- the Fair Debt Collection Act, governing the manner in which
consumer debts may be collected by collection agencies; and
- the rules and regulations of the various federal agencies
charged with the responsibility of implementing such federal
laws.
The deposit operations of the bank also are subject to:
- the Right to Financial Privacy Act, which imposes a duty to
maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative
subpoenas of financial records; and
- the Electronic Funds Transfer Act and Regulation E issued by the
Federal Reserve Board to implement that act, which governs
automatic deposits to and withdrawals from deposit accounts and
customers' rights and liabilities arising from the use of
automated teller machines and other electronic banking services.
Capital Regulations. The federal bank regulatory authorities have
adopted risk-based capital guidelines for banks and bank holding companies that
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and account
for off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios in excess of the minimums. We have
not received any notice indicating that either Greenville First Bancshares or
Greenville First Bank is subject to higher capital requirements. The current
guidelines require all bank holding companies and federally-regulated banks to
maintain a minimum risk-based total capital ratio equal to 8%, of which at
least 4% must be Tier 1 capital. Tier 1 capital includes common shareholders'
equity, qualifying perpetual preferred stock, and minority interests in equity
accounts of consolidated subsidiaries, but excludes goodwill and most other
intangibles and excludes the allowance for loan and lease losses. Tier 2
capital includes the excess of any preferred stock not included in Tier 1
capital, mandatory convertible securities, hybrid capital instruments,
subordinated debt and intermediate term-preferred stock, and general reserves
for loan and lease losses up to 1% of risk-weighted assets.
Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of 0%, 20%, 50%, or 100%. In addition, certain off-balance
sheet items are given credit conversion factors to convert them to asset
equivalent amounts to which an appropriate risk-weight applies. These
computations result in the total risk-weighted assets. Most loans are assigned
to the 100% risk category, except for first mortgage loans fully secured by
residential property and, under certain circumstances, residential construction
loans, both of which carry a 50% rating. Most investment securities are
assigned to the 20% category, except for municipal or state revenue bonds,
which have a 50% rating, and direct obligations of or obligations guaranteed by
the United States Treasury or United States Government agencies, which have a
0% rating.
The federal bank regulatory authorities have also implemented a
leverage ratio, which is equal to Tier 1 capital as a percentage of average
total assets less intangibles, to be used as a supplement to the risk-based
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guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which a bank holding company may leverage
its equity capital base. The minimum required leverage ratio for top-rated
institutions is 3%, but most institutions are required to maintain an
additional cushion of at least 100 to 200 basis points.
The FDIC Improvement Act established a new capital-based regulatory
scheme designed to promote early intervention for troubled banks which requires
the FDIC to choose the least expensive resolution of bank failures. The new
capital-based regulatory framework contains five categories of compliance with
regulatory capital requirements, including "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." To qualify as a "well capitalized" institution,
a bank must have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio
of no less than 6%, and a total risk-based capital ratio of no less than 10%,
and the bank must not be under any order or directive from the appropriate
regulatory agency to meet and maintain a specific capital level. Initially, we
will qualify as "well capitalized."
Under the FDIC Improvement Act regulations, the applicable agency can
treat an institution as if it were in the next lower category if the agency
determines (after notice and an opportunity for hearing) that the institution
is in an unsafe or unsound condition or is engaging in an unsafe or unsound
practice. The degree of regulatory scrutiny of a financial institution
increases, and the permissible activities of the institution decreases, as it
moves downward through the capital categories. Institutions that fall into one
of the three undercapitalized categories may be required to do some or all of
the following:
- submit a capital restoration plan;
- raise additional capital;
- restrict their growth, deposit interest rates, and other
activities;
- improve their management;
- eliminate management fees; or
- divest themselves of all or a part of their operations.
Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.
These capital guidelines can affect us in several ways. If we grow the
bank's loan portfolio at a rapid pace, its capital may be depleted too quickly
and a capital infusion from the holding company may be required, which could
impact our ability to pay dividends. Our 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 our
capital position in a relatively short period of time.
The FDIC Improvement Act requires the federal banking regulators to
revise the risk-based capital standards to provide for explicit consideration
of interest-rate risk, concentration of credit risk, and the risks of
untraditional activities. We are uncertain what effect these regulations would
have.
Failure to meet these capital requirements would mean that a bank
would be required to develop and file a plan with its primary federal banking
regulator describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital
adequacy, such as a branch or merger application, unless the bank could
demonstrate a reasonable plan to meet the capital requirement within a
reasonable period of time.
Enforcement Powers. The Financial Institution Reform Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices can include the failure of an
institution to timely file required reports or the filing of false or
misleading information or the submission of inaccurate reports. Civil penalties
may be as high as $1,000,000 a day for such
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violations. Criminal penalties for some financial institution crimes have been
increased to twenty years. In addition, regulators are provided with greater
flexibility to commence enforcement actions against institutions and
institution-affiliated parties. Possible enforcement actions include the
termination of deposit insurance. Furthermore, banking agencies' power to issue
cease-and-desist orders were expanded. Such orders may, among other things,
require affirmative action to correct any harm resulting from a violation or
practice, including restitution, reimbursement, indemnification's or guarantees
against loss. A financial institution may also be ordered to restrict its
growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.
Recent Legislative Developments. From time to time, various bills are
introduced in the United States Congress with respect to the regulation of
financial institutions. Some of these proposals, if adopted, could
significantly change the regulation of banks and the financial services
industry. We cannot predict whether any of these proposals will be adopted or,
if adopted, what effect these would have.
Effect of Governmental Monetary Policies. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary
policies have had, and are likely to continue to have, an important impact on
the operating results of commercial banks through its power to implement
national monetary policy in order, among other things, to curb inflation or
combat a recession. The monetary policies of the Federal Reserve Board have
major effects upon the levels of bank loans, investments and deposits through
its open market operations in United States government securities and through
its regulation of the discount rate on borrowings of member banks and the
reserve requirements against member bank deposits. It is not possible to
predict the nature or impact of future changes in monetary and fiscal policies.
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MANAGEMENT
GENERAL
The following table sets forth the number and percentage of
outstanding shares of common stock we expect to be beneficially owned by the
organizers and executive officers after the completion of this offering.
Although they have not promised to do so, the organizers may purchase
additional shares in the offering, including up to 100% of the offering. All of
our organizers will serve as directors. The addresses of our organizers are the
same as the address of the bank. Prior to the offering, Art Seaver purchased
ten shares of common stock for $10.00 per share. We will redeem this stock
after the offering. This table includes shares based on the "beneficial
ownership" concepts as defined by the SEC. Beneficial ownership includes
spouses, minor children, and other relatives residing in the same household,
and trusts, partnerships, corporations or deferred compensation plans which are
affiliated with the principal. This table does not reflect warrants that will
be granted to each organizer to purchase one share of common stock for every
two shares of common stock purchased by the organizers during the offering
because these warrants will not be exercisable within 60 days of the date of
this prospectus.
<TABLE>
<CAPTION>
SHARES ANTICIPATED TO BE OWNED
FOLLOWING THE OFFERING
--------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ ------ -------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
James M. Austin, III 6,000 0.55%
Andrew B. Cajka, Jr. 10,000 0.91%
Mark A. Cothran 30,000 2.73%
Leighton M. Cubbage 80,000 7.278%
Fred Gilmer, Jr. 17,300 1.57%
Tecumseh Hooper, Jr. 15,000 1.36%
Rudolph G. Johnstone, III 10,600 0.96%
Keith J. Marrero 5,000 0.45%
James B. Orders, III 20,000 1.82%
R. Arthur Seaver, Jr. 12,000 1.09%
William B. Sturgis 60,000 5.45%
All directors and executive officers as a 265,900 24.17%
group (11 persons)
</TABLE>
EXECUTIVE OFFICERS AND DIRECTORS OF GREENVILLE FIRST BANCSHARES
The following table sets forth biographical information about our
executive officers and directors. The CEO and president, senior vice
presidents, chief financial officer, and directors of Greenville First
Bancshares will also hold these same positions with Greenville First Bank.
Greenville First Bancshares' articles of incorporation provide for a classified
board of directors so that, as nearly as possible, one-third of the directors
are elected each year to serve three-year terms. The terms of office of the
classes of directors expire as follows: Class I at the 2000 annual meeting of
shareholders, Class II at the 2001 annual meeting of shareholders, and Class
III at the 2002 annual meeting of shareholders. Executive officers serve at the
discretion of the board of directors.
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<PAGE> 32
<TABLE>
<CAPTION>
POSITION WITH
NAME AGE GREENVILLE FIRST BANCSHARES
---- --- ---------------------------
<S> <C> <C>
James M. Austin, III 42 Senior Vice President, CFO
Andrew B. Cajka, Jr. 40 Director
Mark A. Cothran 41 Director
Leighton M. Cubbage 46 Director
Fred Gilmer, Jr. 63 Director, Senior Vice President
Tecumseh Hooper, Jr. 52 Director
Rudolph G. Johnstone, III, M.D. 39 Director
Keith J. Marrero 39 Director
James B. Orders, III 46 Director, Chair
R. Arthur Seaver, Jr. 35 Director, CEO, President
William B. Sturgis 64 Director
</TABLE>
James "Jim" M. Austin, III will be the senior vice president and chief
financial officer of Greenville First Bank. He has over 20 years of experience
in the financial services industry. From 1978 to 1983, Mr. Austin was employed
by KPMG Peat Marwick specializing in bank audits. Mr. Austin was employed for
12 years with American Federal Bank as controller and senior vice president
responsible for the financial accounting and budgeting. From 1995 until 1997,
Mr. Austin was the senior vice president and chief financial officer of
Regional Management Corporation, a 58-office consumer finance company where he
was responsible for the finance and operations area of the company. From 1997
until July 1999, he was the director of corporate finance for Homegold
Financial, a national sub-prime financial service company that specializes in
mortgage loan originations. Mr. Austin is a 1978 graduate of the University of
South Carolina with degrees in accounting and finance. He is also a Certified
Public Accountant and graduate of the University of Georgia's Executive
Management's Savings Bank program. He is a graduate of Leadership Greenville
and is active in the First Presbyterian Church. He has served on the community
boards of River Place Festival, Junior Achievement, and Pendleton Place, and he
is the past president of the Financial Manager's Society of South Carolina and
former board member of the Young Manager's Division of the Community of
Financial Institutions of South Carolina.
Andrew B. Cajka, Class III Director, is the founder and president of Southern
Hospitality Group, LLC, a hotel management and development company in
Greenville, South Carolina. Prior to starting his own business, Mr. Cajka was a
managing member of Hyatt Hotels Corporation from 1986 until 1998. He is a
graduate of Bowling Green State University in 1982. Mr. Cajka is currently on
the board of directors for the Greenville Chamber of Commerce and past
president of the downtown area council. He is a member of the Greenville
Hospital Foundation Board, past chairman of the Children's Hospital, Board of
Trustee member and chairman of the Foundation at St. Joseph High School, past
chairman of the Greenville Tech Hospitality Board, board member of the Urban
League, and past chairman of the Greenville Convention and Visitors Bureau.
Mark A. Cothran, Class I Director, is the president and principal owner of
Cothran Company, Inc., a real estate construction and development company in
Greenville, South Carolina. He has been with Cothran Company, Inc. since 1986.
Mr. Cothran received his bachelors degree in finance and banking from the
University of South Carolina in 1980 and is a licensed real estate broker in
the State of South Carolina. He is currently on the board of directors of the
Greenville Chamber of Commerce and member of their economic development board.
He is past president of the state chapter of NAIOP and past member of the
Advisory Board of Greenville National Bank.
Leighton M. Cubbage, Class II Director, was the co-founder, president, and
chief operating officer of Corporate Telemanagement Group in Greenville, South
Carolina from 1989 until 1995, when the company was acquired by LCI
International. Since 1995, Mr. Cubbage has been a private investor maintaining
investment interests in a telecommunications company, a car dealership, and a
trucking company. He is a 1977 graduate of Clemson University with a bachelors
degree in political science. Mr. Cubbage is on the board of directors for the
Greenville United Way, a member of the Greenville Technical College Foundation
Board, and a member of the Clemson University Entrepreneurial Board.
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<PAGE> 33
Fred Gilmer, Jr, Class III Director, will be the senior vice president of
Greenville First Bancshares and Greenville First Bank. He is a seasoned banker
with over 40 years of experience in the financial industry. He was the
executive officer in charge of client relations for Greenville National Bank
from 1994 until April 1999, when he resigned to help organize Greenville First
Bank. Mr. Gilmer has held executive positions with three other banks in the
Greenville area between 1959 and 1995. He graduated from the University of
Georgia in 1958, and the LSU Graduate School of Banking of the South in Baton
Rouge, Louisiana in 1970. Mr. Gilmer is very active in the Greenville
community. He is a graduate of Leadership Greenville and presently serves
numerous organizations, including the Greenville Rotary Club, Greenville
Chamber of Commerce, YMCA, and the First Presbyterian Church. He is a past
board member of Family Children Service, Goodwill Industries, Downtown Area
Council, Greenville Little Theater, Greenville Cancer Society, South Carolina
Arthritis Foundation, Freedom Weekend Aloft, and the Greenville Chamber of
Commerce.
Tecumseh "Tee" Hooper, Jr., Class III Director, is the president of IKON Office
Solutions in Greenville, South Carolina. He is also a director of Homegold,
Inc., a sub-prime mortgage lender and a director of Peregrine Energy, Inc., an
energy management company. From 1994 until 1997, he served as a director of
Carolina Investors, a savings and loan institution. Mr. Hooper graduated from
The Citadel in 1969 with a degree in business administration, and he received a
Masters in Business Administration from the University of South Carolina in
1971. Mr. Hooper has served the community as a member of the Greenville County
Development Board, the Greenville Chamber of Commerce, and the board of
directors for Camp Greenville, as well as the vice chairman of communications
for the United Way. Mr. Hooper also serves on the board of directors for
Leadership Greenville, Leadership South Carolina, and the YMCA Metropolitan.
Rudolph "Trip" G. Johnstone, III, M.D., Class I Director, is a physician
practicing with the Cross Creek Asthma, Allergy and Immunology medical clinic.
He graduated from Washington & Lee University in 1982 with a degree in biology
and from the Medical University of South Carolina in 1986. Mr. Johnstone is
active with the Greenville Art Museum and served on the consulting board to
Greenville National Bank from 1995 until 1998, when it was acquired by Regions
Bank.
Keith J. Marrero, Class I Director, is the principal and owner of AMI
Architects, an architectural firm located in Greenville, South Carolina that
was founded in 1988. He is a registered architect with the South Carolina and
Louisiana Boards of Architectural Examiners and the National Council of
Architectural Registration Boards. Mr. Marrero is a previous advisory board
member of BB&T. He graduated from the University of Notre Dame with a bachelors
degree in Architecture in 1983. Mr. Marrero was appointed by former Governor
David Beasley to the board of directors of the South Carolina Legacy Trust
Fund. He is also an executive committee member of the Greenville Chamber of
Commerce, serving as vice chairman of Minority Business. Mr. Marrero is also an
advisory board member of the Bi-Lo Center and serves on the Historic
Architecture Review Board for the City of Greenville.
James B. Orders, III, Class II Director, is the Chairman of the Board for
Greenville First Bancshares. He is the president of Park Place Corporation, a
company engaged in the manufacture and sale of bedding and other furniture to
the wholesale market. Mr. Orders is chairman of Comfortaire Corporation and a
director of Orders Realty Co., Inc., a real estate development and management
company that is a wholly owned subsidiary of Park Place Corporation. He
attended Clemson University from 1970 until 1974. Mr. Orders is the past
president of the Downtown Rotary Club, a past member of the advisory board of
Greenville National Bank, and a past member of the advisory board of Carolina
First Bank. In addition, he is a member of the Lay Christian Association Board
and the Downtown Soccer Association Board.
R. Arthur "Art" Seaver, Jr., Class I Director, will be the president and chief
executive officer of Greenville First Bank. He has over 13 years of banking
experience. From 1986 until 1992, Mr. Seaver held various positions with The
Citizens & Southern National Bank of South Carolina, including assistant vice
president of corporate banking. From 1992 until February 1999, he was with
Greenville National Bank, which was acquired by Regions Bank in 1998. He was
the senior vice president in charge of Greenville National Bank's liability
portion of the balance sheet prior to leaving to form the proposed Greenville
First Bank. Mr. Seaver is a 1986 graduate of Clemson University with a
bachelors degree in Finance and a 1999 graduate of the BAI Graduate School of
Community Bank Management. He is very active in the Greenville community, where
he works with numerous
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<PAGE> 34
organizations, including Leadership Greenville, the South Carolina Network of
Business and Education Partnership, Junior Achievement, the Greenville
Convention and Visitors Bureau, the United Way, and the First Presbyterian
Church.
William B. Sturgis, Class II Director, held various executive positions with
W.R. Grace & Co. from 1984 until his retirement in 1997, including executive
vice president of W.R. Grace's worldwide packaging operations and president of
its North American Cryovac Division. Mr. Sturgis graduated from Clemson
University in 1957 with a degree in chemical engineering and is a graduate of
the Advanced Management Program at Harvard. He is active with Clemson
University, serving on the Foundation Board, the President's Advisory Council,
and the Engineering Advisory Board. He is also an advisory board member of the
Peace Center and a member of the Downtown Rotary Club and Presbyterian
Community Foundation.
Family Relationships. Dr. Johnstone is Mr. Gilmer's stepson. No other director
has a family relationship with any other director or executive officer of
Greenville First Bancshares.
EMPLOYMENT AGREEMENTS
We have entered into an employment agreement with Art Seaver for a
three-year term, pursuant to which he will serve as the president, the chief
executive officer, and a director of Greenville First Bancshares and Greenville
First Bank. Mr. Seaver will be paid an initial salary of $123,000, plus his
yearly medical insurance premium. He shall receive an annual increase in his
salary equal to the previous year's salary times the increase in the Consumer
Price Index during the previous year. The board of directors may increase Mr.
Seaver's salary above this level, but not below it. He is entitled to receive a
bonus of $10,000 upon the opening of the bank and will be eligible to receive
an annual bonus of up to 5% of the net pre-tax income of the bank, if the bank
meets performance goals set by the board. He will be eligible to participate in
any management incentive program of the bank or any long-term equity incentive
program and will be eligible for grants of stock options and other awards
thereunder. Upon the closing of the offering (or as soon thereafter as an
appropriate stock option plan is adopted by the company), Mr. Seaver will be
granted options to purchase a number of shares of common stock equal to 5% of
the number of shares sold in this offering. These options will vest over a
five-year period and will have a term of ten years. Additionally, Mr. Seaver
will participate in the bank's retirement, welfare, and other benefit programs
and is entitled to a life insurance policy and an accident liability policy and
reimbursement for automobile expenses, club dues, and travel and business
expenses.
Mr. Seaver's employment agreement also provides that following
termination of his employment and for a period of twelve months thereafter, he
may not (a) compete with the company, the bank, or any of its affiliates by,
directly or indirectly, forming, serving as an organizer, director or officer
of, or consultant to, or acquiring or maintaining more than 1% passive
investment in, a depository financial institution or holding company thereof if
such depository institution or holding company has one or more offices or
branches within radius of thirty miles from the main office of the company or
any branch office of the company, (b) solicit major customers of the bank for
the purpose of providing financial services, or (c) solicit employees of the
bank for employment. If Mr. Seaver terminates his employment for good cause as
that term is defined in the employment agreement or if he is terminated
following a change in control of Greenville First Bancshares as defined in the
agreement, he will be entitled to severance compensation of his then current
monthly salary for a period of 12 months, plus accrued bonus, and all
outstanding options and incentives shall vest immediately.
DIRECTOR COMPENSATION
We intend to pay each of our ten directors $200 for each meeting they
attend and $50 for each committee meeting they attend. During the first year we
expect to have 12 directors meetings. We expect nine directors to attend each
meeting for total directors' fees for the year of $21,600. We also expect to
hold 64 committee meetings during the first year. We expect four directors to
attend each committee meeting for total fees for the year of $12,800.
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<PAGE> 35
STOCK OPTION PLAN
After the offering, we expect to adopt a stock option plan which will
permit Greenville First Bancshares to grant options to its officers, directors,
and employees. We anticipate that we will initially authorize the issuance of a
number of shares under the stock option plan equal to 15% of the shares
outstanding after the offering. We do not intend to issue stock options at less
than the fair market value of the common stock on the date of grant.
STOCK WARRANTS
The organizers have invested significant time and effort to form
Greenville First Bancshares and Greenville First Bank, and they have
individually guaranteed a $600,000 line of credit to Greenville First
Bancshares to cover organizational expenses. In recognition of the financial
risk and efforts they have undertaken in organizing the bank, each organizer
will also receive, for no additional consideration, a warrant to purchase one
share of common stock at a purchase price of $10.00 per share for every two
shares purchased by that organizer in the offering. Executive officers who are
not organizers will not receive warrants. The warrants, which will be
represented by separate warrant agreements, will vest over a three year period
beginning one year from the date of the completion of the offering and will be
exercisable in whole or in part during the ten year period following that date.
The warrants will not be transferable, except for estate planning purposes, and
the warrants and the shares issued pursuant to the exercise of such warrants
will be subject to transferability restrictions applicable to affiliates of
Greenville First Bancshares. For more information on these restrictions see
"Shares Eligible for Future Sale" on page 38. If the Office of the Comptroller
of the Currency or the FDIC issues a capital directive or other order requiring
the bank to obtain additional capital, the warrants will be forfeited if not
immediately exercised.
The organizers plan to purchase approximately 259,900 shares of common
stock for a total investment of $2,599,000. As a result, the organizers will
own approximately 23.6% of the common stock outstanding upon completion of the
offering and we will issue warrants for 129,950 shares to the organizers in
this offering. If each organizer exercises his warrant in full, the organizers'
ownership of Greenville First Bancshares will increase to 31.7% of the
outstanding common stock.
EXCULPATION AND INDEMNIFICATION
Greenville First Bancshares's articles of incorporation contain a
provision which, subject to limited exceptions, limits the liability of a
director for any breach of duty as a director. There is no limitation of
liability for:
- a breach of duty involving appropriation of a business
opportunity;
- an act or omission which involves intentional misconduct or a
knowing violation of law;
- any transaction from which the director derives an improper
personal benefit; or
- as to any payments of a dividend or any other type of
distribution that is illegal under Section 33-8-330 of the South
Carolina Business Corporation Act of 1988.
In addition, if such act is amended to authorize further elimination or
limitation of the liability of director, then the liability of each director
shall be eliminated or limited to the fullest extent permitted by such
provisions, as so amended, without further action by the shareholders, unless
the law requires such action. The provision does not limit the right of the
company or its shareholders to seek injunctive or other equitable relief not
involving payments in the nature of monetary damages.
Greenville First Bancshares's bylaws contain provisions which provide
indemnification to directors that is broader than the protection expressly
mandated in Sections 33-8-510 and 33-8-520 of the South Carolina Business
Corporation Act. To the extent that a director or officer has been successful,
on the merits or otherwise, in the defense of any action or proceeding brought
by reason of the fact that such person was a director or officer, Sections
33-8-510 and 33-8-520 would require Greenville First Bancshares to indemnify
these persons against
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<PAGE> 36
expenses, including attorney's fees, actually and reasonably incurred in
connection with the matter. The South Carolina Business Corporation Act
expressly allows Greenville First Bancshares to provide for greater
indemnification rights to its officers and directors, subject to shareholder
approval.
Our board of directors also has the authority to extend to officers,
employees, and agents the same indemnification rights held by directors,
subject to all of the accompanying conditions and obligations. The board of
directors intends to extend indemnification rights to all of its executive
officers.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of Greenville First Bancshares pursuant to the foregoing provisions, or
otherwise, Greenville First Bancshares has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
We expect to have banking and other transactions in the ordinary
course of business with the organizers, directors, and officers and their
affiliates, including members of their families or corporations, partnerships,
or other organizations in which such organizers, officers, or directors have a
controlling interest, on substantially the same terms, including price, or
interest rates and collateral, as those prevailing at the time for comparable
transactions with unrelated parties. These transactions are also restricted by
our regulatory agencies, including the Federal Reserve Board. For a discussion
of the Federal Reserve Board regulations, please see "Transactions with
Affiliates and Insiders" on page 26. These transactions are not expected to
involve more than the normal risk of collectibility nor present other
unfavorable features. Loans to individual directors and officers must also
comply with the bank's lending policies, regulatory restrictions, and statutory
lending limits, and directors with a personal interest in any loan application
will be excluded from the consideration of such loan application. We intend for
all of our transactions with organizers or other affiliates to be on terms no
less favorable than could be obtained from an unaffiliated third party and to
be approved by a majority of our disinterested directors.
LEASE AND CONSTRUCTION OF MAIN OFFICE
We expect to lease our bank's main facility from Halton Properties,
LLC for a term of 20 years at an initial rental rate of $16,667 per month. Mark
A. Cothran, one of our directors, is a 50% owner of Halton Properties, LLC. One
of our other directors, Keith J. Marrero, is an architect and is designing the
facility. Mr. Marrero will be paid approximately $70,000 for his architectural
services. Halton Properties, LLC is purchasing the land and building the bank
facility on the land to our specifications. We expect to complete construction
of our main facility by August 2000, at which time we will begin to pay rent in
the amount of $16,667 per month. Prior to completion of the permanent bank
facility, we will lease a modular bank facility on a month to month basis for
an initial payment of $13,050 and a monthly lease rate of $5,880. The modular
facility will be located on the same site as out future main office, and we
will pay $500 per month in rent to Halton Properties, LLC for the use of this
site prior to completion of the main office. We have conducted two separate
appraisals of the lease and the property, which includes Mr. Marrero's
architectural services, to ensure that the terms of the proposed lease are on
substantially the same terms as those prevailing at the time for comparable
transactions with unrelated parties.
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LOAN GUARANTEE
Each of the directors has guaranteed the $600,000 line of credit used
to pay organizing expenses for the bank and holding company.
DESCRIPTION OF CAPITAL STOCK OF GREENVILLE FIRST BANCSHARES
GENERAL
The authorized capital stock of Greenville First Bancshares consists
of 10,000,000 shares of common stock, par value $0.01 per share, and 10,000,000
shares of preferred stock, par value $0.01 per share. The following summary
describes the material terms of Greenville First Bancshares's capital stock.
Reference is made to the articles of incorporation of Greenville First
Bancshares which is filed as an exhibit to the Registration Statement of which
this prospectus forms a part, for a detailed description of the provisions
summarized below.
COMMON STOCK
Holders of shares of the common stock are entitled to receive such
dividends as may from time to time be declared by the board of directors out of
funds legally available for distribution. We do not plan to declare any
dividends in the immediate future. See "Dividend Policy" on page 12. Holders of
common stock are entitled to one vote per share on all matters on which the
holders of common stock are entitled to vote and do not have any cumulative
voting rights. Shareholders have no preemptive, conversion, redemption, or
sinking fund rights. In the event of a liquidation, dissolution, or winding-up
of the company, holders of common stock are entitled to share equally and
ratably in the assets of the company, if any, remaining after the payment of
all debts and liabilities of the company and the liquidation preference of any
outstanding preferred stock. The outstanding shares of common stock are, and
the shares of common stock offered by the company hereby when issued will be,
fully paid and nonassessable. The rights, preferences and privileges of holders
of common stock are subject to any classes or series of preferred stock that
the company may issue in the future.
PREFERRED STOCK
Greenville First Bancshares' articles of incorporation provide that
the board of directors is authorized, without further action by the holders of
the common stock, to provide for the issuance of shares of preferred stock in
one or more classes or series and to fix the designations, powers, preferences,
and relative, participating, optional and other rights, qualifications,
limitations, and restrictions thereof, including the dividend rate, conversion
rights, voting rights, redemption price, and liquidation preference, and to fix
the number of shares to be included in any such classes or series. Any
preferred stock so issued may rank senior to the common stock with respect to
the payment of dividends or amounts upon liquidation, dissolution or
winding-up, or both. In addition, any such shares of preferred stock may have
class or series voting rights. Upon completion of this offering, we will not
have any shares of preferred stock outstanding. Issuances of preferred stock,
while providing the company with flexibility in connection with general
corporate purposes, may, among other things, have an adverse effect on the
rights of holders of common stock. For example, the issuance of any preferred
stock with voting or conversion rights may adversely affect the voting power of
the holders of common stock, and could have the effect of decreasing the market
price of the common stock. We do not plan to issue any shares of preferred
stock, and will not issue preferred stock to organizers on terms more favorable
than those on which it issues preferred stock to shareholders other than
organizers.
ANTI-TAKEOVER EFFECTS
The provisions of the articles, the bylaws, and South Carolina law
summarized in the following paragraphs may have anti-takeover effects and may
delay, defer, or prevent a tender offer or takeover attempt that a shareholder
might consider to be in such shareholder's best interest, including those
attempts that might result in
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<PAGE> 38
a premium over the market price for the shares held by shareholders, and may
make removal of management more difficult.
Restriction on Acquisition. Sections 34-25-50 and 34-25-240 of the
Code of Laws of South Carolina prohibit a company from "acquiring" Greenville
First Bancshares or Greenville First Bank until the bank has been in existence
and continuous operation for five years.
Control Share Act. Greenville First Bancshares has specifically
elected to opt out of a provision of South Carolina law which may deter or
frustrate unsolicited attempts to acquire South Carolina corporations. This
statute, commonly referred to as the "Control Share Act" applies to public
corporations organized in South Carolina, unless the corporation specifically
elects to opt out. The Control Share Act generally provides that shares of a
public corporation acquired in excess of specific thresholds will not possess
any voting rights unless such voting rights are approved by a majority vote of
the corporation's disinterested shareholders.
Authorized but Unissued Stock. The authorized but unissued shares of
common stock and preferred stock will be available for future issuance without
shareholder approval. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions, and employee benefit plans. The existence of
authorized but unissued and unreserved shares of common stock and preferred
stock may enable the board of directors to issue shares to persons friendly to
current management, which could render more difficult or discourage any attempt
to obtain control of Greenville First Bancshares by means of a proxy contest,
tender offer, merger or otherwise, and thereby protect the continuity of the
company's management.
Number of Directors. The bylaws provide that the number of directors
shall be fixed from time to time by resolution by at least a majority of the
directors then in office, but may not consist of fewer than five nor more than
25 members. Initially we will have ten directors.
Classified Board of Directors. Our articles and bylaws divide the
board of directors into three classes of directors serving staggered three-year
terms. As a result, approximately one-third of the board of directors will be
elected at each annual meeting of shareholders. The classification of
directors, together with the provisions in the Articles and bylaws described
below that limit the ability of shareholders to remove directors and that
permit the remaining directors to fill any vacancies on the board of directors,
will have the effect of making it more difficult for shareholders to change the
composition of the board of directors. As a result, at least two annual
meetings of shareholders may be required for the shareholders to change a
majority of the directors, whether or not a change in the board of directors
would be beneficial and whether or not a majority of shareholders believe that
such a change would be desirable.
Number, Term, and Removal of Directors. We currently have ten
directors, but our bylaws authorize this number to be increased or decreased by
our board of directors. Our directors are elected to three year terms by a
plurality vote of our shareholders. Our bylaws provide that our shareholders,
by a majority vote of those entitled to vote in an election of directors, or
our board of directors, by a unanimous vote, excluding the director in
question, may remove a director with or without cause. Our bylaws provide that
all vacancies on our board may be filled by a majority of the remaining
directors for the unexpired term.
Advance Notice Requirements for Shareholder Proposals and Director
Nominations. The bylaws establish advance notice procedures with regard to
shareholder proposals and the nomination, other than by or at the direction of
the board of directors or a committee thereof, of candidates for election as
directors. These procedures provide that the notice of shareholder proposals
must be in writing and delivered to the secretary of the company no earlier
than 30 days and no later than 60 days in advance of the annual meeting.
Shareholder nominations for the election of directors must be made in writing
and delivered to the secretary of the company no later than 90 days prior to
the annual meeting, and in the case of election to be held at a special meeting
of shareholders for the election of directors, the close of business on the
seventh day following the date on which notice of the meeting is first given to
shareholders. We may reject a shareholder proposal or nomination that is not
made in accordance with such procedures.
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Nomination Requirements. Pursuant to the bylaws, we have established
nomination requirements for an individual to be elected as a director,
including that the nominating party provide (i) notice that such party intends
to nominate the proposed director; (ii) the name of and biographical
information on the nominee; and (iii) a statement that the nominee has
consented to the nomination. The chairman of any shareholders' meeting may, for
good cause shown, waive the operation of these provisions. These provisions
could reduce the likelihood that a third party would nominate and elect
individuals to serve on the board of directors.
TRANSFER AGENT
The transfer agent and registrar for the common stock will be SunTrust
Bank.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 1,100,000 shares of
common stock outstanding. The shares sold in this offering will be freely
tradable, without restriction or registration under the Securities Act of 1933,
except for shares purchased by "affiliates" of Greenville First Bancshares,
which will be subject to resale restrictions under the Securities Act of 1933.
An affiliate of the issuer is defined in Rule 144 under the Securities Act of
1933 as a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
issuer. Rule 405 under the Securities Act of 1933 defines the term "control" to
mean the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the person whether through the
ownership of voting securities, by contract or otherwise. Directors will likely
be deemed to be affiliates. These securities held by affiliates may be sold
without registration in accordance with the provisions of Rule 144 or another
exemption from registration.
In general, under Rule 144, an affiliate of the company or a person
holding restricted shares may sell, within any three-month period, a number of
shares no greater than 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 the sale, whichever is greater. Rule 144 also requires that the
securities must be sold in "brokers' transactions," as defined in the
Securities Act of 1933, and the person selling the securities may not solicit
orders or make any payment in connection with the offer or sale of securities
to any person other than the broker who executes the order to sell the
securities. This requirement may make the sale of the common stock by
affiliates of Greenville First Bancshares pursuant to Rule 144 difficult if no
trading market develops in the common stock. Rule 144 also requires persons
holding restricted securities to hold the shares for at least one year prior to
sale.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement
among us and the underwriter named below, the underwriter has agreed to
purchase from us, and we have agreed to sell to the underwriter, the number of
shares of common stock listed opposite the underwriter's name below.
<TABLE>
<CAPTION>
Number of Firm Number of Over-
Underwriter Shares Allotment Shares
----------- ------ ----------------
<S> <C> <C>
Wachovia Securities, Inc................................... 1,100,000 165,000
</TABLE>
The underwriting agreement provides that the underwriter's obligations
are subject to approval of certain legal matters by counsel and to various
other conditions customary in a firm commitment underwritten public offering.
The underwriter is required to purchase and pay for the shares offered by this
prospectus other than those covered by the over-allotment option described
below.
The underwriting discount that will apply to shares not purchased by
our directors and executive officers in this offering will equal 7.5% of the
public offering price listed on the cover page of this prospectus, or $.75 per
share. The underwriting discount that will apply to shares purchased in this
offering by our directors and
38
<PAGE> 40
executive officers and certain other investors recommended by our directors and
executive officers, up to 380,000 shares, will equal 3.5% of the public
offering price, or $.35 per share.
The underwriter proposes to offer the common stock directly to the
public at the public offering price of $10.00 per share and to certain
securities dealers at the price less a concession not in excess of $0.45 per
share. The underwriter may allow, and the selected dealers may reallow, a
concession not in excess of $0.10 per share to certain other broker and
dealers. We expect that the shares of common stock will be ready for delivery
on or about October 29, 1999. After the offering, the offering price and other
selling terms may change.
The public offering price was determined by negotiations between us
and the underwriter based on several factors. These factors included prevailing
market conditions, the price to earnings and price to book value multiples of
comparable publicity traded companies and Greenville First Bank's growth
potential and cash flow and earnings prospects.
We have granted the underwriter an option, exercisable within 30 days
after the date of this prospectus, to purchase up to 165,000 additional shares
of common stock to cover over-allotments, if any, at the public offering price
listed on the cover page of this prospectus, less the 7.5% underwriting
discount. The underwriter may purchase these shares only to cover
over-allotments made in connection with this offering.
The underwriter does not intend to sell shares of common stock to any
account over which it exercises discretionary authority.
We, and our directors and executive officers, have each agreed with
the underwriter that we will not sell, contract to sell, or otherwise dispose
of any shares of common stock or any securities that can be converted into or
exchanged for shares of common stock for a period of 180 days from the date of
this prospectus without the underwriter's prior written consent, except in
limited circumstances. The underwriter may on occasion be a customer of, engage
in transactions with, and perform services for us and Greenville First Bank in
the ordinary course of business.
We have agreed to indemnify the underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
currently in effect, or to contribute to payments that the underwriter may be
required to make in connection with these liabilities.
In connection with this offering, the underwriter may purchase and
sell common stock in the open market. These transactions may include
over-allotment and stabilizing transactions, and purchases to cover syndicate
short positions created in connection with this offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the common stock, and syndicate
short positions involve the underwriter's sale of a greater number of shares of
common stock than it is required to purchase from us in the offering. These
activities may stabilize, maintain or otherwise affect the market price of the
common stock, which may be higher than the price that might otherwise prevail
in the open market. The underwriter may effect these transactions on the Nasdaq
OTC Bulletin Board or otherwise and may discontinue them at any time.
39
<PAGE> 41
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon
for Greenville First Bancshares by Nelson Mullins Riley & Scarborough, L.L.P.,
Atlanta, Georgia and Greenville, South Carolina. Legal matters related to the
shares of common stock offered by this prospectus will be passed upon for
Wachovia Securities by Smith Helms Mulliss & Moore, L.L.P., Charlotte, North
Carolina.
EXPERTS
Greenville First Bancshares's financial statements dated June 30, 1999
and for the period from February 1999 (inception), until June 30, 1999 have
been audited by Elliott Davis & Company, L.L.P., as stated in their report
appearing elsewhere herein, and have been so included in reliance on the report
of this firm given upon their authority as an expert in accounting and
auditing.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form SB-2
(together with all amendments, exhibits, schedules and supplements thereto, the
"Registration Statement"), under the Securities Act of 1933 and the rules and
regulations thereunder, for the registration of the common stock offered
hereby. This prospectus, which forms a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement. For
further information with respect to Greenville First Bancshares, Greenville
First Bank, and the common stock, you should refer to the Registration
Statement and the exhibits thereto.
You can examine and obtain copies of the Registration Statement at the
Public Reference Section of the SEC, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site at http://www.sec.gov that contains all of the reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC using the EDGAR filing system, including
Greenville First Bancshares.
We have filed or will file various applications with the Office of the
Comptroller of the Currency and the FDIC. You should only rely on information
in this prospectus and in our related Registration Statement in making an
investment decision. If other available information is inconsistent with
information in this prospectus, including information in public files or
provided by the Office of the Comptroller of the Currency and the FDIC, such
other information is superseded by the information in this prospectus.
Projections appearing in the applications to such agencies were based on
assumptions that the organizers believed were reasonable at the time, but which
may have changed or otherwise be wrong. Greenville First Bancshares and
Greenville First Bank specifically disclaim all projections for purposes of
this prospectus and caution prospective investors against placing reliance on
them for purposes of making an investment decision. Statements contained in
this prospectus regarding the contents of any contract or other document
referred to are not necessarily complete. If such contract or document is an
exhibit to the Registration Statement, you may obtain and read such document or
contract for more information.
As a result of this offering, Greenville First Bancshares will become a
reporting company subject to the full informational requirements of the
Securities Exchange Act of 1934. We will fulfill our obligations with respect
to such requirements by filing periodic reports and other information with the
SEC. We will furnish our shareholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each fiscal year containing unaudited summary financial information. Our fiscal
year ends on December 31.
40
<PAGE> 42
GREENVILLE FIRST BANCSHARES, INC
(A DEVELOPMENT STAGE ENTERPRISE)
GREENVILLE, SOUTH CAROLINA
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT F-2
FINANCIAL STATEMENTS
Balance sheet F-3
Statement of operations F-4
Statement of changes in owners' equity F-5
Statement of cash flows F-6
NOTES TO FINANCIAL STATEMENTS F-7
</TABLE>
F-1
<PAGE> 43
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Directors
GREENVILLE FIRST BANCSHARES, INC.
Greenville, South Carolina
We have audited the accompanying balance sheet of GREENVILLE FIRST
BANCSHARES, INC. (a development stage enterprise) as of June 30, 1999 and the
related statements of operations, changes in organizers' deficit and cash flows
for the period from February 22, 1999 (date of inception) through June 30,
1999. 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 GREENVILLE FIRST
BANCSHARES, INC. (a development stage enterprise) as of June 30, 1999 and the
results of its operations and its cash flows for the period from February 22,
1999 through June 30, 1999 in conformity with generally accepted accounting
principles.
/s/ Elliott, Davis & Company, LLP
- --------------------------------------------
Greenville, South Carolina
July 8, 1999
F-2
<PAGE> 44
GREENVILLE FIRST BANCSHARES, INC
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
JUNE 30, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and cash equivalents $ 31,625
Computer equipment 1,855
Deferred stock offering costs 22,960
---------------
Total assets $ 56,440
===============
LIABILITIES AND ORGANIZERS' DEFICIT
LIABILITIES
Line of credit $ 200,000
Interest payable 3,249
Salaries payable 5,200
---------------
208,449
COMMITMENTS AND CONTINGENCIES - Notes 2 and 3
ORGANIZERS' DEFICIT
Preferred stock, par value $.01 per share, 10,000,000 shares
authorized, no shares issued
Common stock, par value $.01 per share, 10,000,000 shares
authorized, 10 shares issued
Additional paid-in capital 100
Retained deficit accumulated during the development stage (152,109)
---------------
(152,009)
Total liabilities and organizers' deficit $ 56,440
===============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-3
<PAGE> 45
GREENVILLE FIRST BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 22, 1999 (DATE OF INCEPTION)
THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
EXPENSES
<S> <C>
Salaries and payroll taxes $ 68,966
Professional fees 38,000
Marketing 24,523
Insurance 4,721
Rent 2,400
Telephone and supplies 4,174
Interest 3,248
Other 6,077
---------------
Loss before provision for income taxes (152,109)
PROVISION FOR INCOME TAXES --
---------------
Net loss $ (152,109)
===============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-4
<PAGE> 46
GREENVILLE FIRST BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN ORGANIZERS' DEFICIT
FOR THE PERIOD FROM FEBRUARY 22, 1999 (DATE OF INCEPTION)
THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
RETAINED
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
------------ PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
------ ------ ------- ----- -----
<S> <C> <C> <C> <C> <C>
PROCEEDS FROM THE SALE OF
STOCK TO ORGANIZERS 10 $ -- $ 100 $ -- $ 100
NET LOSS -- -- -- $ (152,109) $ (152,109)
---------- ---------- ----------- -------------- ------------
BALANCE, JUNE 30, 1999 10 $ -- $ 100 $ (152,109) $ (152,009)
========== ========== =========== ============== ============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-5
<PAGE> 47
GREENVILLE FIRST BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 22, 1999 (DATE OF INCEPTION)
THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
NET CASH USED FOR PRE-OPERATING ACTIVITIES
<S> <C>
Net loss $ (152,109)
Deferred stock offering costs (22,960)
Interest payable 3,249
Salaries payable 5,200
---------------
Net cash used for pre-operating activities (166,620)
---------------
INVESTING ACTIVITIES
Purchase of computer equipment (1,855)
---------------
FINANCING ACTIVITIES
Proceeds from borrowings on line of credit 200,000
Proceeds from issuance of stock to organizer 100
---------------
Net cash provided by financing activities 200,100
---------------
Net increase in cash 31,625
CASH AND CASH EQUIVALENTS, FEBRUARY 22, 1999
(DATE OF INCEPTION) --
---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,625
===============
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-6
<PAGE> 48
GREENVILLE FIRST BANCSHARES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES
GREENVILLE FIRST BANCSHARES, INC. (the "Company") is a South Carolina
corporation organized for the purpose of owning and controlling all of the
capital stock of GREENVILLE FIRST BANK (in organization) (the "Bank"). The Bank
is being organized as a national bank under the laws of the United States with
the purpose of becoming a new bank to be located in Greenville County, South
Carolina. The Company has filed a charter application with the OCC and an
application for deposit insurance with the FDIC. Provided that the applications
are timely approved and the necessary capital is raised, it is expected that
banking operations will commence in January 2000.
The Company is a development stage enterprise as defined by Statement
of Financial Accounting Standard No. 7, "Accounting and Reporting by
Development Stage Enterprises", as it devotes substantially all its efforts to
establishing a new business. The Company's planned principal operations have
not commenced and revenue has not been recognized from the planned principal
operations.
The Company intends to sell 1,100,000 shares of its common stock at
$10 per share. The offering will raise $10,196,000 net of estimated
underwriting discounts and commissions and offering expenses. The directors and
executive officers of the Company plan to purchase 265,900 shares of common
stock at $10 per share, for a total of $2,659,000. Upon purchase of these
shares, the Company will issue stock warrants to the organizers to purchase up
to an additional 129,950 shares of common stock. Additionally, the underwriter
may exercise the over-allotment option and purchase up to 165,000 additional
shares of common stock. The remaining shares will be sold through a public
offering. The Company will use $8.5 million of the proceeds to capitalize the
proposed Bank.
YEAR-END
The Company has adopted a fiscal year ending on December 31, effective for
the period ending December 31, 1999. A minimal amount of transactions
occurred prior to the Company's incorporation have been combined in these
financial statements for ease of presentation.
ESTIMATES
The financial statements include estimates and assumptions that effect the
Company's financial position and results of operations and disclosure of
contingent assets and liabilities. Actual results could differ from these
estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. The Company places its
temporary cash investments with high credit quality financial institutions.
At times such investments may be in excess of the FDIC insurance limits.
DEFERRED STOCK OFFERING COSTS
Deferred stock offering costs are expenses incurred by the Company in
connection with the offering and issuance of its stock. The deferred stock
offering costs will be deducted from the Company's additional paid-in
capital after the stock offering. If the stock offering is deemed
unsuccessful, all deferred stock offering costs will be charged to
operations during the period in which the offering is deemed unsuccessful.
ORGANIZATION COSTS
Organization costs include incorporation, legal and consulting fees incurred
in connection with establishing the Company. In accordance with Statement of
Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities,"
organization costs are expensed when incurred.
F-7
<PAGE> 49
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES, CONTINUED
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the financial reporting and
income tax bases of assets and liabilities. At June 30, 1999, no taxable
income has been generated and therefore, no tax provision has been included
in these financial statements.
NOTE 2 - LINE OF CREDIT
The Company has established a $600,000 line of credit with an
individual to fund operating expenses of the Company during the development
stage. The line is uncollateralized and is guaranteed by the organizers. The
line bears interest at the prime rate and expires February 28, 2000. As of June
30, 1999, $200,000 is outstanding on this line of credit.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company has engaged a law firm to assist in preparing and filing
all organizational, incorporation, and bank applications and to assist in
preparing stock offering documents and consummating the Company's initial
offering. The aggregate cost of the services is expected to approximate
$40,000.
The Company leases temporary office space under a month-to-month
operating lease requiring monthly payments of $800. Additionally, the Company
has entered into a 12-month operating lease for a modular unit to temporarily
serve as its first commercial bank office. The lease requires monthly payments
of approximately $5,880.
The Company has also entered into an operating lease for the property
of its first commercial bank office for $500 a month. Future plans are to
construct its main building on this site and to lease the building and property
for $16,667 per month for 20 years.
The Company has engaged a bank consultant to assist in establishing
the Bank and bank holding company. The aggregate cost of the services is
expected to approximate $45,000.
The Company has entered into an employment agreement with its
president and chief executive officer that includes a three year compensation
term, annual bonus, incentive program, stock option plan and a one-year
non-compete agreement upon early termination.
The Company has entered into an agreement with a data processor to
provide ATM services, item processing and general ledger processing. Components
of this contract include minimum charges based on volume and include initial
setup costs of approximately $56,200.
NOTE 4 - RELATED PARTY TRANSACTIONS
One of the organizers of the Company owns the land where the Company
will lease the land and building for use as its main office (Note 3).
F-8
<PAGE> 50
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary ..........................................3
Risk Factors......................................6
Use of Proceeds .................................10
Capitalization...................................12
Dividend Policy .................................12
Plan of Operation................................13
Proposed Business................................16
Supervision and Regulation.......................23
Management.......................................30
Certain Relationships and Related Transactions...35
Description of Capital Stock.....................36
Underwriting.....................................38
Legal Matters....................................40
Experts..........................................40
Additional Information ..........................40
Index to Financial Statements ..................F-1
--------------------------
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE
NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. THE
INFORMATION IN THIS PROSPECTUS IS COMPLETE AND ACCURATE AS OF THE DATE ON THE
COVER, BUT THE INFORMATION MAY CHANGE IN THE FUTURE.
UNTIL JANUARY 24, 2000, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITER, AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
1,100,000 SHARES
COMMON STOCK
GREENVILLE FIRST
BANCSHARES, INC.
A PROPOSED BANK HOLDING COMPANY FOR
[BANK LOGO HERE]
GREENVILLE FIRST BANK, N.A.
(IN ORGANIZATION)
-------------
PROSPECTUS
-------------
[WACHOVIA LOGO HERE]
OCTOBER 26, 1999
<PAGE> 51
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Item 24. Indemnification of Directors and Officers
Greenville First Bancshares' articles of incorporation contain a
provision which, subject to certain limited exceptions, limits the liability of
a director to Greenville First Bancshares or its shareholders for any breach of
duty as a director. There is no limitation of liability for: a breach of duty
involving appropriation of a business opportunity of Greenville First
Bancshares; an act or omission which involves intentional misconduct or a
knowing violation of law; any transaction from which the director derives an
improper personal benefit; or as to any payments of a dividend or any other
type of distribution that is illegal under Section 33-8-330 of the South
Carolina Business Corporation Act of 1988 (The "Corporation Act"). In addition,
if at any time the Corporation Act shall have been amended to authorize further
elimination or limitation of the liability of director, then the liability of
each director of Greenville First Bancshares shall be eliminated or limited to
the fullest extent permitted by such provisions, as so amended, without further
action by the shareholders, unless the provisions of the Corporation Act
require such action. The provision does not limit the right of Greenville First
Bancshares or its shareholders to seek injunctive or other equitable relief not
involving payments in the nature of monetary damages.
Greenville First Bancshares' bylaws contain certain provisions which
provide indemnification to directors that is broader than the protection
expressly mandated in Sections 33-8-510 and 33-8-520 of the Corporation Act. To
the extent that a director or officer has been successful, on the merits or
otherwise, in the defense of any action or proceeding brought by reason of the
fact that such person was a director or officer, Sections 33-8-510 and 33-8-520
of the Corporation Act would require Greenville First Bancshares to indemnify
those persons against expenses (including attorney's fees) actually and
reasonably incurred in connection with that action or proceeding. The
Corporation Act expressly allows Greenville First Bancshares to provide for
greater indemnification rights to its officers and directors, subject to
shareholder approval.
Insofar as indemnification for liabilities arising under the
Corporation Act may be permitted to directors, officers, and controlling
persons in the articles of incorporation or bylaws, or otherwise, we have been
advised that in the opinion of the SEC for matters under the securities laws,
such indemnification is against public policy as expressed in the Corporation
Act and is, therefore, unenforceable.
The board of directors also has the authority to extend to officers,
employees and agents the same indemnification rights held by directors, subject
to all of the accompanying conditions and obligations. The board of directors
has extended or intends to extend indemnification rights to all of its
executive officers.
We have the power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent against any
liability asserted against him or incurred by him in any such capacity, whether
or not we would have the power to indemnify him against such liability under
the bylaws.
II-1
<PAGE> 52
Item 25. Other Expenses of Issuance and Distribution.
Estimated expenses (other than underwriting commissions) of the sale
of the shares of common stock are as follows:
<TABLE>
<S> <C>
Registration Fee $ 4,226
NASD Filing Fee 1,880
Printing and Engraving 25,000
Legal Fees and Expenses 40,000
Accounting Fees 5,000
Blue Sky Fees and Expenses 15,000
Miscellaneous Disbursements 14,894
-------------
TOTAL $ 106,000
=============
</TABLE>
Item 26. Recent Sales of Unregistered Securities.
From inception, Greenville First Bancshares has issued a total of 10
shares of its common stock to one of its organizers. The price per share was
$10.00 for a total purchase price of $100.00. There were no underwriting
discounts or commissions paid with respect to these transactions. These shares
will be redeemed at $10.00 per share after the offering. All sales were exempt
under Section 4(2) of the Securities Act of 1933.
Item 27. Exhibits.
<TABLE>
<S> <C>
1. Form of Underwriting Agreement between Greenville First Bancshares and
Wachovia Securities*
3.1. Articles of Incorporation, as amended*
3.2. Bylaws*
4.1. See Exhibits 3.1 and 3.2 for provisions in Greenville First
Bancshares's Articles of Incorporation and Bylaws defining the rights
of holders of the common stock*
4.2. Form of certificate of common stock*
5.1. Opinion Regarding Legality*
10.1. Employment Agreement dated July 27, 1999 between Greenville First
Bancshares and Art Seaver*
10.2. Form of Lease Agreement between Greenville First Bank and Halton
Properties, LLC, formerly Cothran Properties, LLC*
10.3 Data Processing Services Agreement dated June 28, 1999 between
Greenville First Bancshares and the Intercept Group*
10.4 Form of Stock Warrant Agreement*
10.5 Promissory Note dated February 22, 1999 from Greenville First
Bancshares, Inc. in favor of John J. Meindl, Jr.*
23.1. Consent of Independent Public Accountants
23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its
opinion filed as Exhibit 5.1)*
24.1. Power of Attorney (filed as part of the signature page to the
Registration Statement)*
27.1. Financial Data Schedule (for electronic filing purposes)*
</TABLE>
* Previously filed
II-2
<PAGE> 53
Item 28. Undertakings.
The undersigned Company will:
(a)(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act of 1933,
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of Greenville First Bancshares pursuant to the provisions
described in Item 24 above, or otherwise, Greenville First Bancshares has been
advised that in the opinion of the SEC for matters under the securities laws,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
If a claim for indemnification against such liabilities (other than
the payment by Greenville First Bancshares of expenses incurred or paid by a
director, officer or controlling person of Greenville First Bancshares 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, Greenville First Bancshares 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 Securities Act of 1933 and will
be governed by the final adjudication of such issue.
II-3
<PAGE> 54
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of
Greenville, State of South Carolina, on October 22, 1999.
GREENVILLE FIRST BANCSHARES, INC.
By: /s/ R. Arthur Seaver, Jr.
--------------------------------------
R. Arthur Seaver, Jr.
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints R. Arthur Seaver, Jr. and he is the true
and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that such attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*
- -----------------------------------
Andrew B. Cajka Director October 22, 1999
*
- -----------------------------------
Mark A. Cothran Director October 22, 1999
*
- -----------------------------------
Leighton M. Cubbage Director October 22, 1999
*
- -----------------------------------
Tecumseh Hooper, Jr. Director October 22, 1999
*
- -----------------------------------
Rudolph G. Johnstone, III, M.D. Director October 22, 1999
*
- -----------------------------------
Keith J. Marrero Director October 22, 1999
</TABLE>
II-4
<PAGE> 55
<TABLE>
<S> <C> <C>
*
- -----------------------------------
James B. Orders, III Director, Chairman October 22, 1999
*
- -----------------------------------
William B. Sturgis Director October 22, 1999
/s/ R. Arthur Seaver, Jr.
- ----------------------------------- Director, Chief Executive October 22, 1999
R. Arthur Seaver, Jr. Officer and President
(principal executive officer)
(principal financial
and accounting officer)
*
- ----------------------------------- Director, Senior Vice President October 22, 1999
Fred Gilmer, Jr.
/s/ R. Arthur Seaver, Jr.
- -----------------------------------
* As Attorney-in Fact
</TABLE>
II-5
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
1. Form of Underwriting Agreement between Greenville First Bancshares and
Wachovia Securities*
3.1. Articles of Incorporation, as amended*
3.2. Bylaws*
4.1. See Exhibits 3.1 and 3.2 for provisions in Greenville First
Bancshares's Articles of Incorporation and Bylaws defining the rights
of holders of the common stock*
4.2. Form of certificate of common stock*
5.1. Opinion Regarding Legality*
10.1. Employment Agreement dated July 27, 1999 between Greenville First
Bancshares and Art Seaver*
10.2. Form of Lease Agreement between Greenville First Bank and Halton
Properties, LLC, formerly Cothran Properties, LLC*
10.3 Data Processing Services Agreement dated June 28, 1999 between
Greenville First Bancshares and the Intercept Group*
10.4 Form of Stock Warrant Agreement*
10.5 Promissory Note dated February 22, 1999 from Greenville First
Bancshares, Inc. in favor of John J. Meindl, Jr.*
23.1. Consent of Independent Public Accountants
23.2. Consent of Nelson Mullins Riley & Scarborough, L.L.P. (appears in its
opinion filed as Exhibit 5.1)*
24.1. Power of Attorney (filed as part of the signature page to the
Registration Statement)*
27.1 Financial Data Schedule (for electronic filing purposes)*
* Previously filed
</TABLE>
II-6
<PAGE> 1
Exhibit 23.1
ELLIOTT, DAVIS & COMPANY, L.L.C.
Certified Public Accountants
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference of our report
dated July 8, 1999, relating to the financial statements of Greenville First
Bancshares, Inc. in Amendment No. 3 to the Registration statement of Form SB-2
and Prospectus, and to the reference to our firm therein under the caption
"Experts."
/s/ Elliott, Davis & Company, L.L.P.
-----------------------------------
ELLIOTT, DAVIS & COMPANY, L.L.P.
Greenville, South Carolina
October 25, 1999
INTERNATIONALLY - MOORE STEPHENS ELLIOTT DAVIS, LLC
870 S. PLEASANTBURG DRIVE POST OFFICE BOX 6258
GREENVILLE, SOUTH CAROLINA 29606-6286
TELEPHONE (864) 242-3370 TELEFAX (864) 232-7161
