<PAGE>
Registration Statement No. 333-92653
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
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FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ISLANDS BANCORP
(Name of Small Business Issuer in Its Charter)
South Carolina 6021 57-1082388
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification
Incorporation or Classification Code Number)
Organization) Number)
211 Charles Street, Suite 100
Beaufort, South Carolina 29902
(843) 470-9962
(Address and Telephone Number of Principal Executive Offices
and Intended Principal Place of Business)
---------------
William B. Gossett
President and Chief Executive Officer, Islands Bancorp
211 Charles Street, Suite 100
Beaufort, South Carolina 29902
(843) 470-9962
(Name, Address and Telephone Number of Agent For Service)
Copy to:
William S. McMaster
Nexsen Pruet Jacobs & Pollard, LLP
1441 Main Street
P.O. Drawer 2426
Columbia, SC 29201
(803) 253-8217
(803) 253-8277 (Fax)
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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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell the securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities, and it is not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
This is a preliminary prospectus that is not yet complete. February 11, 2000
ISLANDS BANCORP
A Holding Company for
[LOGO HERE]
Common Stock
Purchase Price $10.00 Per Share
630,000 shares (Minimum) 1,000,000 shares (Maximum)
Islands Bancorp is offering shares of its common stock to organize Islands
Community Bank, N.A., a proposed national bank to be headquartered in Beaufort,
South Carolina. We will be the sole shareholder of Islands Community Bank after
it is organized. Islands Community Bank is expected to be a community-oriented
financial institution focused on providing a full range of personalized
commercial and consumer banking services and products designed to meet the
needs of individuals and businesses in our community. This is our initial
public offering, and no public market currently exists for our shares. Our
directors will receive warrants to purchase one share of common stock for
$10.00 per share for every share they purchase in the offering.
Investing in our common stock involves a high degree of risk. It is not a
deposit or an account, and it is not insured by the FDIC or any other
government agency. We urge you to read carefully the "Risk Factors" section
beginning on page 6, along with the rest of this prospectus, before you make
your investment decision. You should not invest in this offering unless you can
afford to lose your entire investment.
We will be offering the shares through the efforts of our officers and
directors. We may also engage the services of a sales agent to use its best
efforts to assist in the offering. If we utilize a sales agent, we anticipate
that the sales agent will be paid no more than an eight percent commission for
each share sold. In our computation of the commissions in the table below, we
have assumed that 200,000 of the shares will be sold through a sales agent. See
"The Offering."
<TABLE>
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<CAPTION>
Selling Agent Proceeds to
Price to Public Commissions Islands Bancorp
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<S> <C> <C> <C>
Per Share ........................ $10.00 $0.80 $9.20
Total Minimum..................... $6,300,000 $160,000 $6,140,000
Total Maximum..................... $10,000,000 $160,000 $9,840,000
</TABLE>
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
February , 2000
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Offering............................................................. 10
Use of Proceeds.......................................................... 14
Capitalization........................................................... 15
Dividend Policy.......................................................... 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 16
Proposed Business of the Bancorp and the Bank............................ 18
Supervision and Regulation............................................... 24
Management............................................................... 29
Security Ownership of Management......................................... 34
Transactions with Management............................................. 35
Description of Securities................................................ 37
Legal Matters............................................................ 41
Experts.................................................................. 41
Additional Information................................................... 41
Index to Financial Statements............................................ F-1
Subscription Offer Forms
</TABLE>
------------------
You should rely only on the information contained in this prospectus. 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.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
It includes all significant aspects of the offering of our common stock, but it
may not contain all of the information that is important to you before
investing in our common stock. To better understand this offering, you should
read the entire prospectus carefully, including the risk factors and the
financial statements.
Islands Bancorp and Islands Community Bank
Islands Bancorp is a South Carolina corporation that was incorporated on
July 23, 1999 to organize and serve as the holding company for Islands
Community Bank, N.A., a proposed national bank. The bank will operate as a
community bank emphasizing prompt, personalized customer service to the
individuals and businesses located in Beaufort County, South Carolina,
including the City of Beaufort, and its neighboring islands and communities.
We have filed an application for a charter to be granted to the bank by the
Office of the Comptroller of the Currency and an application for insurance of
its deposits to be obtained from the FDIC. On February 1, 2000 we received
preliminary approval from the Office of the Comptroller of the Currency to
charter the bank. Final approval is conditioned upon raising the required
minimum amount in this offering, receipt of FDIC approval for insurance of the
bank's deposits and the bank's implementation of proper bank regulatory
policies and procedures. We intend to apply to the Board of Governors of the
Federal Reserve System for authority to become a bank holding company once the
bank's charter is granted and FDIC insurance is obtained.
We hope to receive all necessary regulatory approvals in the second quarter
of 2000. At that point, if at least the minimum number of shares are sold in
this offering, we anticipate beginning operations out of a temporary facility
to be located at 131 Sea Island Parkway (federal highway 21) in Lady's Island,
South Carolina. This site is approximately two miles from downtown Beaufort and
is currently under contract by the Bancorp. We expect construction of our
permanent facility at this site to be completed in the third quarter of 2001.
Our Market Area
Our primary service area consists of a large portion of Beaufort County. It
includes the City of Beaufort and the adjacent communities of Port Royal and
Burton. It also includes the islands that are northeast of the Broad River and
south of the Coosaw River. Some of the major islands are Lady's Island, Fripp
Island, Parris Island, St. Helena Island, Hunting Island, Port Royal Island,
Dataw Island and Harbor Island. Located in the southernmost corner of coastal
South Carolina, Beaufort County is one of the fastest growing counties in South
Carolina, in terms of both population and commercial growth, according to
information published by the Greater Beaufort Chamber of Commerce. The City of
Beaufort serves as the commercial and retail center for communities in the
southern corner of South Carolina and is considered a key economic focal point
of the Beaufort County area. According to CACI Marketing Systems Group, a
national demographic and market information provider, the 1998 population of
Beaufort County was approximately 109,200 and is expected to grow to
approximately 123,700 in 2003. We anticipate that the deposit base in the
Beaufort County area will grow as its population and economic activity continue
to increase. As of June 30, 1998, there were eight commercial banks represented
in the Beaufort market with aggregate deposits of approximately $402 million.
Our Market Opportunity
We believe an attractive opportunity exists in our primary service area for
a locally headquartered community bank that focuses on personalized service to
individuals and businesses. The banking industry in our primary service area
has experienced significant consolidation in recent years principally as the
result of the liberalization of interstate banking and branching laws. Many of
our area's former community banks have been acquired by large regional
financial institutions headquartered outside our market area. As a result, none
of the
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<PAGE>
eight commercial banks operating in our primary service area as of December 31,
1999 were headquartered in Beaufort or Beaufort County. This consolidation in
the banking industry has also resulted in the dissolution of local boards of
directors and the dislocation of management and customer service personnel with
extensive banking experience and strong ties to our local community.
Accordingly, we believe that many customer relationships in the Beaufort market
have been disrupted as the bigger financial institutions have increasingly
focused their attention on larger corporate customers, standardized loan and
deposit products and other services. Generally, these products and services are
offered by less personalized delivery systems. We believe this has created a
demand for the delivery of higher quality, personalized banking services to
individuals and small to medium-sized businesses. For these reasons, we believe
we have a unique opportunity to attract and retain experienced and talented
individuals who are familiar with the banking needs of the local community. As
a locally owned community bank headquartered in Beaufort, we will offer
convenient service, local decision-making and competitive loans. Additionally,
by focusing our operations on the community we serve, we believe that we will
be able to respond to changes in the Beaufort market more quickly than large,
centralized institutions.
Our Organizers and Directors
Beaufort Bancorp was organized by ten individuals residing or doing business
in Beaufort County. These organizers have advanced approximately $100,000 and
have guaranteed a $90,000 line of credit that the Bancorp obtained from
GrandSouth Bank and a $500,000 line of credit that the Bancorp obtained from
The Bankers Bank. These lines of credit were obtained in order to pay
organizational and offering expenses.
The board of directors of the Bancorp consists of nine of our organizers and
our President and Chief Executive Officer, all of whom are also expected to be
the directors of the bank. All of our directors have significant business
interests in Beaufort County and are active participants in the Beaufort
community. For the names of and biographical information about our organizers,
see "Management--Directors and Executive Officers of the Bancorp and the Bank."
The directors intend to utilize their diverse backgrounds and their extensive
local business relationships to attract customers from all segments of our
community. Our directors will not be compensated for their services until the
bank becomes cumulatively profitable. In connection with the initial
organization and capitalization of the Bancorp, each of our organizers and our
President and Chief Executive Officer purchased 50 shares of common stock of
the Bancorp at $10.00 per share. In addition to these shares, the directors and
executive officers have indicated their intent to purchase an aggregate of
approximately 121,000 more shares of common stock in the offering. In that
event, the directors and executive officers will own an amount of shares equal
to approximately 19.3 percent of the shares of stock to be outstanding after
this offering, assuming the completion of the minimum offering of 630,000
shares. See "Security Ownership of Management." We believe that our directors'
ownership interests in the Bancorp should encourage their active participation
in growing our business.
The Offering
<TABLE>
<S> <C>
Common stock offered................ Minimum: 630,000 shares
Maximum: 1,000,000 shares
Common stock outstanding
prior to this offering............. 550 shares
Common stock to be outstanding
after this offering................ Minimum: 630,550 shares
Maximum:1,000,550 shares
Price to public..................... $10.00 per share
Net proceeds........................ $6,040,000 if the minimum number of shares of common
stock are sold and $9,740,000 if the maximum number
of shares are sold. These amounts are net of the
payment of an eight percent sales agent commission
on up to 200,000 shares sold and the payment of
offering and organizational expenses estimated at
$100,000.
</TABLE>
4
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<TABLE>
<S> <C>
Use of proceeds..................... We will use the proceeds of the offering as follows:
.To pay the offering expenses;
.To reimburse the organizational expenses incurred
by the organizers;
.To repay the line of credit guaranteed by the
organizers;
.To capitalize the bank; and
.To add to the working capital of the Bancorp.
If the ultimate net proceeds of the offering are
greater than $7 million, then we may invest all or a
portion of the excess in the capital of the bank.
Any balance will be retained as working capital of
the Bancorp.
The bank will use the funds it receives from the
Bancorp as follows:
.To pay expenses;
.To purchase the site for its initial offices;
.To build and furnish its offices; and
.To provide working capital to operate the bank.
Offering conditions................. We must satisfy the following conditions to complete
the offering:
.At least $6,300,000 of subscription proceeds must
be deposited in an escrow account with an
independent escrow agent;
.The Federal Reserve Board must approve our
application to become a bank holding company;
.The Federal Deposit Insurance Corporation must
approve the bank's application for deposit
insurance; and
.We must not have cancelled this offering before
funds are withdrawn from the subscription escrow
account.
Escrow arrangements................. Until we have satisfied all of the offering
conditions, we will place all funds in an escrow
account. If we have not satisfied the offering
conditions by January 31, 2001, we will return to
the subscribers all funds placed in the escrow
account, without interest. Once we have satisfied
all of the offering conditions, the escrow agent
will release all funds to the Bancorp. Any funds
received after that time will not be placed in
escrow, but will be immediately available for use by
the Bancorp. At that point, all subscribers may lose
a portion of their investment if either the Bancorp
or the bank does not receive final regulatory
approval.
</TABLE>
Plan of Distribution
Our officers and directors are expected to handle the sale of substantially
all of the shares of common stock in this offering. They will not be paid any
fees or commissions for their efforts. In addition, we may engage a registered
broker-dealer as our sales agent to use its best efforts to assist us in the
sale of shares above the minimum offering of 630,000 shares. If we utilize a
sales agent, we anticipate that the sales agent will be paid not more than an
eight percent commission on each share sold. See "The Offering--Plan of
Distribution."
5
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RISK FACTORS
An investment in our common stock involves a significant degree of risk. You
should not invest in our common stock unless you can afford to lose your entire
investment. You should consider carefully the following risk factors and other
information included in this prospectus before you decide to purchase any
shares of our common stock. You should also carefully read the cautionary
statement following the "Risk Factors" regarding the use of forward-looking
statements.
Because we have no operating history, you may not be able to accurately
evaluate Islands Bancorp.
Neither the Bancorp nor the bank has any operating history on which to base
an assessment of the risk that they may be unsuccessful. The Bancorp was only
recently formed, and the bank is not expected to receive final approval from
regulatory authorities to begin operations until after this offering is
completed. Consequently, you will not have access to historical information
that would be helpful in deciding whether to invest in the Bancorp. You should
consider the risk of an investment in the Bancorp in light of the expenses,
complications and delays frequently encountered in connection with the
development of a new bank.
We will incur substantial start-up expenses, and there is a risk that we may
never become profitable.
We will be the sole shareholder of the bank, and it will be our only
operating asset. This means that our success, and any return on your investment
in our common stock, will depend entirely on the operations of the bank. If the
bank is ultimately unsuccessful, you may not recover all or any part of your
investment in the common stock. Typically, new banks are not profitable in the
first year of operation and sometimes they are not profitable for several
years. Total organizational costs as of December 31, 1999 amounted to $85,169.
From December 10, 1998 to December 31, 1999, the net loss of the Bancorp
amounted to $174,255. The estimated net loss for the period from January 1,
2000 through July 1, 2000, the anticipated opening date for the Bank, is
$328,045. In order for us to become profitable, the bank will need to attract a
large number of customers to deposit and borrow money. Additionally, many of
the bank's loans initially will be new loans to new borrowers. Accordingly, it
will take several years to determine the borrowers' payment histories. As a
result, management will not be able to evaluate reliably the quality of the
loan portfolio until that time.
If we experience delays in receiving regulatory approvals our schedule for
opening the bank will be delayed, which will delay any revenue realization and
will cause our losses to increase.
Although we expect to receive all regulatory approvals to begin operations
in the second quarter of 2000, we can give no assurance as to when, if ever,
these events will occur. Any delay in beginning our operations will increase
our pre-opening expenses and postpone realization of potential revenue by the
bank. A delay will cause our accumulated deficit to increase as a result of our
lack of revenues and our continuing operating expenses, such as salaries and
other administrative expenses.
If we fail to receive necessary regulatory approvals, you could lose a portion
of your investment.
If the conditions for releasing subscription funds from the escrow account
are satisfied and we release the funds, but fail to receive final regulatory
approval, we would seek to dissolve and liquidate the Bancorp. Upon
liquidation, we would return to subscribers all of their funds, without
interest, less all expenses incurred by the Bancorp. Consequently, subscribers
whose funds are originally placed in escrow, but became available to the
Bancorp, may lose a portion of their investment. In addition, funds available
for return to subscribers could be reduced by amounts necessary to satisfy
claims of creditors. See "The Offering--Failure of Bank to Begin Operations."
We will be competing with many other larger financial institutions which may
have an adverse effect on our success.
As a new bank in an established market, we expect to encounter strong
competition from existing banks and other types of financial institutions
operating in our market area and elsewhere. Our relatively small size may
affect our ability to compete effectively with these institutions in attracting
deposits and offering other
6
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financial services. We will compete with numerous other lenders and deposit-
takers including other commercial banks, savings and loan associations, credit
unions, finance companies, mutual funds, insurance companies and brokerage and
investment banking firms. These institutions may have competitive advantages
over the bank because they have greater capitalization and other resources, and
they can offer potential depositors higher lending limits and other services
which the bank may not be able to offer. Although we will compete primarily
with other financial institutions in our market area, we may also compete with
Internet banks and financial institutions located throughout the United States
for products such as large certificates of deposit. We are aware of a proposed
new community bank that plans to commence operations in our primary service
area in the first half of 2000. If that occurs, we would also face competition
with that community bank.
All of our competitors actively solicit business from residents of Beaufort
County. Some of these institutions are not subject to the same degree of
regulation as we will be, and some have greater resources than will be
available to us. Because of this competition, we may have to pay higher rates
of interest to attract deposits. We can offer you no assurance that the bank
will be successful in attracting the deposits it will need to sustain its
growth.
The Gramm-Leach-Bliley Act will go into effect March 11, 2000 and will
remove some of the former legal barriers to the entry of non-banking
enterprises into the commercial banking business. As a consequence, the bank
may face even greater competition in its primarily service area from large,
well-capitalized enterprises. At the same time, regulations may prevent the
Bancorp and the bank from diversifying into non-banking businesses. See
"Supervision and Regulation."
Our initial lending limit will be lower than many of our competitors, which may
discourage potential customers and limit our growth.
At least initially, the bank will have less capital than many of its
competitors. This means that its legally mandated lending limits will be lower
than those of these competitors. These lower lending limits may discourage
potential borrowers who have lending needs that exceed our limits, which may
restrict our ability to grow. Until the bank is profitable, we will lose money,
which will decrease our capital and therefore our lending limit. We may try to
serve the needs of our borrowers by selling loan participations to other
institutions, but this strategy may not succeed.
Departures of our key personnel or directors will impair our operations.
William B. Gossett will be our President and Chief Executive Officer. He
will be instrumental in our organization and will be the key management
official in charge of our daily business operations. Although we have entered
into an employment agreement with Mr. Gossett, we cannot be assured of his
continued service, and he would be difficult to replace. Additionally, our
directors' community involvement, diverse backgrounds and extensive local
business relationships are important to our success. Our growth could be
adversely affected if the composition of our board of directors changes
materially. See "Management."
A downturn in the general economic conditions in Beaufort County could cause
our operations to suffer and decrease the value of your investment.
A prolonged economic dislocation or recession affecting Beaufort County
could cause the bank's non-performing assets to increase, causing operating
losses, impaired liquidity and the erosion of capital. Such an economic
dislocation or recession could result from a variety of causes, including
natural disasters such as hurricanes or tornadoes, or a prolonged downturn in
various industries including the real estate development, resort and retirement
industries, upon which the economy of Beaufort County is highly dependent.
Moreover, as many of our shareholders are expected to be residents of the
Beaufort County area, a prolonged downturn in the economy of Beaufort County
could result in sales of large amounts of our common stock.
7
<PAGE>
Because the offering price cannot be supported by value of assets or earnings,
you may be overpaying for the shares.
We set the offering price at $10.00 per share on the basis of the start-up
capital needs of the bank and the offering prices of other newly-organized bank
holding companies. This price bears no relationship to assets, book value,
earnings or other established criteria of value. As a result, you may be
overpaying for the shares.
You may have difficulty in selling your shares because of the absence of an
active public market.
There is no established market for the common stock. A public market having
depth and liquidity depends on having enough buyers and sellers at any given
time. Because the size of this offering is relatively small, it is unlikely
that there will be enough shareholders or outstanding shares to support an
active trading market. Consequently, you should only invest in the common stock
if you have a long-term investment intent. If an active market does not
develop, you may be required to locate a buyer on your own and may not be able
to do so.
We intend to grant warrants and stock options to the directors and to some of
our employees which, if exercised, would reduce your percentage ownership in
the Bancorp.
If the offering is unsuccessful, the organizers will lose the funds of
approximately $100,000 which they have advanced toward organizational and
offering expenses and the $5,500 they paid to purchase shares of the Bancorp.
They will also be obligated to repay the line of credit obtained to pay a
portion of such expenses which they have personally guaranteed. In recognition
of these financial risks, and their willingness to serve as directors without
pay until the bank is cumulatively profitable, we intend to grant to each of
the directors who purchases shares in this offering one warrant to purchase one
additional share of common stock for each share of common stock the director
purchases in this offering, up to an aggregate maximum for all directors of
210,115 shares. On the basis of the amount of shares our directors have
indicated they intend to purchase in this offering, we intend to issue to the
directors warrants to purchase up to an aggregate of 121,000 shares of common
stock. See "Management--Stock Warrants of Directors" and "Security Ownership of
Management." In addition, we intend to establish an incentive stock option plan
which will allow us to grant stock options to officers and other employees who
are contributing significantly to the management or operation of the business
of the Bancorp or the bank. Under this plan, we intend to reserve a number of
shares of common stock for the issuance of options equal to 15% of the shares
outstanding after this offering.
Any future exercise of the organizer's warrants or any options that may be
granted under the stock option plan would reduce your percentage ownership in
the Bancorp. For example, prior to the exercise of their warrants, the
organizers will own approximately 19.3 percent of the shares outstanding. This
assumes the sale of only the minimum number of shares in this offering and the
purchase by the organizers of the aggregate number of shares of common stock
they have indicated they intend to purchase. See "Security Ownership of
Management." If the organizers exercised all of their warrants, they would own
approximately 32.3 percent of the outstanding shares. Again, this assumes the
sale of only the minimum number of shares in this offering and the purchase by
the organizers of the aggregate number of shares of common stock they have
indicated they intend to purchase.
Anti-takeover provisions in our articles of incorporation and state corporate
laws could deter or prevent take-over attempts by a potential purchaser of our
common stock and deprive you of the opportunity to obtain a takeover premium
for your shares.
In many cases, shareholders receive a premium for their shares when a
company is purchased by another. Various provisions in our articles of
incorporation and bylaws and state corporate laws could deter and make it more
difficult for a third party to bring about a merger, sale of control, or
similar transaction without approval of our board of directors. These
provisions tend to perpetuate existing management. As a result, you may be
8
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deprived of opportunities to sell some or all of your shares at prices that
represent a premium over market prices. These provisions, which could make it
less likely that a change in control will occur, include:
. provisions in our articles of incorporation establishing three classes of
directors with staggered terms, which means that only one-third of the
members of the board of directors is elected each year and each director
serves for a term of three years.
. provisions in our articles of incorporation authorizing the board of
directors to issue a series of preferred stock without shareholder action,
which issuance could discourage a third party from attempting to acquire, or
make it more difficult for a third party to acquire, a controlling interest
in the Bancorp.
. provisions in our bylaws relating to meetings of shareholders which limit
who may call a meeting and what matters will be voted upon.
. state law provisions that require two-thirds of the shareholders to approve
mergers and similar transactions, and amendments to the articles of
incorporation.
See "Description of Securities--Change of Control and Anti-takeover
Effects".
You may suffer dilution in your interests in common stock if we offer
additional shares of common stock in the future.
The directors of the Bancorp believe that the sale of the minimum number of
630,000 shares of common stock in this offering will provide adequate capital
to sustain the bank during its initial years of operations. See "Use of
Proceeds." There is no present intent to offer for sale additional shares of
common stock over and above the maximum number of one million shares. However,
the bank's success will depend on a number of factors, including the factors
set forth in this "Risk Factors" section of the prospectus. Accordingly, no
assurance can be given that, in the future, the Bancorp will not have to seek
additional capital by offering and selling additional shares of common stock in
order to continue to operate, satisfy regulatory requirements or achieve
successful operations. See "Supervision and Regulation -- Capital Adequacy
Requirements." If it becomes necessary to raise additional capital to support
the bank's operations, there is no assurance that additional capital will be
available to the bank, that additional capital can be obtained on terms
favorable to the bank or that the price of which additional shares may be
offered by the Bancorp in the future will not be less than the subscription
price in this offering. The effect on existing shareholders of sales of
additional shares of common stock cannot presently be determined. However,
those sales could have a dilutive effect on the interests of subscribers who
purchase common stock in this offering.
It is possible that computer systems of our data processing vendor or loan
customers will fail to properly accommodate year 2000 dates.
As a financial institution, we expect to be heavily dependent upon computers
for the conduct of our business. During the years leading up to the year 2000,
an important business issue emerged regarding the concern that then existing
software programs and operating systems would fail to recognize the year 2000
and other year 2000-sensitive dates. This was expected to result in system
failures or miscalculations causing disruption of operations. We believe that
evidence of nationwide computer system performance following January 1, 2000
indicates that most of the areas for exposure to system malfunctions associated
with the year 2000 have been properly addressed. We have not yet purchased our
information systems or commenced our banking operations. Accordingly, we
believe we are in a position to avoid much of the uncertainty surrounding year
2000 compliance in our operating systems that would otherwise have existed if
these systems had been purchased and in operation prior to January 1, 2000. In
any event, we intend to utilize third-party vendors to provide our primary
banking computer applications, including core processing systems. The bank will
depend on the efforts of these third party vendors to ensure that their data
processing systems accommodate year 2000 information. Although we intend to
require vendor certification regarding year 2000 readiness before we purchase
any equipment, we cannot verify independently that the equipment will, in fact,
be year 2000 compliant. In addition, the bank could be affected by year 2000
problems experienced by others over which it
9
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will have no control. These parties include our customers, service providers,
vendors, customers' vendors, correspondent banks, government agencies, and the
financial services industry in general. We plan to include Year 2000 criteria
in our loan approval process. Nevertheless, it may be difficult to identify all
problems, and any such problems could have a significant adverse impact on the
bank's operations, and in turn, the financial condition and results of
operations of the Bancorp.
Note Regarding Forward-looking Statements
Some of the statements contained in this prospectus discuss future
expectations or state other "forward-looking" information. Such statements can
be identified by the use of forward-looking words such as "may," "will,"
"expect," "anticipate," "estimate" or other similar words. Those statements
could be affected by known and unknown risks, uncertainties and other factors
that could cause the actual results to differ materially from those
contemplated by the statements. When considering such forward-looking
statements, you should keep in mind the preceding risk factors and other
cautionary statements in this prospectus.
THE OFFERING
We are offering a minimum of 630,000 shares and a maximum of 1,000,000
shares of common stock at a public offering price of $10.00 per share. This
offering is intended to raise gross proceeds of between $6,300,000 and
$10,000,000. The minimum purchase for any investor is 100 shares and the
maximum purchase is 4.99 percent of the aggregate shares subscribed in the
offering, although we may accept subscriptions for more or less. We must
receive your subscription for shares before midnight, Eastern Standard Time, on
June 30, 2000, unless all of the shares are sold earlier, or unless the
offering is terminated or extended. We reserve the right to terminate the
offering at any time or to extend the expiration date up to January 31, 2001.
Extension of the expiration date might cause an increase in our expenses. We do
not have to give you any prior written notice of an extension. If we extend the
offering, subscriptions we have already accepted will still be binding. We may
also terminate the offering at any time prior to the sale of the minimum number
of shares offered in this offering by providing you with written notice of such
termination. In such event, we will cause all subscription funds to be refunded
to you, without interest.
Conditions of the Offering
The offering is conditioned upon fulfillment of the following conditions on
or prior to the expiration date of the offering. The offering conditions are as
follows:
. At least $6,300,000 in subscription proceeds must be deposited with the
escrow agent in the subscription escrow account;
. We must receive approval from the Federal Reserve Board of our
application to become a bank holding company;
. The bank must receive approval of its application for deposit insurance
from the FDIC; and
. We must not have terminated this offering prior to the time funds are
withdrawn from the subscription escrow account.
Escrow of Subscription Funds
Until the offering conditions above have been met, all subscriptions and
documents tendered by investors will be placed in an escrow account with an
independent escrow agent, The Bankers Bank. Under the terms of the escrow
agreement, if all of the offering conditions are met, the Bancorp may certify
this fact to the escrow agent and the escrow agent will release all funds, with
interest earned on the funds, to the Bancorp.
The escrow agent has not investigated the desirability, advisability or
merits of a purchase of the shares of common stock in this offering. The escrow
agent will invest escrowed funds in deposit accounts or certificates
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<PAGE>
of deposit which are fully insured by the FDIC or another agency of the United
States government, short-term securities issued or fully guaranteed by the
United States government, and/or federal funds. The Bancorp will invest all
funds obtained after the release of the funds from the escrow account and
before it invests capital into the bank in a similar manner. The Bancorp will
use the offering proceeds to purchase capital stock of the bank and to repay
expenses incurred in the organization of the Bancorp and the bank. See "Use of
Proceeds."
If the offering conditions are not satisfied by the expiration date, the
escrow agent will promptly return to the subscribers their proportionate share
of the funds from the escrow account, without interest. If the offering
conditions are not satisfied, the expenses incurred by the Bancorp will be
borne by the organizers and not by the shareholders. If all of the offering
conditions are satisfied, and the Bancorp withdraws the funds from the
subscription escrow account, all profits and earnings on such account will
belong to the Bancorp. If subscriptions for 630,000 shares of common stock are
received and accepted before the expiration date, a minimum closing will be
held at the Bancorp's offices. At that minimum closing, the funds will be
released from the subscription escrow account to the Bancorp and the
subscribers will become shareholders of the Bancorp.
Failure of Bank to Begin Operations
If the conditions for releasing subscription funds from the escrow account
are met and the funds are released, but we do not receive final regulatory
approval to operate the bank, or if the bank does not open for any other
reason, our board of directors intends to propose that the shareholders approve
a plan to liquidate the Bancorp. Upon liquidation, the Bancorp would be
dissolved and the Bancorp's net assets, consisting primarily of the funds
received in this offering, less the costs and expenses we have incurred, would
be distributed to the shareholders other than the organizers, who will not
receive any distribution until all of the shareholders have received their
initial investments. If our expenses exceed the amounts by which the organizers
have contributed toward payment of such expenses, subscribers whose funds were
originally placed in escrow but became available to the Bancorp may lose a
portion of their investment.
It is also possible that the amount returned to subscribers may be further
reduced by amounts paid to satisfy claims of creditors. Once the Bancorp issues
shares of common stock following the release of funds from the escrow account,
the offering proceeds will be considered part of the Bancorp's general
corporate funds and may be subject to the claims of creditors of the Bancorp.
These claims would include claims against the Bancorp that may arise out of
actions of its officers, directors or employees. It is possible, therefore,
that one or more creditors may seek to attach the proceeds of the offering
before the Bancorp begins banking operations. If such an attachment occurred
and it became necessary to return funds to shareholders because of failure to
obtain all necessary regulatory approvals, the payment process might be delayed
further.
Plan of Distribution
We expect that the common stock will be sold by the Bancorp exclusively
through the efforts of our officers and directors. Our officers and directors
may also elect to have their selling efforts supplemented by a licensed broker-
dealer acting as a sales agent. In such event, the sales agent would be engaged
to offer the common stock on a best efforts basis to the general public.
No fees, commissions or other remuneration will be paid to any of our
officers or directors in connection with his or her solicitation activities. We
anticipate that if we engage a sales agent, we will pay the agent a commission
of no more than eight percent of the gross proceeds from the sales of shares
sold by the agent. We expect that our arrangement with any sales agent will
also include our obligation to reimburse the sales agent for some portion of
its out-of-pocket expenses in connection with the offering. We may also be
required to indemnify the sales agent against liabilities it may be exposed to
in connection with the offering, including liabilities under federal securities
laws.
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<PAGE>
None of our officers and directors who will participate in the offer and
sale of shares of common stock is affiliated with a securities broker or
dealer, and none of these persons is, or intends to become, registered or
licensed as a broker or dealer or an agent of a broker or dealer. We believe
that each of our personnel who will assist in sales activities in connection
with this offering will be exempt from federal registration as a broker or
dealer as provided in Rule 3a4-1 under the Securities Exchange Act of 1934.
Purchases of Common Stock by Our Directors
Each of our directors has purchased 50 shares of common stock of the
Bancorp. The directors have also indicated their intent to purchase up to an
aggregate of 121,000 additional shares of the common stock in this offering.
The aggregate of these shares, when added to the 500 shares already owned by
the directors, will constitute approximately 19.3 percent of the 630,550 shares
to be outstanding upon completion of the minimum offering, or 12.1 percent of
the 1,000,550 shares to be outstanding should the maximum number of shares be
sold. The directors may also purchase shares in this offering in excess of
these amounts, although they have not indicated an intent to do so. Because
purchases by the directors may be substantial, you should not assume that the
sale of a specified minimum offering amount indicates the merits of this
offering. All purchases of shares by the directors will be made at the same
public offering price of $10.00 per share paid by other investors in this
offering and will count toward the achievement of the minimum offering. The
directors have represented to the Bancorp that any of these purchases will be
made for investment purposes only, and not with a view to the resale of the
shares. See "Security Ownership of Management."
In consideration for their efforts in organizing the Bancorp and the bank,
and in recognition of financial risk of loss undertaken by each of them in
connection with the funding of the organizational expenses of the Bancorp and
the bank, each of our directors who purchases shares in this offering will be
granted one warrant for each share of common stock the director purchases. The
warrants are expected to be granted to the directors for no additional
consideration upon completion of this offering. Each warrant will entitle the
director to purchase, at any time within ten years from the date the bank opens
for business, one additional share of our common stock at a price of $10.00 per
share. The warrants will provide the directors with an opportunity to profit
from any future increase in the market value of our common stock, or any
increase in the net worth of the bank, without paying for the warrant shares up
front. See "Management--Stock Warrants of Directors."
If each of our directors purchases the number of shares he or she has
indicated he or she intends to purchase in this offering, and also exercises
his or her warrants in full, the directors' aggregate ownership of the Bancorp
would be 32.3 percent based on the minimum offering and 21.6 percent based on
the maximum offering. Consequently, any future exercise of the warrants by our
directors will reduce your percentage ownership interest in the Bancorp.
The shares of common stock are not insured bank deposits.
Although deposits at the bank will be insured by the FDIC to the maximum
amount permitted by law, shares of the Bancorp common stock are not bank or
deposit accounts. Consequently, our common stock is not insured by the FDIC or
any other governmental agency.
How to Subscribe
The minimum subscription is 100 shares or $1,000, but we reserve the right
to accept subscriptions for less than the minimum subscription. If you desire
to purchase shares of the common stock of the Bancorp, you must:
. Complete and sign the Subscription Offer Form accompanying this prospectus;
. Make full payment for the purchase price for the shares in United States
currency by check, bank draft or money order payable to "The Bankers Bank--
Islands Bancorp Escrow Account"; and
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. Deliver the executed Subscription Offer Form, in person or by mail, together
with full payment for the purchase price, to 211 Charles Street, Suite 100,
Beaufort, South Carolina 29902.
We reserve the right to disregard any subscription which is not fully paid
when we receive it. No subscription will be binding until we have accepted it,
and we may refuse to accept any subscription for shares, in whole or in part,
for any reason. In determining which subscriptions to accept, in whole or in
part, we may take into account the order in which we receive subscriptions and
a subscriber's potential to do business with, or to refer customers to, the
bank. In the event we reject all or part of your subscription, the escrow agent
will refund by mail all or the appropriate portion of the amount paid in by you
with the subscription, without interest, promptly after the rejection. In the
event we do not satisfy the conditions to release the funds from the escrow
account, all subscription proceeds will be returned promptly by mail in full,
without interest. After a subscription is accepted and proper payment is
received, we will not cancel it unless all other accepted subscriptions are
also cancelled.
If we engage a sales agent to assist us in this offering, consistent with
Rule 15c2-4 under the Securities Exchange Act of 1934, the sales agent will
transmit all subscribers' checks to the escrow agent not later than the close
of the next business day. The sales agent will be entitled to any commission
only after the conditions to the release of subscription proceeds from the
escrow agent to us are satisfied and the proceeds are actually released to us.
Certificates representing shares of common stock of the Bancorp will be
issued as soon as practicable after funds are released to us from the
subscription escrow account.
If you have any questions about the offering or how to subscribe, please
call William B. Gossett, our President and Chief Executive Officer, at (843)
470-9962. If you subscribe, you should retain a copy of the completed
subscription documents for your records.
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<PAGE>
USE OF PROCEEDS
The gross proceeds from the sale of shares of common stock offered by the
Bancorp will be $6,300,000 assuming the sale of a minimum of 630,000 shares,
and $10,000,000 assuming the sale of a maximum of 1,000,000 shares. We have set
forth below a description of our anticipated use of the proceeds of the
offering by the Bancorp and by the bank based on our plans and estimates of our
start-up expenses. The sales agent's commission reflects an eight percent
commission on the sale of 200,000 shares. The following numbers are estimates
only, and the actual numbers may be different. The following presentation
assumes that the offering proceeds are released from escrow and the bank is
capitalized on July 1, 2000. We cannot assure you that the bank will be
capitalized at that time or ever. If the opening of the bank is delayed, our
expenses will be substantially higher.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
(630,000 shares) (1,000,000 shares)
---------------- -----------------
<S> <C> <C>
Gross proceeds from offering............... $6,300,000 $10,000,000
Sales agent's commission................... 160,000 160,000
---------- -----------
Net proceeds to the Bancorp................ $6,140,000 $ 9,840,000
========== ===========
Anticipated use of proceeds by the Bancorp:
Offering and organizational expenses
funded by organizers' advances.......... 100,000 100,000
Investment in the common stock of the
bank.................................... 6,000,000 7,000,000
Working capital.......................... 40,000 2,740,000
---------- -----------
Total.................................... $6,140,000 $ 9,840,000
========== ===========
</TABLE>
Anticipated use of capital by the bank:
As reflected below, a minimum of $6,000,000 will be invested by the Bancorp
to capitalize the bank. The land upon which the bank's main office will be
located is under contract by the Bancorp for a purchase price of $520,000. This
contract is expected to be assigned to the bank prior to the closing of the
real estate acquisition. We expect that construction of the bank's main office
at this site will commence shortly following the closing of the bank's purchase
of the real estate. That closing is expected to occur on or before May 15,
2000. The estimated cost of the building is approximately $1,050,000. See
"Proposed Business of the Bancorp and the Bank--Facilities." If the total
offering proceeds exceed $7 million, we may invest all or a portion of the
excess in the bank. We will retain any proceeds which are not invested in the
bank and will initially invest them in United States government securities or
deposit them with the bank. These funds will be held by us for the operational
expenses of the Bancorp and for 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 branches or acquiring
other financial institutions. We do not currently have any definitive plans for
expansion.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
(630,000 shares) (1,000,000 shares)
---------------- ------------------
<S> <C> <C>
Organizational and pre-opening expenses... $ 402,300 $ 402,300
Land and bank facility.................... 1,570,000 1,570,000
Furniture, fixtures and equipment......... 420,000 420,000
Working capital........................... 3,607,700 4,607,700
---------- ----------
Total..................................... $6,000,000 $7,000,000
========== ==========
</TABLE>
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<PAGE>
CAPITALIZATION
The following table shows the Bancorp's capitalization as of December 31,
1999 and the pro forma consolidated capitalization of the Bancorp and the bank,
as adjusted to give effect to the sale of the minimum and maximum number of
shares in this offering and after deducting estimated sales agent commissions
and estimated expenses of the offering. The Bancorp's capitalization as of
December 31, 1999 reflects the purchase of an aggregate of 550 shares of common
stock at a purchase price of $10.00 per share by our organizers shortly
following the incorporation of the Bancorp. The "As Adjusted" columns reflect
the estimated costs of organizing the Bancorp and organizing and preparing to
open the bank through the expected opening date, which is anticipated to be at
the end of the second quarter of 2000. See "Use of Proceeds."
<TABLE>
<CAPTION>
December 31, As Adjusted for As Adjusted for
1999 Minimum Offering Maximum Offering
Shareholders' Equity: ------------ ---------------- ----------------
<S> <C> <C> <C>
Common stock , no par value per
share, 10,000,000 shares
authorized, 550 shares issued
and outstanding, 630,550 shares
issued and outstanding as
adjusted (minimum offering),
1,000,550 shares issued and
outstanding (maximum
offering)...................... $ 5,500 $6,140,000 $9,840,000
Preferred stock, undesignated
par value, 2,000,000 shares
authorized; no shares issued
and outstanding 0 0 0
Accumulated deficit during pre-
opening stage.................. (174,255) (502,300) (502,300)
--------- ---------- ----------
Total shareholder's equity...... $(168,755) $5,637,700 $9,337,700
========= ========== ==========
Book value per share............ $ N/A $ 8.94 $ 9.33
========= ========== ==========
</TABLE>
DIVIDEND POLICY
The Bancorp and the bank are both start-up operations. In order to preserve
capital to facilitate growth and expansion of the bank, we do not anticipate
paying cash dividends on the shares of common stock in the near future. Our
board of directors intends to reinvest earnings for a period of time as is
necessary to ensure the success of the operations of the bank. Our board of
directors will make a determination whether to pay cash dividends on the basis
of operating results, financial condition, tax considerations and other
relevant factors. Our ability to pay any dividends will depend on the ability
of the bank to pay dividends to us, which depends on the profitability of the
bank. The bank similarly does not anticipate paying cash dividends to us in the
near future in order to preserve its capital to facilitate growth and expansion
of its business. Payment of cash dividends by the bank is also limited by
regulatory requirements and limitations. See "Supervision and Regulation--
Dividends."
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
On December 10, 1998, our organizers commenced activities to establish the
Bancorp and the bank. On July 23, 1999, we incorporated the Bancorp to serve as
the holding company for the bank. On August 25, 1999, we succeeded to all of
the assets and liabilities of the partnership through which the organizers'
activities had been conducted. We are still in the development stage and will
remain in that stage until the bank opens for business. Since December 10,
1998, our main activities have been centered on:
. seeking, interviewing and selecting the directors and officers for the
Bancorp and the bank,
. identifying and acquiring our permanent principal office and banking
site,
. applying for a national bank charter,
. applying for FDIC deposit insurance,
. applying to become a bank holding company, and
. raising equity capital through this offering.
Funding of Our Initial Operations
Our operations from December 10, 1998 through the closing date of this
offering have been and will continue to be funded through:
. advances from our organizers in the aggregate amount of $100,000,
. a line of credit obtained by the Bancorp from GrandSouth Bank in the
amount of $90,000,
. a line of credit obtained by the Bancorp from The Bankers Bank in the
amount of $500,000; and
. the purchase by our organizers of an aggregate of $5,500 of our common
stock (550 shares).
As of January 31, 2000, approximately $85,000 was outstanding on each of the
lines of credit. These lines of credit have been guaranteed by each of our
organizers. The GrandSouth Bank line of credit bears interest at the annual
rate of GrandSouth Bank's prime rate and is due on March 7, 2000. The Bankers
Bank line of credit bears interest at the annual rate of one-half percent less
than the prime rate as published in the Wall Street Journal and is due on
December 24, 2000. We may use a portion of The Bankers Bank line of credit to
repay the GrandSouth Bank line of credit on or prior to its maturity. We intend
to use the proceeds of this offering to repay the advances of the organizers
and the lines of credit. See "Use of Proceeds."
We believe the minimum net proceeds from the minimum offering will be
adequate capital to support the growth of both the Bancorp and the bank for
their initial years of operations. We do not anticipate that the Bancorp will
need to raise additional funds to meet expenditures required to operate the
business of the Bancorp or the bank over the next twelve months. All
anticipated material expenditures during that period are expected to be
provided for out of the proceeds of this offering. See "Use of Proceeds."
Financial Results
Total organizational costs as of December 31, 1999 amounted to $85,169. From
December 10, 1998 to December 31, 1999, the net loss of the Bancorp amounted to
$174,255. The estimated net loss for the period from January 1, 2000 through
July 1, 2000, the anticipated opening date for the bank, is $328,045. This
amount is attributable to estimated expenses for salaries and benefits of
approximately $185,000, legal and professional fees of approximately $40,000
and other pre-opening expenses of approximately $103,045.
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<PAGE>
Initially, the bank anticipates deriving its income principally from
interest charged on loans and, to a lesser extent, from interest earned on
investments, fees received in connection with the origination of loans and
miscellaneous fees and service charges. Its principal expenses are anticipated
to be interest expense on deposits and operating expenses. The funds for these
activities are anticipated to be provided principally by operating revenues,
deposit growth, purchase of federal funds from other banks, repayment of
outstanding loans and sale of loans and investment securities.
The bank's operations will depend substantially on its net interest income,
which is the difference between the interest income earned on its loans and
other assets and the interest expense paid on its deposits and other
borrowings. This difference is largely affected by changes in market interest
rates, credit policies of monetary authorities, and other local, national or
international economic factors which are beyond our ability to predict or
control. Large moves in interest rates may decrease or eliminate our
profitability.
Operating Facilities
The Bancorp has entered into an agreement for the purchase of approximately
2.3 acres of land at 131 Sea Island Parkway (federal highway 21) in Lady's
Island, South Carolina to be used as the site for the main office of the bank.
The purchase price under the agreement is $520,000. The purchase agreement is
expected to be assigned from the Bancorp to the bank upon the commencement of
the bank's operations. Promptly following that assignment, the bank is expected
to close the purchase. The Bancorp is entitled to extend the closing date of
the land purchase up to six months beyond the scheduled closing date of May 15,
2000 in return for the non-refundable payment to the current landowner of
$3,000 for each 30-day extension.
We expect that construction of the bank's main office building at this site
will commence shortly following the closing of the bank's purchase of the real
estate. The estimated cost of the building is approximately $1,050,000. The
bank will fund the purchase of the real estate acquisition and the construction
of its main building with a portion of the net proceeds received from the
issuance of its common stock to the Bancorp. See "Use of Proceeds." We expect
construction of our permanent facility at this site to be completed in the
third quarter of 2001. Pending the completion of the permanent facility, we
expect to commence the bank's operations from temporary modular facilities
located at this site.
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<PAGE>
PROPOSED BUSINESS OF THE BANCORP AND THE BANK
Background
The Bancorp was incorporated as a South Carolina corporation on July 23,
1999 to serve as a bank holding company for the bank. The Bancorp plans to use
$6 million of the net proceeds of this offering to capitalize the bank through
the Bancorp's purchase of 600,000 shares of the bank's common stock at $10.00
per share. This purchase price has been established at the level that is
intended to provide the bank with the total amount of capital and surplus
sufficient to meet the minimum capitalization level set for the bank by the
Office of the Comptroller of the Currency. The Bancorp will be the bank's sole
shareholder. The Bancorp initially will engage in no business other than owning
and managing the bank.
We have organized the Bancorp as a holding company to make it easier for the
bank to serve its future customers. The holding company structure is expected
to provide flexibility for expansion of the Bancorp's banking business. This
could occur through the possible acquisition by the Bancorp of other financial
institutions and the provision of additional capital for banking-related
services which the traditional commercial bank may not provide under existing
laws. A holding company structure should make it easier for the Bancorp to
raise capital for the bank because the Bancorp will be able to issue securities
without the need for prior banking regulatory approval. The proceeds of
securities issued by the Bancorp can be invested by the Bancorp in the bank as
primary capital.
The Bancorp has no present plans to acquire any operating subsidiaries other
than the bank. However, it is expected that the Bancorp may make additional
acquisitions in the event that the bank becomes profitable and the acquisitions
are deemed to be in the best interests of the Bancorp and its shareholders. Any
acquisitions will be subject to regulatory approvals and requirements. See
"Supervision and Regulation."
Once the bank has received approvals from the Office of the Comptroller of
the Currency and the FDIC, the Bancorp will apply to the Federal Reserve Board
and the South Carolina State Board of Financial Institutions for approval to
capitalize the bank. If these agencies grant the necessary approvals, the
Bancorp will become a bank holding company within the meaning of the Bank
Holding Company Act of 1956 and the South Carolina Bank Holding Company Act
upon its purchase of the bank's common stock. See "Supervision and Regulation."
The bank is currently being organized under the laws of the United States as
a national bank whose deposits are insured by the FDIC. The bank will not be
authorized to conduct its banking business until it obtains a charter from the
Office of the Comptroller of the Currency. On February 1, 2000 we received
preliminary approval from the Office of the Comptroller of the Currency to
charter the bank. The issuance of final approval will depend, among other
things, upon the bank's receipt of at least $6 million in capital from the
Bancorp and upon compliance with other standard conditions expected to be
imposed by the FDIC and the Office of the Comptroller of the Currency. These
conditions are generally designed to familiarize the bank with operating
requirements and to prepare it to begin business operations. We expect to
receive preliminary approval from the FDIC by the end of March, 2000.
Immediately upon obtaining all regulatory approvals and being capitalized,
the bank will engage in attracting deposits from the general public and will
make commercial, consumer and real estate loans. We anticipate that the bank
will commence operations on or about July 1, 2000, assuming completion by that
date of at least the minimum offering of shares of common stock.
Business Strategy of the Bank
The bank's business strategy for its initial years of operation will rely
principally upon local advertising and promotional activity and upon personal
contacts by its directors, officers and shareholders to attract business and to
acquaint potential customers with the bank's personalized services. Our
marketing approach will emphasize the advantages of dealing with an
independent, locally owned and headquartered commercial bank to meet the
particular needs of individuals, professionals and small to medium-sized
businesses. We intend to emphasize a high degree of personalized client service
in order to be able to serve each customer's banking needs. In particular, we
intend to
18
<PAGE>
. respond to credit requests more quickly (in some cases within the same
day);
. be more flexible in approving complex loans based on a combination of
collateral quality, financial strength, market tenure and personal
knowledge of the customer;
. cross-train our staff to ensure that customers' questions can be
resolved by the first person contacted;
. require that our staff and officers operate with the attitude that the
customer deserves to be treated politely and efficiently; and
. have our employees personally greet customers as they enter the bank.
We expect that these approaches will produce a competitive edge that will
enable the bank to capture a significant share of the existing and future
growth in our market.
We will continually evaluate all banking services as to their profitability
and make efforts to modify the bank's business plan if the plan does not prove
successful. We believe that the bank's business plan will make it profitable by
the end of its third year of operations. However, it has been the experience in
the banking industry for new financial institutions to lose money in the first
several years of operations. There can be no assurance as to when, if ever, the
bank's operations will become profitable.
The Banks Primary Service Area
The bank's primary service area will be in Beaufort County, South Carolina,
including the towns of Beaufort, Port Royal and Burton, as well as many
neighboring islands. Some of the major islands are Lady's Island, Fripp Island,
Parris Island, St. Helena Island, Hunting Island, Port Royal Island, Dataw
Island and Harbor Island. The primary service area from which the bank expects
to draw at least 75 percent of its business is defined as the area northeast of
the Broad River, northwest of the Atlantic Ocean and south of the Coosaw River.
According to CACI Marketing Systems, a national demographic and market
information provider, the 1998 population in our primary service area was
approximately 63,800. It has been projected to rise to approximately 70,800 by
the Year 2003.
Services and retail trade industries employ approximately two-thirds of the
work force and account for almost two-thirds of the payroll dollars in Beaufort
County, according to information obtained from the Greater Beaufort Chamber of
Commerce. In 1998, our primary service area had a median household income of
$39,408, which is projected to increase to $44,665 by 2003, with more than 48
percent of the households in the primary service area having an annual income
over $35,000.
The Beaufort County area has a lower unemployment rate that the state of
South Carolina and its climate and geography have encouraged strong population
and economic growth. The premier resort destinations of Hilton Head Island,
Fripp Island and Dafuskie Island have also given the Beaufort County area a
higher profile regionally and nationally. Beaufort County has many positive
attributes that contribute to the area's business growth and stability. These
include easy access to Interstate Highway 95, rail service, and an employment
base comprised substantially of federal, state and local government employers.
These include the United States Marine Corps recruit depot at Parris Island,
the Marine Corps Air Station, the Beaufort Naval Hospital and the Beaufort
County Board of Education. This employment base, along with the real estate and
tourism industries, form the core of the area's economy.
Competition
As a commercial bank, the bank will compete primarily with other financial
institutions for deposits. In turn, our deposit base will directly affect our
loan activities and general growth. Primary methods of competition include
interest rates on deposits and loans, service charges on deposit accounts,
convenience of office locations, flexible office hours, and the range of
financial services offered. The bank will face strong competition in its
primary service area with other commercial banks, savings and loan
associations, credit unions, finance companies and brokerage firms.
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The Beaufort County area is currently served by at least eight commercial
banks with a total of fifteen offices holding over $402 million in deposits as
of June 30, 1998. There are also two credit unions. We are also aware of a
proposed new community bank that plans to commence operations in our primary
service area during the first half of 2000. A number of the existing
competitors are well established in the Beaufort County area. These competitors
have substantially greater resources and lending limits than the bank will
have, and offer services, including extensive and established branch networks
and trust services, that we either do not expect to provide or will not provide
initially. As a result of these competitive factors, the bank may have to pay
higher interest rates to attract depositors or extend credit with lower
interest rates to attract borrowers. Among the larger competitors operating in
our primary service area are Wachovia, Regions Bank, Firstbank, NA, Branch
Banking and Trust, Bank of America and Palmetto State Bank. Due to the growth
of the bank's primary service area, it is anticipated that additional
competition will continue to be created by new entrants to the financial
services market. We believe that the advantage of being a locally owned and
managed community bank headquartered in Beaufort will provide the bank with a
unique opportunity to obtain a share of those institutions' deposits.
Deposit Activities
The bank will offer a full range of interest bearing and non-interest
bearing accounts, including commercial and retail checking accounts, money
market accounts, individual retirement accounts, savings accounts, and other
time deposits of various types, ranging from daily money market accounts to
longer-term certificates of deposits. All deposit accounts will be insured by
the FDIC up to the maximum amount permitted by law. The bank's transaction
accounts and time certificates will be tailored to its principal market area at
competitive rates. The sources of deposits will be residents, businesses and
employees of businesses within the bank's primary service area. These deposits
are expected to be obtained through the personal solicitation of the bank's
officers and directors, direct mail solicitations, and advertisements published
in the local media.
Lending Activities
General.
The bank will use its deposits, together with borrowings and other sources
of funds, to originate and purchase loans. It will offer a full range of short
and medium-term small business and commercial, consumer and real estate loans.
The bank intends to generally allocate its loan portfolio as follows: small
business and commercial loans, 19 percent; real estate loans, 42 percent; and
consumer loans, 39 percent. Management intends to originate loans and to
participate with other banks with respect to loans which exceed the bank's
lending limits. The bank intends to develop a loan approval process which will
provide for various levels of officer lending authority. When a loan amount
exceeds an officer's lending authority, it will be transferred to an officer
with a higher limit, with ultimate lending authority resting with the loan
committee of the bank's board of directors.
The risk of nonpayment of loans is inherent in making all loans. However,
management intends to carefully evaluate all loan applicants and to attempt to
minimize its credit risk exposure by use of thorough loan application and
approval procedures that will be established for each category of loan prior to
beginning operations. In determining whether to make a loan, the bank will
consider the borrower's credit history, analyze the borrower's income and
ability to service the loan, and evaluate the need for collateral to secure
recovery in the event of default. The bank will maintain an allowance for loan
losses based upon management's assumptions and judgments regarding the ultimate
collectibility of loans in its portfolio and based upon a percentage of the
outstanding balances of specific loans when their ultimate collectibility is
considered questionable. Risks with regard to specific categories of loans are
described below.
Lending activities will be directed primarily to individuals and businesses
in the bank's primary service area whose demands for funds fall within the
bank's legal lending limits and which are also potential deposit customers of
the bank. The following is a description of each of the major categories of
loans anticipated to be made by the bank.
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Commercial Loans.
Commercial lending activities will be directed principally toward businesses
whose demand for funds falls within the bank's anticipated lending limits. This
category of loans includes loans made to individuals, partnerships or corporate
borrowers, and obtained for a variety of business purposes. Particular emphasis
will be placed on loans to small to medium-sized professional firms, retail and
wholesale businesses, light industry and manufacturing concerns operating in
and around the primary service area. The bank considers "small businesses" to
include commercial, professional and retail businesses with annual gross sales
of less than $15 million or annual operating costs of less than $3 million.
Within small business lending, the bank intends to focus on niches in the
market and expects to offer small business loans utilizing government
enhancements, such as the Small Business Administration's 7(a) loan guaranty
program. This program operates through private sector lenders, such as the
bank, that provide loans to small businesses unable to secure financing on
reasonable terms through normal lending channels. These loans are, in turn,
guaranteed by the Small Business Administration.
The types of commercial and small business loans provided will include
principally term loans with variable interest rates secured by equipment,
inventory, receivables and real estate, as well as secured and unsecured
working capital lines of credit. Risks of these types of loans depend on the
general business conditions of the local economy and the local business
borrower's ability to sell its products and services in order to generate
sufficient business profits to repay the loan under the agreed upon terms and
conditions. Personal guarantees may be obtained from the principals of business
borrowers and third parties to further support the borrower's ability to
service the debt and reduce the risk of nonpayment.
Consumer and Installment Loans.
Consumer loans will include lines of credit and term loans secured by second
mortgages on the residences of borrowers for a variety of purposes including
home improvements, education and other personal expenditures. Consumer loans
will also include installment loans to individuals for personal, family and
household purposes, including automobile loans to individuals and pre-approved
lines of credit. Consumer loans will generally involve more risk than first
mortgage loans because the collateral for a defaulted loan may not provide an
adequate source of repayment of the principal due to damage to the collateral
or other loss of value while the remaining deficiency often does not warrant
further collection efforts. In addition, consumer loan performance is dependent
upon the borrower's continued financial stability and is, therefore, more
likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy. Various federal and state laws also limit the amount that can be
recovered.
Real Estate Loans. The bank will make commercial real estate loans,
construction and development loans, and residential real estate loans. These
loans include commercial loans where the bank takes a security interest in real
estate out of an abundance of caution and not as the principal collateral for
the loan, but will exclude home equity loans, which are classified as consumer
loans. Interest rates for all categories may be fixed or adjustable, and will
more than likely be fixed for shorter-term loans. The bank will compete for
real estate loans with competitors who are well established in the Beaufort
County area and have greater resources and lending limits. As a result, we may
have to charge lower interest rates to attract borrowers.
Commercial Real Estate. The bank expects to offer commercial real estate
loans to developers of both commercial and residential properties. The bank
intends to manage its credit risk by actively monitoring such measures as
advance rate, cash flow, collateral value and other appropriate credit factors.
Risks associated with commercial real estate loans include the general risk of
the failure of each commercial borrower, which will be different for each type
of business and commercial entity. We will evaluate each business on an
individual basis and attempt to determine its business risks and credit
profile. Management will attempt to reduce credit risks 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 percent. In addition, we may also require personal
guarantees of the principal owners.
Construction and Development Loans. Construction and development loans will
be made both on a pre-sold and speculative basis. If the borrower has entered
into an arrangement to sell the property prior to beginning construction, the
loan will be considered to be on a pre-sold basis. If the borrower has not
entered
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into an agreement to sell the property prior to beginning construction, the
loan will be considered to be on a speculative basis. Residential and
commercial construction loans will be made 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 18 months, although payments may
be structured on a longer amortization basis. The ratio of the loan principal
to the value of the collateral as established by independent appraisal will not
exceed 75 percent. Speculative loans will be based on the borrower's financial
strength and cash flow position. Loan proceeds will be disbursed based on the
percentage of completion and only after the project has been inspected by an
experienced construction lender or appraiser. These loans generally command
higher rates and fees commensurate with the risks warranted in the construction
lending field. The risk in construction lending is dependent upon the
performance of the builder building the project to the plans and specifications
of the borrower and the bank's ability to administer and control all phases of
the construction disbursements. Upon completion of the construction, management
anticipates that the mortgage will be converted to a permanent loan and may be
sold to an investor in the secondary mortgage market.
Residential Real Estate Loans. Residential real estate loans will be made to
qualified individuals for the purchase of existing single-family residences in
our primary service area. These loans will be made consistent with the bank's
appraisal policy and real estate lending policy which will detail maximum loan-
to-value ratios and maturities. We expect these loan-to-value ratios will be
sufficient to compensate for fluctuations in real estate market value and to
minimize losses that could result from a downturn in the residential real
estate market. Mortgage loans that do not conform to the bank's policies will
be sold in the secondary markets. The risk of these loans depends on the
salability of the loan to national investors and on interest rate changes. The
bank intends to limit interest rate risk and credit risk on these loans by
locking in the interest rate for each loan with the secondary market investor
and receiving the investor's underwriting approval before originating the loan.
The bank will retain loans for its portfolio when it has sufficient liquidity
to fund the needs of the established customers and when rates are favorable to
retain the loans. The loan underwriting standards and policies will generally
be the same for both loans sold in the secondary market and those retained in
the bank's portfolio.
Asset and Liability Management
The primary assets of the bank will consist of its loan portfolio and its
investment accounts. Its liabilities will consist primarily of its deposits.
Our objective is to support asset growth primarily through growth of core
deposits, which include deposits of all categories made by individuals,
partnerships, corporations and other entities. Consistent with the requirements
of prudent banking necessary to maintain liquidity, we will seek to match
maturities and rates of loans and the investment portfolio with those of
deposits, although exact matching is not always possible. Management will seek
to invest the largest portion of the bank's assets in commercial, consumer and
real estate loans. We anticipate that loans will be limited to less than 75
percent of deposits and capital funds. This ratio may be exceeded, however, in
the initial period of operation. We anticipate that the bank's investment
account will consist primarily of marketable securities of the United States
Government, federal agencies and state and municipal governments, generally
with varied maturities.
We expect that the bank's asset/liability mix will be monitored on a regular
basis with a monthly report detailing interest-sensitive assets and interest-
sensitive liabilities prepared and presented to the board of directors. The
objective of this policy is to control interest-sensitive assets and
liabilities so as to minimize the impact of substantial movements in interest
rates on the bank's earnings.
Correspondent Banking
Correspondent banking involves the providing of services by one bank to
another bank which, from an economic or practical standpoint, cannot provide
that service for itself. The bank may purchase correspondent services offered
by larger banks, including check collections, purchase of federal funds,
securities safekeeping, investment services, coin and currency supplies,
overline and liquidity loan participations, and sales of loans to or
participations with correspondent banks. We anticipate that we will sell loan
participations to correspondent banks with respect to loans which exceed our
lending limits. As compensation for services provided by a correspondent bank,
we may maintain balances with correspondents in non-interest bearing accounts.
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Other Banking Services
Other anticipated services include cash management services, safe deposit
boxes, traveler's checks, direct deposit of payroll and social security checks,
wire transfers, telephone banking, and automatic drafts for various accounts.
We plan to offer a debit card, VISA(R) and/or MasterCard(R) credit card
services through a correspondent bank as an agent for the bank. We also plan to
offer extended banking hours, both drive-in and lobby, and an after-hours
depository. We expect to become associated with a shared network of automated
teller machines that our customers will be able to use throughout our primary
service area and other regions. We also intend to associate with a third party
Internet banking service provider that will enable us to provide our customers
with a cost effective, secure and reliable Internet banking solution. We do not
plan to exercise trust powers during our initial years of operation.
Employees
When it begins operations, the bank is anticipated to have approximately
eleven full-time employees and no part-time employees. We do not expect that
the Bancorp will have any employees other than its officers who are also
employees of the bank. We anticipate that in its first year of operation, the
bank will hire five additional persons on a full-time basis and one additional
person on a part-time basis, subject to the bank's needs.
Facilities
The temporary office for the Bancorp is located at 211 Charles Street, Suite
100, in downtown Beaufort, South Carolina. This office space, consisting of
approximately 1,200 square feet, is leased through April 30, 2000 and becomes a
month-to-month lease after that date. The monthly lease rate is $1,250.
The Bancorp has entered into an agreement for the purchase of approximately
2.3 acres of land at 131 Sea Island Parkway (federal highway 21) in Lady's
Island, South Carolina to be used as the site for the main office of the bank.
The purchase agreement is expected to be assigned from the Bancorp to the bank
upon the commencement of the bank's operations. Promptly following that
assignment, the bank is expected to close the purchase of the real estate. The
Bancorp is entitled to extend the closing date of the land purchase up to six
months beyond the scheduled closing date of May 15, 2000 in return for the non-
refundable payment to the current landowner of $3,000 for each 30-day
extension.
We expect that construction of the bank's main office at this site will
commence shortly following the closing of the bank's purchase of the real
estate. The estimated cost of the building is approximately $1,050,000. The
bank will fund the purchase of this real estate acquisition and the
construction of the main building with a portion of the net proceeds received
from the issuance of its common stock to the Bancorp. See "Use of Proceeds." We
expect construction of our permanent facility at this site to be completed in
the third quarter of 2001. Pending the completion of the permanent facility, we
expect to commence the bank's operations from temporary modular facilities
located at this site.
Legal Proceedings
Neither the Bancorp, the bank, nor any of their properties are subject to
any legal proceedings as of the date of this prospectus.
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SUPERVISION AND REGULATION
General
The Bancorp and the bank will be subject to an extensive collection of state
and federal banking laws and regulations which impose specific requirements and
restrictions on, and provide for general regulatory oversight with respect to,
virtually all aspects of the Bancorp's and the bank's operations. These
regulations are generally intended to provide protections for depositors and
borrowers, rather than for the benefit of shareholders. Each of the Bancorp and
the bank will also be affected by government monetary policy and by regulatory
measures affecting the banking industry in general. The actions of the Federal
Reserve System affect the money supply, and in general, the lending abilities
of the bank in increasing or decreasing the costs and availability of funds to
the bank. Additionally, the Federal Reserve System regulates the availability
of bank credit in order to combat recession and curb inflationary pressures in
the economy by open market operations in United States government securities,
changes in the discount rate on member bank borrowings, changes in the reserve
requirements against bank deposits and limitations on interest rates which
banks may pay on time and savings deposits.
The burden imposed by federal and state regulations may place us at a
competitive disadvantage as compared to competitors which are less regulated.
Applicable laws, regulations, interpretations and enforcement policies may be
subject to significant future changes. Our ability to achieve profitability and
grow could be adversely affected by state and federal banking laws and
regulations.
The following is a brief summary of some of the statutes, rules and
regulations affecting the Bancorp and the bank. This summary is qualified in
its entirety by reference to the particular statutory and regulatory provisions
referred to below and is not intended to be an exhaustive description of the
statutes or regulations applicable to the business of the Bancorp and the bank.
Any change in applicable laws or regulations may have a material adverse effect
on the business and prospects of these entities.
The Bancorp
The Bancorp is a bank holding company within the meaning of the Federal Bank
Holding Company Act of 1956 and the South Carolina Banking and Branching
Efficiency Act of 1996. The Bancorp will be registered with both the Federal
Reserve System and the South Carolina State Board of Financial Institutions.
The Bancorp is required to file with both of these agencies annual reports and
other information regarding its business operations and those of any
subsidiary. It is also subject to the supervision of, and to regular
examinations by, these agencies. The regulatory requirements to which the
Bancorp will be subject also set forth various conditions regarding the
eligibility and qualifications of its directors and officers.
The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Federal Reserve Board before:
. acquiring all or substantially all of the assets of a bank,
. acquiring direct or indirect ownership or control of more than five
percent of the voting shares of any bank, or
. merging or consolidating with another bank holding company.
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 five percent of the voting shares of any company engaged in, any business
other than the business of banking or managing and controlling banks. Some of
the activities the Federal Reserve Board has determined by regulation to be
proper incidents to the business of banking, and thus permissible for bank
holding companies, include:
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. 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 advisor,
. owning savings associations, and
. making investments in corporations or projects designed primarily to
promote community welfare.
In determining whether an activity is so closely related to banking as to be
permissible for bank holding companies, the Federal Reserve Board is required
to consider whether the performance of the particular activities by a bank
holding company or its subsidiaries can reasonably be expected to produce
benefits to the public such as greater convenience, increased competition and
gains in efficiency that outweigh possible adverse effects such as undue
concentration of resources, decreased or unfair competition, conflicts of
interests and unsound banking practices. Generally, bank holding companies are
required to obtain prior approval of the Federal Reserve Board to engage in any
new activity not previously approved by the Federal Reserve Board. Despite
prior approval, the Federal Reserve Board may order a bank holding company or
its subsidiaries to terminate any activity or to terminate its ownership or
control of any subsidiary when it has reasonable cause to believe that the
holding company's continued ownership, activity or control constitutes a
serious risk to the financial safety, soundness or stability of any of its bank
subsidiaries.
The Bank Holding Company Act and the Federal Change in Bank Control Act,
together with regulations promulgated by the Federal Reserve Board, require
that, depending on the particular circumstances, either the Federal Reserve
Board's approval must be obtained or notice must be furnished to the Federal
Reserve Board and not disapproved prior to any person or company acquiring
control of a bank holding company, such as the Bancorp, subject to certain
exemptions. Control is conclusively presumed to exist when an individual or
company acquires 25 percent or more of any class of voting securities of the
bank holding company. Control is rebuttably presumed to exist if a person
acquires 10 percent or more, but less than 25 percent, of any class of voting
securities and either the bank holding company 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. The Bancorp may be required to register its common stock under
Section 12 of the Securities Exchange Act of 1934 once its common stock is held
by more than 500 shareholders of record. The regulations provide a procedure
for challenge of the rebuttable control presumption.
The Federal Reserve Board, pursuant to regulation and published policy
statements, has maintained that a bank holding company must serve as a source
of financial strength to its subsidiary banks. In adhering to the Federal
Reserve Board policy, the Bancorp may be required to provide financial support
to a subsidiary bank at a time when, absent such Federal Reserve Board policy,
the Bancorp may not deem it advisable to provide such assistance. Under the
Bank Holding Company Act, the Federal Reserve Board may also 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 the 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.
Under the South Carolina Banking and Branching Efficiency Act, the Bancorp
must obtain the approval of the South Carolina State Board of Financial
Institutions before the Bancorp acquires all or substantially all of the assets
of a bank or any other bank holding company or more than five percent of the
voting shares of any bank or any other bank holding company, or merges or
consolidates with any other bank holding company.
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The Bank
As a national bank, the bank is subject to the supervision of the Office of
the Comptroller of the Currency and, to a limited extent, the FDIC and the
Federal Reserve Board. The bank's deposits will be insured by the FDIC for a
maximum of $100,000 per depositor. For this protection, the bank will pay a
semi-annual statutory assessment and will have to comply with the rules and
regulations of the FDIC. The Office of the Comptroller of the Currency and the
FDIC will regulate and monitor 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 out safe lending and deposit
gathering practices.
In addition, federal law prohibits the bank from engaging in certain "tie-in"
or "tying" arrangements. Tying is generally defined as any arrangement in which
a bank requires a customer who wants one service, such as credit, to buy other
services or products from the bank or its affiliates as a condition of
receiving the first service. The regulatory requirements to which the bank will
be subject also set forth various conditions regarding the eligibility and
qualification of its officers and directors.
Capital Adequacy Requirements
Both the Bancorp and the bank will be subject to regulatory capital
requirements imposed by the Federal Reserve Board and the Office of the
Comptroller of the Currency which vary based on differences in risk profiles.
The capital adequacy guidelines issued by the Federal Reserve Board are applied
to bank holding companies on a consolidated basis with the banks owned by the
holding company. The Office of the Comptroller of the Currency's risk-based
capital guidelines apply directly to national banks, such as the bank,
regardless of whether they are a subsidiary of a bank holding company. Both
agency's requirements, which are substantially similar, provide that banking
organizations must have capital (as defined in the rules) equivalent to eight
percent of risk-weighted assets. The risk weights assigned to assets are based
primarily on credit risks. Depending upon the riskiness of a particular asset,
it is assigned to a risk category. For example, securities with an
unconditional guarantee by the United States government are assigned to the
lowest risk category. The aggregate amount of assets assigned to each risk
category is multiplied by the risk weight assigned to that category to
determine the weighted values, which are added together to determine total
risk-weighted assets.
Both the Federal Reserve Board and the Office of the Comptroller of the
Currency have also adopted minimum capital leverage ratios to be used in tandem
with the risk-based guidelines in assessing the overall capital adequacy of
banks and bank holding companies. The guidelines define a two-tier capital
framework. Tier 1 capital consists of common and qualifying preferred
shareholder's equity, less goodwill and other adjustments. Tier 2 capital
consists of mandatory convertible, subordinated, and other qualifying term
debt, preferred stock not qualifying for Tier 1, and a limited allowance for
credit losses up to a designated percentage
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of risk-weighted assets. Under the guidelines, institutions must maintain a
specified minimum ratio of "qualifying" capital to risk-weighted assets. At
least 50 percent of an institution's qualifying capital must be "core" or "Tier
1" capital, and the balance may be "supplementary" or "Tier 2" capital. The
guidelines imposed on the bank will include a minimum leverage ratio standard
of capital adequacy. The leverage standard requires top-rated institutions to
maintain a minimum Tier 1 capital to assets ratio of three percent, with
institutions receiving less than the highest rating required to maintain a
ratio of four percent or greater, based upon their particular circumstances and
risk profiles.
Federal bank regulatory authorities have adopted regulations revising the
risk-based capital guidelines to further ensure that the guidelines take
adequate account of interest rate risk. Interest rate risk is the adverse
effect that changes in market interest rates may have on a bank's financial
condition and is inherent to the business of banking. Under the regulations,
when evaluating a bank's capital adequacy, the revised capital standards now
explicitly include a bank's exposure to declines in the economic value of its
capital due to changes in interest rates. The exposure of a bank's economic
value generally represents the change in the present value of its assets, less
the change in the value of its liabilities, plus the change in the value of its
interest rate off-balance sheet contracts. The Office of the Comptroller of the
Currency's risk assessment approach used to evaluate a bank's capital adequacy
for interest rate risk relies on a combination of quantitative and qualitative
factors. Banks that are found to have high levels of exposure or weak
management practices will be directed by the Office of the Comptroller of the
Currency to take corrective action.
The foregoing capital guidelines could affect the bank in several ways. If
the bank grows rapidly, its capital base may become insufficient to support
continued growth, making an additional capital infusion necessary. The capital
guidelines could also impact the bank's ability to pay dividends. It is
expected that the bank's capital levels will initially be more than adequate.
Rapid growth, poor loan portfolio performance or poor earnings performance, or
a combination of these factors, could change our capital position in a
relatively short period of time. Failure to meet these capital requirements
would require the bank to develop and file a plan with the Office of the
Comptroller of the Currency describing the means and a schedule for achieving
the minimum capital requirements. In addition, we would not be able to receive
regulatory approval of any application that required consideration of capital
adequacy, such as a branch or merger application, unless we could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.
Dividends
The ability of the Bancorp to pay cash dividends will depend entirely upon
the amount of dividends paid by the bank. The Bancorp is subject to the South
Carolina state business corporation law requirements that dividends may be paid
only if the dividend payment would not render the Bancorp insolvent or unable
to meet its obligations as they come due. The Bancorp is not presently subject
to any direct legal or other regulatory restrictions on dividends.
The bank is subject to regulatory restrictions on the payment of dividends,
including the prohibition of payment of dividends from the bank's capital. All
dividends of the bank must be paid out of undivided profits then on hand, after
deducting expenses, including losses and bad debts. In addition, the 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
not less than one-tenth of the bank's net income 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 the bank in any calendar year exceeds the total of
its net income for that year combined with its retained net income for the
preceding two years, less any required transfers to surplus or a fund for the
retirement of any preferred stock.
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Other Regulations
Interest and various other charges collected or contracted for by the bank
will be subject to state usury laws and federal laws concerning interest rates.
The bank's loan operations will also be subject to federal laws applicable to
credit transactions, such as the:
. Federal Truth-In-Lending Act governing disclosures of credit terms to
consumer borrowers,
. Community Reinvestment Act of 1977 requiring financial institutions to
meet their obligations to provide for the total credit needs of the
communities they serve, including investing their assets in loans to low
and moderate-income borrowers,
. Home Mortgage Disclosure Act of 1975 requiring financial institutions to
provide information to enable public officials to determine whether a
financial institution is fulfilling its obligations to meet the housing
needs of the community it serves,
. Equal Credit Opportunity Act prohibiting discrimination on the basis of
race, creed or other prohibitive factors in extending credit,
. Fair Credit Reporting Act governing the manner in which consumer debts
may be collected by collection agencies, and
. the rules and regulations of various federal agencies charged with the
responsibility of implementing such federal laws.
The deposit operations of the bank will also be 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
. Electronic Funds Transfer Act and Regulation E issued by the Federal
Reserve Board to implement that act, which govern 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.
Interstate and Intrastate Banking and Branching
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, eligible bank holding companies in any state are permitted, with Federal
Reserve Board approval, to acquire banking organizations in any other state. As
such, all regional compacts and substantially all then-existing regional
limitations on interstate acquisitions of banking organizations have been
eliminated. The Interstate Banking and Branching Efficiency Act removed
substantially all of the then-existing prohibitions on interstate branching by
banks. The authority of a national bank to establish and operate branches
within a state continues to be subject to applicable state branching laws.
Subject to these laws, a bank operating in any state may now establish one or
more branches within any other state without the establishment of a separate
banking structure within the other state. The South Carolina Banking and
Branching Efficiency Act permits out-of-state banks and bank holding companies
to acquire and merge with South Carolina banks and bank holding companies as
long as the State Board of Financial Institutions gives prior approval for the
acquisition or merger. That same Act also permits South Carolina state banks,
with the prior approval of the State Board of Financial Institutions, to
operate branches outside of South Carolina. Although the Interstate Banking and
Branching Efficiency Act has the potential to increase the number of
competitors in the market area of the bank, we cannot predict the actual impact
of such legislation on the competitive position of the bank.
Gramm-Leach-Bliley Act
The Gramm-Leach-Bliley Act (popularly referred to as the Financial Services
Modernization Act of 1999 prior to enactment) was enacted November 11, 1999, to
be effective March 11, 2000. The Act accomplished a variety of purposes,
including facilitating the affiliation among banks, securities firms, and
insurance companies and providing privacy protections for customers. Among the
more significant areas affected by this new legislation, the Act:
28
<PAGE>
. amends the Glass-Steagall Act of 1933 by repealing the prohibitions
against affiliation of any Federal Reserve member bank with an entity
engaged principally in securities activities, and repealing the
prohibition against simultaneous service by any officer, director, or
employee of a securities firm as an officer, director, or employee of
any Federal Reserve member bank;
. amends the Bank Holding Company Act to permit bank holding companies to
own shares in non-banking organizations whose activities have been
determined by the Board of Governors of the Federal Reserve System to be
so closely related to banking as to be permissible for bank holding
companies;
. creates a statutory mechanism for the establishment of financial holding
companies whose subsidiary depository institutions are well-capitalized
and well-managed and whose activities may be financial or non-financial,
subject to some restrictions;
. creates a new type of bank, known as a wholesale financial institution,
which will be regulated by the Bank Holding Company Act but not able to
accept insured deposits, potentially giving companies with wholesale
financial institution subsidiaries greater flexibility to engage in non-
financial investments;
. subject to some exemptions, preempts state anti-affiliation laws
restricting transactions among insured depository institutions,
wholesale financial institutions, insurance concerns and national banks;
. amends the Bank Holding Company Act and the Federal Deposit Insurance
Act to mandate public meetings concerning proposed large bank mergers
and acquisitions;
. amends federal laws governing national banks to prohibit a financial
subsidiary of a national bank from
. engaging in any activity or owning shares of a company engaged in
any activity that is impermissible for a national bank;
. engaging in any activity that is conducted under terms other than
those that govern national bank activities, unless a national bank
is expressly authorized to do so by federal statute;
. acting as principal in providing or issuing annuities or in
specified insurance activities, except credit-related insurance; or
. engaging in real estate investment or development activities; and
. imposes obligations on financial institutions to protect the privacy and
confidentiality of customer nonpublic personal information, including
the requirements that financial institutions establish standards for
safeguards to protect privacy and confidentiality, provide the standards
to the customers at the time of establishing the customer relationship
and not less than annually during the continuation of the relationship,
condition disclosure of the private information to nonaffiliated third
parties on the giving of specific disclosures to consumers and giving
consumers the opportunity to prevent such disclosure to third parties.
Although the Gramm-Leach-Bliley Act has the potential to mix traditional
non-banking commerce and banking and enhance the bank's ability to diversify
into a variety of areas, we cannot predict the actual impact of this new
legislation on the bank or the Bancorp.
MANAGEMENT
Directors and Executive Officers of the Bancorp and the Bank
Set forth below is information regarding the directors and executive
officers of the Bancorp. The President and Chief Executive Officer and each of
the directors of the Bancorp are expected to hold these same positions with the
bank. The Bancorp, as the sole shareholder of the bank, will nominate each of
the following individuals to serve as a director of the bank at the bank's
first shareholders meeting. That meeting is expected
29
<PAGE>
to convene shortly after the bank receives its charter. Directors of the bank
will serve for a term of one year and will be elected by the Bancorp each year
at the bank's annual meeting of shareholders. The bank's officers will be
appointed by its board of directors and will hold office at the will of its
board.
Under the articles of incorporation of the Bancorp, the board of directors
is divided into three classes of directors that serve staggered three-year
terms. The members of one class are elected at each annual meeting of
shareholders and hold office until the third annual meeting following their
election, or until their successors are elected and qualified. 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 of the Bancorp serve at the discretion of the board of
directors. Unless otherwise set forth below, each of the individuals listed
below has served as a director of the Bancorp since its incorporation on July
23, 1999.
<TABLE>
<CAPTION>
Name Age Position with Bancorp
- ---- --- ---------------------
<S> <C> <C>
William B. Gossett...... 56 President and Chief Executive Officer, Class I Director
Avery E. Cleland........ 39 Class III Director
Louis O. Dore........... 54 Class I Director
Paul M. Dunnavant, III.. 36 Treasurer, Class II Director
Martha B. Fender........ 54 Vice President, Class I Director
D. Martin Goodman....... 53 Chairman of the Board, Class I Director
Edward J. McNeil, Jr.... 45 Secretary, Class II Director
Frances K. Nicholson.... 45 Class II Director
J. Frank Ward........... 53 Class III Director
Bruce K. Wyles.......... 45 Class III Director
</TABLE>
William B. Gossett has served as the President and Chief Executive Officer
of the Bancorp since its inception on July 23, 1999, and will be the President
and Chief Executive Officer of the bank. Prior to joining the Bancorp, he
served for 16 years as the President and Chief Executive Officer of Liberty
National Bank in Longwood, Florida. Liberty National Bank, which Mr. Gossett
helped organize, was named by the American Bankers Association as Florida's
Most Profitable Bank and was listed in the Nation's 50 Most Profitable Banks
since 1992. Liberty National Bank operated three banking offices in Greater
Orlando, Florida and had loan production offices in Jacksonville and Tampa,
Florida. During his years with Liberty National Bank, Mr. Gossett developed a
reputation for his small business and entrepreneurial financing expertise. He
served as a frequent local and national speaker on small business and minority
financing. In 1973, Mr. Gossett was selected to organize and charter Tropic
Bank of Seminole (formerly known as Atlantic Bank of Casselberry) where he
served as President and Chief Executive Officer for seven years. Prior to
joining Tropic Bank of Seminole, Mr. Gossett served as a Commercial Loan
Officer with Atlantic National Bank of Jacksonville, Florida. Mr. Gossett has
been very involved in professional and civic activities. He is past Chairman of
the Bank Operations Committee of the Independent Bankers Association of
America, as well as a past member of its Lending Issues Sub-Committee, its
Policy Development Committee, and its Long-Term Planning Committee. He is past
Chairman of the District Advisory Committee of the United States Small Business
Administration, Jacksonville, Florida and a member of the Wholesale Financial
Services Advisory Group of the American Bankers Association.
Avery E. Cleland has served as President of Cleland Construction Co., Inc.
since 1986 and is currently its sole shareholder. Under his leadership, Cleland
Construction has grown from a small land site development company into a multi-
company enterprise specializing in subdivision, shopping mall, highway and
public utility construction. Mr. Cleland currently serves as Chairman of the
Jasper County Council and is active in many community organizations.
Louis O. Dore has practiced as a trial lawyer in Beaufort, South Carolina
since 1976, and has practiced with Louis O. Dore, P.A. since he formed the firm
in 1991. He is a member of the Beaufort County and South Carolina Bar
Associations and the Advisory Board of Branch Banking and Trust in Beaufort.
His past activities
30
<PAGE>
include service on the Boards of Trustees of Beaufort Memorial Hospital, Penn
Community Services, and Benedict College (Columbia, South Carolina); and
service as Chairman of the Beaufort County Democratic Party, Chairman of the
South Carolina Board of Education, and a member of the South Carolina
Democratic Party Executive Council. Mr. Dore has served as a director of the
Bancorp since August 17, 1999.
Paul M. Dunnavant, III has served as Chief Financial Officer and Treasurer
of Amick Farms, Inc., an integrated poultry processor, in Batesburg, South
Carolina for over six years. Prior to joining Amick Farms, Inc. in 1993, Mr.
Dunnavant was employed for six years by Arthur Andersen & Co. in Columbia,
South Carolina, having served as Tax Manager for two of the six years. Mr.
Dunnavant is a Certified Financial Planner, a Certified Public Accountant, a
member of the South Carolina Association of CPA's, a member of the Palmetto
Baptist Foundation Development Board and a member of the Deacon Board of First
Baptist Church of Columbia, South Carolina.
Martha B. Fender has served as President and owner of Coastal Carolina
Realty, Inc. since 1987, having joined that firm in 1984. For the past fifteen
years, Mrs. Fender has also been actively involved in multiple positions with
the Child Abuse Prevention Association for the Open Arms Shelter for Abused and
Neglected Children in Beaufort, including service in various executive offices
and as a member of its board of directors, service as Chairman of the Building
and Personnel Committees, and service for eleven years as the Volunteer Shelter
Administrator. She is a member of the National Association of Realtors, the
South Carolina Association of Realtors and the Beaufort Board of Realtors where
she has held various executive officer and committee chairman positions since
1989.
D. Martin Goodman has served as Area Manager of the University of South
Carolina Small Business Development Center in Beaufort, South Carolina since
July 1992. He has been the co-owner, with his wife, of Ollie's Seafood
Restaurants in Beaufort since 1996. Prior to moving to Beaufort in 1991, Mr.
Goodman held various management positions with several companies in the United
States tire industry. Mr. Goodman is a Director of Mainstreet Beaufort, USA,
past President of the Greater Beaufort Chamber of Commerce, Board Member of the
Beaufort County Economic Development Board, Advisory Board Member of the
Business Department of the Technical College of the Lowcountry, Finance
Committee Chairman of Carteret Street United Methodist Church and has served as
President and is a Board Member of the Beaufort Small Business Assistance
Corporation.
Edward J. McNeil, Jr. has served as a practicing physician with Low Country
Medical Group, specializing in internal medicine, since January 1998. He
currently serves as Medical Director for his multi-speciality group, as well as
Lab Director. Prior to joining Low Country Medical Group, Dr. McNeil had
practiced as a physician with Internal Medicine Health Care in Beaufort from
January 1997 to December 1997, and with Southeast Health Care Association from
January 1995 to December 1996. Prior to that, he had operated his own medical
practice in Beaufort since 1987. Dr. McNeil is currently a Member of the
American Medical Association as well as the South Carolina Medical Association.
He also serves as the Medical Director for Care One Home Health Agency and is a
member as well as Chairman of the Trustee Board and Steward Board at Wesley
United Methodist Church.
Frances K. Nicholson has served since 1992 as the manager and principal
owner of Nicholson Investments LLC, a real estate leasing and securities
portfolio company; since 1998 as the manager and principal owner of Big Nickel
Properties, LLC, a manager of rental properties; and since 1992 as the business
manager and a principal of Carolina Capital Leasing, Inc., an equipment and
vehicle sales and leasing company. Mrs. Nicholson was a buyer and product
manager for a large distribution company from 1985 to 1990 and served as a
part-time faculty member of Southern State Community College in Wilmington,
Ohio from 1991 to 1992. She currently serves as an Executive Board Member of
J.L. Mann High School and is a sustaining member of the Junior League of
Greenville. Mrs. Nicholson has served as a director of the Bancorp since August
17, 1999.
31
<PAGE>
J. Frank Ward has served as Sales Coordinator and Realtor with Renaissance
Marketing, LLC in Beaufort, South Carolina since February 1998. Prior to
joining Renaissance Marketing, LLC, Mr. Ward was employed with Toyota Center in
West Columbia/Lexington, South Carolina for 21 years, spending the last 12
years of that period as new car sales manager. He has been a Mason since 1976
and a Shriner since 1980.
Bruce K. Wyles has served as a practicing dentist in Beaufort, South
Carolina since 1983 and is a real estate investor.
Remuneration of Directors
The directors of the Bancorp and the bank have not received and will not
receive any fees or other compensation in connection with the organization of
the Bancorp or the bank. We do not intend to pay director's fees until the bank
is cumulatively profitable. In addition, after the offering, we expect to adopt
a stock option plan which will permit the Bancorp 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 percent of the shares outstanding after the offering. We will not issue
stock options at less than the fair market value of the common stock on the
date of grant.
Employment Agreement
On July 27, 1999, we entered into an employment agreement with William B.
Gossett pursuant to which Mr. Gossett serves as President and Chief Executive
Officer of the Bancorp and, upon its organization, the bank, for a term of five
years. The agreement automatically renews for additional two-year terms unless
either party notifies the other party of its intent not to renew at least 180
days prior to the end of the then current term. Mr. Gossett's initial annual
base salary under the agreement is $135,000. His annual salary becomes $130,000
effective August 1, 2000. He is also entitled to receive a bonus of $10,000
upon the opening of the bank, which bonus may increase to $27,500 based upon
the board of directors' consideration of various factors. For each year
following the first full calendar year of the bank's operations, Mr. Gossett is
also entitled to a bonus of five percent of the bank's net income if the board
of directors determines the bonus is appropriate in light of its analysis of
various performance criteria.
In addition to his salary and bonus compensation, Mr. Gossett will be
provided with an automobile, or an automobile allowance; life insurance of
$300,000 payable to his spouse and heirs; and reimbursement for automobile
expenses, club dues, business expenses, and moving and relocation expenses. He
will also participate in the bank's retirement, medical and other benefit
programs.
Mr. Gossett will be eligible to participate in any long-term equity
incentive program of the Bancorp and will be eligible for the grant of stock
options, restricted stock and other awards under such program or any similar
program adopted by the Bancorp. Upon closing of this offering, or as soon after
the closing as an appropriate stock option plan is adopted by the Bancorp, Mr.
Gossett will be granted options to purchase a number of shares of the Bancorp's
common stock equal to three percent of the number of shares sold in this
offering at a purchase price of $10.00 per share. One-third of the shares
covered by the option will vest on each of the first, second and third
anniversaries of the date the bank opens for business, subject to accelerated
vesting upon a change in control of the Bancorp.
The employment agreement with Mr. Gossett also provides that during the term
of his employment and for a period expiring on the earlier to occur of
. one year after termination of his employment for any reason other than
without cause,
. six months after expiration of the employment agreement where expiration
results from Mr. Gossett's timely notification of his intent not to
renew the agreement, and
. the expiration of the agreement where expiration results from the
Bancorp's or the bank's timely notification to Mr. Gossett of its intent
not to renew the agreement,
32
<PAGE>
Mr. Gossett will not compete, directly or indirectly, with the Bancorp or the
bank, or any of their subsidiaries, or have more than a two percent passive
investment in any financial institution that maintains an office or branch
within 25 miles of each location where the Bancorp or the bank maintains an
office or branch at any time during Mr. Gossett's employment under the
agreement. The agreement also provides that during the term of his employment
and for a period expiring on the earlier to occur of one year after termination
of his employment for any reason and one year following the expiration of the
agreement, Mr. Gossett will not solicit employees of the bank or the Bancorp
for employment and will not solicit customers of the bank to any other
financial institution.
Upon termination of Mr. Gossett's employment by the Bancorp or the bank
without cause or for any reason following a change in control of the Bancorp,
Mr. Gossett will be entitled to a lump sum severance payment equal to two times
his base salary in effect at the time, plus any accrued bonus, and all of his
outstanding options will immediately vest. If the Bancorp terminates Mr.
Gossett's employment as a result of abandoning its effort to organize the bank,
Mr. Gossett will be entitled to any earned but unpaid portion of his base
salary and a cash lump sum severance payment equal to the amount of his base
salary in effect at the time of the termination that would have been payable to
him for the period from the date of such termination to the later to occur of
July 27, 2000 and the date 120 days following the date of such termination.
Stock Warrants of Directors
Each of the directors has devoted substantial time and effort in the
activities necessary to organize the Bancorp and the bank, including attendance
at meetings over a period of several months. In addition, each of the
organizers has undertaken a substantial financial risk of loss in connection
with the funding of the organizational expenses of the Bancorp and the bank. In
consideration for these efforts and in recognition of these risks, upon
completion of this offering, each of the directors who purchases shares in this
offering will be granted, for no additional consideration, one warrant for each
share of common stock the director purchases in the offering, up to an
aggregate maximum for all directors of 210,115 shares. Each warrant will
entitle the director to purchase, at any time within ten years from the date
the bank opens for business, one additional share of our common stock at a
price of $10.00 per share. The warrants will not be immediately exercisable.
The right to exercise the warrants will vest for one-third of the shares
covered by the warrants on each of the first three anniversaries of the date
the bank opened for business, so long as the director has served continuously
as a director of the Bancorp and the bank from its opening until that
particular anniversary date. All of the warrants, however, will become vested
upon a change in control of the Bancorp or the bank, or sale of all or
substantially all of their assets.
Included among the conditions for the Office of the Comptroller of the
Currency's approval of the warrants was the inclusion of a provision to be set
forth in the form of the warrants providing the Bancorp the right, upon notice
from any regulatory authority, to require immediate exercise or forfeiture of
the warrants if, in the opinion of the Office of the Comptroller of the
Currency, the exercise is reasonably necessary in order to inject additional
capital into the bank.
Director Liability and Indemnification
The articles of incorporation of the Bancorp contain a provision which,
subject to certain limited exceptions, limits the liability of a director to
the Bancorp or its shareholders for any breach of duty as a director. There is
no limitation of liability for:
. a breach of the director's duty of loyalty to the corporation or its
shareholders;
. an act or omission not undertaken in good faith;
. an act or omission which involves gross negligence, intentional
misconduct or a knowing violation of law;
33
<PAGE>
. 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 the South Carolina Business Corporation Act is amended to
authorize further elimination or limitation of the liability of a director,
then the liability of each director will 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 Bancorp or its shareholders to seek injunctive
or other equitable relief not involving payments in the nature of monetary
damages.
The bylaws of the Bancorp provide that the Bancorp shall indemnify its
directors to the maximum extent provided by the South Carolina Business
Corporation Act. This protection is broader than the protection expressly
mandated in Section 33-8-520 of the South Carolina Business Corporation Act.
That statutory section provides that a company must indemnify a director or an
officer only to the extent that the director has been wholly successful, on the
merits or otherwise, in the defense of any action or proceeding brought by
reason of the fact that the person was a director or officer. This requirement
would include indemnifying directors against expenses, including attorney's
fees, actually and reasonably incurred in connection with the matter.
In addition to this mandatory indemnification right, our bylaws make
mandatory the indemnification permitted, but not mandated, by Section 33-8-510
of the South Carolina Business Corporation Act. Accordingly, under our bylaws,
the Bancorp shall indemnify a director where
. the director conducted himself or herself in good faith,
. the director reasonably believed that conduct in the director's official
capacity with the Bancorp was either in the Bancorp's best interest or
was not opposed to the best interest of the Bancorp; and
. in the case of any criminal proceeding, the director had no reasonable
cause to believe the director's conduct was unlawful.
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.
The Securities and Exchange Commission has informed us that indemnification
for officers, directors, and controlling persons for liabilities arising under
the Securities Act of 1933 is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable.
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.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number and percentage of outstanding
shares of common stock beneficially owned as of the date of this prospectus by
the officers and directors of the Bancorp, and the proposed officers and
directors of the bank. The following table also sets forth the anticipated
purchases by these individuals in this offering and the percentage of common
stock to be owned by each of them assuming completion of the minimum offering
of 630,000 shares.
34
<PAGE>
The amounts in the table below include, for each individual, 50 shares of
common stock which were purchased by the individual prior to the offering at a
purchase price of $10.00 per share. The table does not include shares which may
be purchased by the individuals pursuant to their exercise of warrants that are
expected to be granted to them upon completion of the offering. For additional
information regarding the grant of these warrants, see "Management--Stock
Warrants of Directors."
Beneficial ownership, as reflected in the table, is determined in accordance
with the rules and regulations of the Securities and Exchange Commission. It
generally includes securities of which a person has or shares the power to vote
or to direct the vote, or has or shares the power to dispose or to direct the
disposition. A person is also deemed to be a beneficial owner of any security
of which that person has the right to acquire beneficial ownership within 60
days, including shares of common stock subject to currently exercisable stock
options or warrants. The percentage ownership has been calculated on the
assumption that the Bancorp has completed the minimum offering of 630,000
shares.
<TABLE>
<CAPTION>
Shares Anticipated to Be Beneficially Owned
After the Offering
Percentage of
Name Number of Shares Total Shares
- ---- ----------------------- -------------------------
<S> <C> <C>
William B. Gossett........... 30,050 4.8%
Avery E. Cleland............. 10,050 1.6
Louis O. Dore................ 10,050 1.6
Paul M. Dunnavant, III....... 11,050 1.8
Martha B. Fender............. 10,050 1.6
D. Martin Goodman............ 10,050 1.6
Edward J. McNeil, Jr......... 10,050 1.6
Frances K. Nicholson......... 10,050 1.6
J. Frank Ward................ 10,050 1.6
Bruce K. Wyles............... 10,050 1.6
----------------------- --------------------
Total...................... 121,500 19.3%
======================= ====================
</TABLE>
TRANSACTIONS WITH MANAGEMENT
Transactions in the Ordinary Course of Business
Once the bank opens for business, it is anticipated that our directors,
officers and their affiliates, including members of their families or
businesses and other organizations with which they are associated, will have
banking and other transactions in the ordinary course of business with the
bank. It will be the policy of the bank that any loans or other transactions
with those persons or entities
. will be made in accordance with applicable law and the bank's lending
policies,
. will be made on substantially the same terms, including price, interest
rates and collateral, as those prevailing at the time for comparable
transactions with other unrelated parties of similar standing, and
. will not be expected to involve more than the normal risk of
collectibility or present other unfavorable features to the Bancorp and
the bank.
In addition, all future transactions with our directors, officers and their
affiliates are intended to be on terms no less favorable than could be obtained
from an unaffiliated third party, and must be approved by a majority of our
directors, including a majority of the directors who do not have an interest in
the transaction.
35
<PAGE>
Funding by the Organizers
In order to fund various costs and expenses associated with the development
and organization of the Bancorp and the bank, we obtained a $90,000 line of
credit from GrandSouth Bank and a $500,000 line of credit from The Bankers
Bank. As of January 31, 2000, approximately $85,000 was outstanding under each
of these lines of credit. Each of the organizers has personally guaranteed each
of these lines of credit. We intend to repay the lines of credit with a portion
of the net proceeds from this offering of common stock. See "Use of Proceeds."
In addition to the lines of credit described above, each of the organizers
has advanced $10,000 pursuant to an Organizer Contribution Agreement to fund
various costs and expenses associated with the development and organization of
the Bancorp and the bank. The Bancorp intends to repay the $100,000 aggregate
amount advanced by the organizers pursuant to that agreement using a portion of
the net proceeds from this offering of common stock. See "Use of Proceeds."
Warrants
In consideration for their efforts in organizing the Bancorp and the bank,
and in recognition of financial risk of loss undertaken by each of them in
connection with the funding of the organizational expenses of the Bancorp and
the bank, upon completion of this offering, each of the directors who purchases
shares in this offering will be granted, for no additional consideration, one
warrant for each share of common stock the director purchases. Each warrant
will entitle the director to purchase, at any time within ten years from the
date the bank opens for business, one additional share of our common stock at a
price of $10.00 per share. See "Management--Stock Warrants of Directors."
36
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Bancorp is 12,000,000 shares, consisting
of 10,000,000 shares of common stock, no par value per share, and 2,000,000
shares of preferred stock. The par value, rights and preferences of the
preferred stock may be designated as the board of directors may determine. As
of the date of this prospectus, 550 shares of common stock were outstanding and
no shares of preferred stock were outstanding.
Common Stock
Subject to the rights of the holders of any outstanding shares of preferred
stock and any restrictions that may be imposed by any lender to the Bancorp,
holders of common stock are entitled to receive dividends, if any, declared by
the board of directors out of funds legally available for dividends. See
"Dividend Policy." In the event of the liquidation, dissolution or winding up
of the Bancorp, holders of common stock are entitled to share, based on the
number of shares held, in the assets, if any, remaining after payment of all
the debts and liabilities of the Bancorp and the liquidation preference of any
outstanding series of preferred stock.
Holders of common stock are entitled to one vote per share for each share
held of record on any matter submitted to the holders of common stock for a
vote. Because holders of common stock do not have cumulative voting rights with
respect to the election of directors, the holders of a majority of the shares
of common stock represented at a meeting can elect all of the directors.
Holders of common stock do not have preemptive or other rights to subscribe for
or purchase any additional shares of capital stock issued by the Bancorp or to
convert their common stock into any other securities. There are no redemption
or sinking fund provisions applicable to the common stock.
Preferred Stock
The authorized shares of preferred stock may be issued in one or more
series, and the board of directors is authorized, without further action by the
shareholders, to designate the rights, preferences, limitations and
restrictions applicable to each series, including dividend, voting, redemption
and conversion rights. The board of directors also may designate par value,
preferences in liquidation, as well as any sinking fund terms and the number of
shares constituting any series or the designation of such series. The Bancorp
believes that the availability of preferred stock issuable in series will
provide increased flexibility for structuring possible future financings and
acquisitions, if any, and in meeting other corporate needs. It is not possible
to state the actual effect of the authorization and issuance of any series of
preferred stock upon the rights of holders of common stock until the board of
directors determines the specific terms, rights and preferences of a series of
preferred stock. However, the effects might include, among other things,
restricting dividends on the common stock, diluting the voting power of the
common stock, or impairing liquidation rights of such shares without further
action by holders of the common stock. In addition, the board of directors is
authorized at any time to issue preferred stock with voting, conversion or
other features that may have the effect of impeding or discouraging a merger,
tender offer, proxy contest, the assumption of control by a holder of a large
block of the securities of the Bancorp or the removal of incumbent management.
Issuance of preferred stock could also adversely affect the market price of the
common stock. The Bancorp has no present plan to issue any shares of preferred
stock.
Change of Control and Anti-takeover Effects
General. Our articles of incorporation and bylaws and South Carolina state
law contain provisions designed to enhance the ability of the board of
directors to deal with attempts to acquire control of the Bancorp. These
provisions may be considered to have an anti-takeover effect and may discourage
takeover attempts which have not been approved by the board of directors. This
would include takeover attempts that some of our shareholders may consider to
be in their best interest. These provisions may also adversely affect the price
that a potential purchaser will be willing to pay for our common stock and
deprive you of the
37
<PAGE>
opportunity to obtain a takeover premium for your shares. To the extent that
takeover attempts are discouraged, temporary fluctuations in the market price
of the common stock resulting from actual or rumored takeover attempts may be
inhibited. These provisions also could make the removal of incumbent management
more difficult and may permit a minority of our directors and the holders of a
minority of our outstanding voting stock to prevent, discourage or make more
difficult a merger, tender offer or proxy contest, even though the transaction
may be favorable to the interests of shareholders. These provisions could also
potentially adversely affect the market price of the common stock.
The following briefly summarizes protective provisions contained in the
articles of incorporation and South Carolina law and is not intended to be a
complete description of all the features and consequences of these provisions.
The following is qualified in its entirety by reference to the articles of
incorporation and the relevant provisions of South Carolina law.
Classified Board of Directors. Our articles of incorporation and bylaws
provide for a classified board of directors so that, as nearly as possible,
one-third of the board of directors is elected each year to serve a three-year
term. This classification would delay an attempt by dissatisfied shareholders
or anyone who obtains a controlling interest in the Bancorp to elect a new
board of directors. This is because, absent the removal, resignation or death
of the members of the Board, it would take three annual meetings of
shareholders to change fully the composition of the Board, and at least two
annual meetings to change a majority of the directors.
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 of stock to persons
friendly to existing management. This may have the effect of protecting the
continuity of current management by discouraging attempts to obtain control of
the Bancorp through a proxy contest, tender offer, merger or otherwise.
Evaluation of Acquisition Proposals. Our articles of incorporation expressly
permit the board of directors, when evaluating any proposed tender or exchange
offer, any merger, consolidation or sale of substantially all of the assets of
the Bancorp, or any similar extraordinary transaction, to consider
. all relevant factors including, without limitation, the social, legal,
and economic effects on the employees, customers, suppliers, and other
constituencies of the Bancorp and its subsidiaries, on the communities
and geographical areas in which the Bancorp and its subsidiaries operate
or are located, and on any of the business and properties of the Bancorp
or any of its subsidiaries, and
. the consideration being offered, not only in relation to the then
current market price for the Bancorp's outstanding shares of capital
stock, but also in relation to the then current value of the Bancorp in
a freely negotiated transaction and in relation to the board of
directors' estimate of the future value of the Bancorp as an independent
going concern.
The board of directors believes that these provisions are in the long-term best
interests of the Bancorp and its shareholders.
Advance Notice Requirements. Our bylaws set forth advance notice procedures
in connection with shareholder proposals at shareholder meetings and
nominations of directors, other than by the board of directors. Specifically,
notice of a shareholder proposal as well as a nomination for the election of
any director by a shareholder must be received by the Bancorp on or before 90
days prior to the shareholders' meeting at which the proposal or nomination is
to be considered. Proposals which fail to be made in accordance with the notice
requirements may be rejected by the Bancorp.
38
<PAGE>
Director Nomination Requirements. Our bylaws require that any shareholder
proposing to nominate an individual for election as a director provide in the
notice of nomination
. a representation of the shareholder's status as a record holder of
common stock and the shareholder's intent to appear at the meeting to
make the nomination;
. a description of any arrangements between the shareholder and the
nominee regarding the making of the nomination;
. the name of and other biographical information regarding the nominee;
and
. 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 of
third-party nominations of directors.
Supermajority Voting on Significant Transactions. South Carolina law
provides that, unless a corporation's articles of incorporation provide for a
higher or lower vote, significant corporation actions, such as a merger, share
exchange or sale of all or substantially all of the corporation's assets, must
be approved by the holders of two-thirds of the shares entitled to vote on the
matter. Our articles of incorporation do not provide for a different vote
requirement. Consequently, a two-thirds shareholder vote is required to
approve any of such transactions involving the Bancorp.
Control Share Acquisitions. We are currently subject to the South Carolina
control share acquisitions statute which is designed to afford shareholders of
public corporations in South Carolina and meet share ownership requirements
set forth in the statute protection against acquisitions in which a person,
entity or group seeks to gain voting control of the public corporation. With
some exceptions, the statute provides that shares of a public corporation
acquired within specific ranges will not possess voting rights in the election
of directors unless the voting rights are approved by a majority vote of the
public corporation's disinterested shareholders. Disinterested shares are
shares other than those owned by the acquiring person or by a member of a
group with respect to a control share acquisition, or by any officer of the
corporation or any employee of the corporation who is also a director. The
specific acquisition ranges that trigger the statute are:
. acquisitions of shares possessing one-fifth or more but less than one-
third of all voting power;
. acquisitions of shares possessing one-third or more but less than a
majority of all voting power; or
. acquisitions of shares possessing a majority of more of all voting
power.
Under certain circumstances, the statute permits the acquiring person to call
a special shareholders meeting for the purpose of considering the grant of
voting rights to the holder of the control shares. Unless otherwise provided
in a corporation's articles of incorporation or bylaws before a control share
acquisition has occurred, in the event the shares acquired in a control share
acquisition are accorded full voting rights and the acquiring person has
acquired a majority or more of all voting power, then all shareholders of the
public corporation have dissenter's rights to receive fair value for their
shares. There is currently no provision in our articles or our bylaws limiting
or eliminating these dissenter's rights. The statute also enables a
corporation to provide the redemption under certain circumstances of control
shares with no voting rights. Among the acquisitions specifically excluded
from the statute are acquisitions accomplished through a merger or plan of
share exchange if the public corporation is a party to the agreement of merger
or plan of share exchange. A corporation may opt-out of the statute by so
providing in its articles of incorporation. We have not opted out of the
statute.
Business Combinations with Interested Shareholders. We are also currently
subject to the South Carolina business combination statute which, with some
exceptions, places restrictions on mergers, consolidations, sales of assets,
liquidations, reclassifications or other similar kinds of transactions with or
between a public corporation in South Carolina and any person who owns,
directly or indirectly, 10% or more of the voting power of the outstanding
voting shares of the public corporation. The statute provides that the public
39
<PAGE>
corporation may not engage in any business combination with any 10% or greater
shareholder of the corporation for a period of two years following the date the
person became a 10% shareholder unless before the date the person became a 10%
shareholder either the business combination or the purchase of shares that
first made the shareholder a 10% shareholder is approved by a majority of the
"disinterested" members of the board of directors of the corporation. A member
of the board is "disinterested" if the director is not a present or former
officer or employee of the public corporation or a related corporation. The
statute further provides that, subject to some exceptions, a public corporation
may not engage at any time in a business combination with a 10% shareholder
unless the business combination complies with all of the requirements of the
public corporation's articles of incorporation and
. the business combination is approved by the board of directors of the
public corporation before the date the shareholder first became a 10%
shareholder, or the purchase of shares made by the 10% shareholder on
the date the shareholder first became a 10% shareholder has been
approved by the board of directors of the public corporation before the
date the shareholder first became a 10% shareholder,
. the business combination is approved by the affirmative vote of the
holders of a majority of the outstanding voting shares not beneficially
owned by the 10% shareholder proposing the business combination at a
meeting called for that purposes no earlier than two years after the
date the shareholder first became a 10% shareholder, or
. the business combination meets specified fair price and form of
consideration requirements.
A company may opt-out of the business combination statute by so providing in
its articles of incorporation. We have not opted out of the statute.
Transfer Agent and Registrar
Unless we otherwise become required by law or administrative action to
appoint an independent transfer agent and registrar, or our board of directors
otherwise deems it appropriate to do so, we will act as transfer agent and
registrar for our common stock.
Shares Eligible for Future Sale
Upon completion of the offering, we will have a minimum of 630,550 shares
and a maximum of 1,000,550 shares of common stock outstanding. Except for the
550 shares purchased originally by the directors and any shares held by
affiliates, all of the shares will be freely tradeable without restriction or
registration under the Securities Act of 1933. Affiliates of the Bancorp will
need to comply with the resale limitations of Rule 144 under the Securities Act
of 1933. Rule 144 defines an "affiliate" of a company as a person who directly,
or indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, the company. Affiliates of a company
generally include its directors, officers and principal shareholders. An
expected total of 135,000 shares owned directly or indirectly by our directors
will be eligible for public sale under Rule 144 following the offering.
Purchasers of the common stock in this offering or on the open market may
resell those shares immediately, although as noted above, affiliates of the
Bancorp will be subject to the volume and other limitations of Rule 144. In
general, under Rule 144, as currently in effect, affiliates will be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of one percent of the outstanding shares of common stock or the average
weekly trading volume during the four calendar weeks preceding his or her sale.
Sales under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about the
Bancorp. Rule 144 also requires persons holding restricted securities to hold
the shares for at least one year prior to resale. The 550 shares originally
purchased by the directors constitute restricted securities and will be subject
to this resale limitation.
40
<PAGE>
LEGAL MATTERS
The validity of the common stock offered in this offering will be passed
upon for the Bancorp by Nexsen Pruet Jacobs & Pollard, LLP, Columbia, South
Carolina.
EXPERTS
The financial statements of the Bancorp as of September 30, 1999, included
in this prospectus have been examined by Francis and Company, CPAs, independent
public accountants, as stated in their opinion, and have been so included in
reliance upon the opinion, which has been rendered upon the authority of that
firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Bancorp has filed with the Securities and Exchange Commission a
registration statement on Form SB-2 under the Securities Act of 1933. That
registration statement covers the common stock offered in this offering. As
permitted by the rules and regulations of the Securities and Exchange
Commission, this prospectus, which forms a part of that registration statement,
does not contain all of the information contained in that registration
statement and its exhibits. You should refer to that registration statement and
its exhibits for further information concerning the Bancorp, the bank and the
securities offered in this offering.
Statements contained in this prospectus as to the contents of a document
filed as an exhibit to the registration statement are not necessarily complete.
You should refer to that exhibit for a complete statement of its terms and
conditions. Copies of the registration statement can be obtained upon payment
of the fees prescribed by the Securities and Exchange Commission, or may be
examined at the offices of the Securities and Exchange Commission without
charge, at its public reference section, Room 1024, 450 Fifth Street, NW,
Washington, DC 20549. You may obtain information on the operation of the public
reference section by calling the Securities and Exchange Commission at 1-800-
SEC-0330 (1-800-732-0330).
The SEC also maintains a website that contains reports, proxy and
information statements and other information regarding registrants such as the
Bancorp that file electronically with the Securities and Exchange Commission.
The address of the SEC's website is http://www.sec.gov.
We have filed or will file various applications with the Office of the
Comptroller of the Currency and the FDIC. You should rely only 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 may otherwise be wrong. The Bancorp and the 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.
41
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Independent Auditors' Report............................................... F-2
Balance Sheets as of December 31, 1999 and 1998............................ F-3
Statement of Operations
from inception, December 10, 1998 through December 31, 1998 and for the
year ended
December 31, 1999......................................................... F-4
Statement of Changes in Stockholders' Equity
from inception, December 10, 1998 through December 31, 1998 and from Janu-
ary 1, 1999 through December 31, 1999..................................... F-5
Statement of Cash Flows
from inception, December 10, 1998 throug h December 31, 1998 and from Jan-
uary 1, 1999 through December 31, 1999.................................... F-6
Notes to Financial Statements.............................................. F-9
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Islands Bancorp
Beaufort, South Carolina
We have audited the accompanying balance sheets of Islands Bancorp Beaufort,
South Carolina, (the "Company") a development stage enterprise, as of December
31, 1999 and 1998 and the related statements of operations, changes in
stockholders' equity and cash flows for the period from December 10, 1998
through December 31, 1998 and for the calendar year ended December 31, 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Islands Bancorp as of
December 31, 1999 and 1998, and the results of its operations and its cash
flows for the period from inception, December 10, 1998 through December 31,
1998 and for the calendar year ended December 31, 1999, in conformity with
generally accepted accounting principles.
/s/ FRANCIS & CO., CPAs
Atlanta, Georgia
February 8, 2000
F-2
<PAGE>
Islands Bancorp
(A Development Stage Enterprise)
Balance Sheet
<TABLE>
<CAPTION>
December 31,
------------------
1999 1998
--------- -------
<S> <C> <C>
ASSETS
Cash....................................................... $ 24,061 $ 4,750
Property and equipment, net................................ 28,830 --
Deferred registration costs................................ 45,890 --
Other assets............................................... 1,453 --
--------- -------
Total Assets............................................... $ 100,234 $ 4,750
========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current liabilities $ 21,607 $ --
Accounts payable and accrued expenses.....................
Advances from organizers.................................. 100,000 10,000
Notes payable............................................. 130,524 --
--------- -------
Total current liabilities............................... $ 252,131 $10,000
--------- -------
Long term liabilities
Notes payable............................................. $ 16,858 $ --
--------- -------
Total long term liabilities............................. $ 16,858 $ --
--------- -------
Commitments and contingencies (Note 3)
Stockholders' Equity (Note 1):
Common stock, zero par value,
10,000,000 shares authorized,
550 shares issued and outstanding........................ $ 5,500 $ --
(Deficit) accumulated during
the development stage.................................... (174,255) (5,250)
--------- -------
Total Stockholders' Equity.............................. $(168,755) $(5,250)
--------- -------
Total Liabilities and
Stockholders' Equity...................................... $ 100,234 $ 4,750
========= =======
</TABLE>
Refer to notes to the financial statements.
F-3
<PAGE>
Islands Bancorp
(A Development Stage Enterprise)
Statement of Operations
<TABLE>
<CAPTION>
For the year ended
December 31,
-------------------
1999 1998
--------- --------
<S> <C> <C>
Revenues:
Interest income........................................... $ -- $ --
--------- --------
Total revenues........................................... -- --
--------- --------
Expenses:
Organizational expenses................................... $ 79,919 $ 5,250
Salaries and benefits..................................... 66,376 --
Depreciation expense...................................... 4,409 --
Legal & professional...................................... 3,500 --
Other expenses............................................ 14,801 --
--------- --------
Total expenses........................................... $ 169,005 $ 5,250
--------- --------
Net (loss)................................................. $(169,005) $ (5,250)
========= ========
</TABLE>
Refer to notes to the financial statements.
F-4
<PAGE>
Islands Bancorp
(A Development Stage Enterprise)
Statement of Changes in Stockholders' Equity
from inception, December 10, 1998 through December 31, 1999
<TABLE>
<CAPTION>
Common (Deficit)
Stock Accumulated
zero Additional During Total
Par Paid-in- the Development Stockholders'
Value Capital Stage Equity
------ ---------- --------------- -------------
<S> <C> <C> <C> <C>
Net (loss), 1998................ $ -- $ -- $ (5,250) $ (5,250)
------ ---- ---------- ----------
Balance,
December 31, 1998.............. $ -- $ -- $ (5,250) $ (5,250)
====== ==== ========== ==========
Issuance of 550 shares
of Common stock................ $5,500 $ -- $ -- $ 5,500
Net (loss) for the
year ended
December 31, 1999.............. -- -- (169,005) (169,005)
------ ---- ---------- ----------
Balance,
December 31, 1999.............. $5,500 $ -- $ (174,255) $ (168,755)
====== ==== ========== ==========
</TABLE>
Refer to notes to the financial statements.
F-5
<PAGE>
Islands Bancorp
(A Development Stage Enterprise)
Statement of Cash Flows
<TABLE>
<CAPTION>
From inception,
December 10, 1998
Year ended through
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Cash flows from pre-operating activities of
the development stage:
Net (loss)................................ $(169,005) $(5,250)
Adjustments to reconcile net (loss) to net
cash used by pre-operating activities of
the development stage:
Increase in registration costs............ (45,890) --
Increase in payables and accruals......... 21,607 --
(Increase) in other assets................ (1,453) --
Depreciation expense...................... 2,909 --
--------- -------
Net cash used by pre-operating activities
of the development stage.................. $(191,832) $(5,250)
--------- -------
Cash flows from investing activities:
Purchase of fixed assets................... $ (31,739) $ --
--------- -------
Net cash used in investing activities...... (31,739) $ --
--------- -------
Cash flows from financing activities:
Issuance of common stock................... $ 5,500 $ --
Advances from organizers................... 90,000 10,000
Increase in notes payable.................. 147,382 --
--------- -------
Net cash provided from financing
activities................................ $ 242,882 $10,000
--------- -------
Net increase in cash....................... $ 19,311 $ 4,750
Cash, beginning of period.................. 4,750 --
--------- -------
Cash, end of period........................ $ 24,061 $ 4,750
========= =======
Supplemental disclosures of cash flow
information:
Cash paid for:
Interest $ 877 $ --
========= =======
Income taxes $ -- $ --
========= =======
</TABLE>
Refer to notes to the financial statements.
F-6
<PAGE>
Islands Bancorp
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 1--Summary of Organization
Islands Bancorp (the "Company") is a proposed one-bank holding company with
respect to a de novo bank, Islands Community Bank, N.A. (in organization),
Beaufort, South Carolina (the "Bank"). Prior to the Company's incorporation on
July 23, 1999, a group of organizers, on December 10, 1998 formed a
partnership, NBB Partnership (the "Partnership"), to facilitate in the initial
process of organizing and forming both the Company and the Bank. All assets,
liabilities, rights, revenues and expenses acquired, incurred or undertaken by
the Partnership from inception have been transferred, by mutual agreement of
the Board of Directors of the Company and the partners of the Partnership, to
the Company. Accordingly, all financial transactions undertaken by the
Partnership from inception until July 23, 1999 are reflected in the Company's
financial statements as of December 31, 1999 and 1998.
The Company filed applications with the Office of the Comptroller of the
Currency (the "OCC") to charter the Bank and with the Federal Deposit Insurance
Corporation (the "FDIC") to insure deposits up to $100,000 per depositor. Once
preliminary approvals on the above applications are obtained, an application
for prior approval to form a bank holding company will be filed with the
Federal Reserve Board (the "FRB").
The Company is authorized to issue up to 10.0 million shares of its zero par
value per share common stock ("Common Stock"). Each share is entitled to one
vote and shareholders have no preemptive, cumulative voting or conversion
rights. The organizers capitalized the Company by acquiring 550 shares of the
Company's Common Stock for an aggregate amount of $5,500. The directors intend
to purchase additional shares of Common Stock in the public offering.
On December 13, 1999, the Company filed a Registration Statement on Form SB-
2 with the Securities and Exchange Commission offering for sale a minimum of
630,000 and maximum of 1,000,000 shares of its zero par value Common Stock (the
"Offering"). As of December 31, 1999, that Registration Statement had not been
declared effective. The sales price for each share of Common Stock is $10.00.
All subscription proceeds will be held by an Escrow Agent pending acceptance of
subscriptions, completion of the Offering, and the receipt of preliminary
approvals from the OCC, FDIC and the FRB. If the sale of the minimum (630,000)
shares of Common Stock is not accomplished by the expiration date, as extended,
all subscriptions will be canceled and all proceeds returned, without interest,
to the subscribers. If the sale of the minimum (630,000) shares of Common Stock
is accomplished and all preliminary regulatory approvals obtained, the Company
will capitalize the Bank and commence banking operations.
The Company is also authorized to issue of up to 2.0 million shares of
Preferred Stock. The Company's Board of Directors may, without further action
by the shareholders, direct the issuance of Preferred Stock for any proper
corporate purpose with preferences, voting powers, conversion rights,
qualifications, special or relative rights and privileges which could adversely
affect the voting power or other rights of shareholders of Common Stock. As of
December 31, 1999, there were no shares of the Company's Preferred Stock issued
or outstanding.
The Company's Articles of Incorporation and Bylaws contain certain
provisions that might be deemed to have potential defensive "anti takeover"
effects. These certain provisions include: (i) provisions relating to meetings
of shareholders which limit who may call meetings and what matters will be
voted upon; (ii) the ability of the Board of Directors to issue additional
shares of authorized Preferred Stock without shareholder approval, thus
retaining the ability to dilute any potential acquirer attempting to gain
control by purchasing Company stock; (iii) a staggered Board of Directors,
limiting the ability to change the members of the Board in a timely manner, and
(iv) a provision that requires two-thirds of the shareholders to approve
mergers and similar transactions, and amendments to the articles of
incorporation.
F-7
<PAGE>
Islands Bancorp
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 1--Summary of Organization (continued)
The directors of the Company will receive one warrant, at no additional
cost, for each share of Common Stock purchased by that director in the
Offering. Each warrant entitles its holder to purchase one share of the
Company's Common Stock for $10.00 for a period of ten years from the date the
Bank opens for business. The warrants will vest equally on each of the first
three anniversaries of the date which the Bank opens for business, and may be
exercised either in whole or in part. All warrants are subject to approval by
the banking regulatory agencies.
The Company is a development stage enterprise as defined by the Financial
Accounting Standards Board Statement No. 7, "Accounting and Reporting by
Development Stage Enterprises," as it devotes substantially all its efforts to
establishing a new business, its planned principal operations have not
commenced and there has been no significant revenue from the planned principal
operations
Note 2--Summary of Significant Accounting Policies
Basis of Accounting. The accounting and reporting policies of the Company
conform to generally accepted accounting principles and to general practices in
the banking industry. The Company uses the accrual basis of accounting by
recognizing revenues when they are earned and expenses in the period incurred,
without regard to the time of receipt or payment of cash. The Company has
adopted a fiscal year that ends on December 31, effective for the period ended
December 31, 1999.
Organizational Expenses. Organizational costs are costs that have been
incurred in the expectation that they will generate future revenues or
otherwise benefit periods after the Company reaches the operating stage.
Organizational costs generally include incorporation, legal and accounting fees
incurred in connection with establishing the Company. In accordance with recent
accounting pronouncements, all organizational expenses have been expensed when
incurred.
Deferred Registration Costs. Deferred registration costs are deferred and
incremental costs incurred by the Company in connection with the underwriting
and issuance of its own Common Stock. Deferred registration costs do not
include any allocation of salaries, overhead or similar costs. In a successful
offering, deferred registration costs are deducted from the Company's Common
Stock account. Registration costs associated with an unsuccessful offering are
charged to operations in the period during which the offering is deemed
unsuccessful.
Income Taxes. The Company will be subject to taxation whenever taxable
income is generated. As of December 31, 1999, no income taxes had been accrued
since no taxable income had been generated.
Basic (Loss) Per Share. Per share data for 1998 is not included since no
shares were outstanding at December 31, 1998. For 1999, the basic loss per
share of $(307.28) was calculated based on 550 shares outstanding for the
entire 1999 calendar year.
Note that the above result may not be indicative of future performance
primarily due to (i) the fact that the number of outstanding shares will
increase significantly and (ii) planned principal operations have not
commenced.
F-8
<PAGE>
Islands Bancorp
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 2--Summary of Significant Accounting Policies (continued)
Statement of Cash Flows. The statement of cash flows was prepared using the
indirect method. Under this method, net loss was reconciled to net cash flows
from pre-operating activities by adjusting for the effects of current assets
and short term liabilities.
Note 3--Commitments and Contingencies
In connection with the Company's formation and the organization of its
subsidiary Bank, the Company has entered into two separate agreements with a
bank consulting firm and an accounting firm. The consulting firm's
responsibilities are to assist the organizers in preparing and filing all
applications with the Bank's regulatory authorities (OCC, FDIC, FRB). The
accounting firm's responsibilities are to perform an audit and prepare a report
on the Company's financial statements as of September 30, and December 31,
1999. The aggregate cost of the above services is estimated to approximate
$60,000. The Company also engaged a law firm to prepare and file all
organizational and incorporation papers, as well as prepare a Registration
Statement on Form SB-2. The law firm is compensated for its services based on
an hourly basis.
On July 27, 1999, the Company entered into an employment agreement (the
"Agreement") with the proposed president and chief executive officer (the
"CEO") of both the Company and the Bank. The Agreement covers a period of five
years with a renewal option for an additional two-year period. The initial
annual base salary is $135,000 and becomes $130,000 effective August 1, 2000.
The CEO is also entitled to receive a bonus of $10,000 at the discretion of the
Company's Board of Directors, which bonus may increase to $27,500 based on
other factors considered by the Company's Board of Directors. For each year
following the first full calendar year of the Bank's operations, the CEO is
also entitled to a bonus of five percent of the Bank's net income if the Board
of Directors determines the bonus is appropriate in light of its analysis of
various performance criteria. Additionally, when a stock option plan is
adopted, the CEO will be granted options to purchase Company's shares equal to
three percent of the number of shares sold in the Offering. The Agreement
provides for other customary benefits such as health and life insurance,
retirement benefits, club dues, use of an automobile and relocation expenses.
The Agreement also includes a non-compete clause prohibiting the CEO, once he
ceases to serve in the Company, from competing against the Company and/or its
subsidiary Bank for a certain period of time and within certain geographical
boundaries.
The organizers advanced $10,000 each or $100,000 in the aggregate to the
Company in order to fund a portion of the pre-operating activities. The
advances are interest-free and will be repaid only after the successful
completion of the minimum Offering (630,000 shares) is accomplished.
On August 6, 1999, the Company borrowed $31,739 to purchase an automobile.
The loan, which is secured by the above automobile, amortizes over thirty six
months at an interest rate of 0.9 percent. The outstanding balance on this loan
as of December 31, 1999 was $27,382.
On September 7, 1999, the Company borrowed, under an unsecured line of
credit arrangement, $90,000 at a prime rate of interest. This loan was renewed
to mature March 7, 2000. As of December 31, 1999, $85,000 was outstanding on
the above line.
On December 24, 1999, the Company borrowed, under an unsecured line of
credit arrangement, $500,000 at a rate of prime less one-half percent ( 1/2%).
This loan matures December 24, 2000 and, as of December 31, 1999, had a balance
of $35,000.
F-9
<PAGE>
Islands Bancorp
(A Development Stage Enterprise)
Notes to Financial Statements
December 31, 1999
Note 4--Related Party Transactions
Please refer to Note 1 regarding all assets, liabilities, rights, revenues
and expenses undertaken by the Partnership, all of which have been assumed by
and transferred to the Company.
Please refer to Note 1 for a discussion concerning the directors' warrants.
Please refer to Note 3 concerning interest-free advances made by the
organizers as well as a description of the CEO's employment Agreement.
As a condition to extend both lines of credit described under Note 3, above,
the lenders required the guaranties of certain organizers of the Company.
Note 5--Subsequent Events
On January 24, 2000, the Company entered into a contract to purchase an
approximately 2.3 acre parcel of land on Lady's Island, at the price of
$520,000. The Company intends to build its main banking facility on the above
parcel of land. Closing of the above transaction is scheduled to occur on or
before May 15, 2000 unless extended for up to six additional months.
On January 7, 2000, the Company entered into a three-month lease arrangement
for its temporary office space. The lease term commenced February 1, 2000, with
monthly lease payments of $1,250.
On February 1, 2000, the OCC granted preliminary approval to charter the
Bank. The approval states that the Bank is required to (i) raise at least $6.0
million in capital within twelve months of preliminary approval and (ii)
commence banking operations within eighteen months of preliminary approval.
F-10
<PAGE>
SUBSCRIPTION OFFER FORMS
Two Subscription Offer Forms are attached hereto. Any prospective investor
desiring to purchase common stock should complete and execute one Subscription
Offer Form and mail or deliver it, together with full payment, to:
Islands Bancorp
211 Charles Street, Suite 100
Beaufort, South Carolina 29902
Attention: William B. Gossett
If you ordered through a broker-dealer, please deliver a completed
Subscription Offer Form to your account representative.
Payments for common stock subscribed may be made by check, draft or money
order payable to "The Bankers Bank--Islands Bancorp Escrow Account."
Subscribers should carefully read the terms and conditions contained in the
Subscription Offer Form before subscribing for common stock. Any questions
concerning subscriptions or the offering may be directed to the Bancorp at
(843) 470-9962.
Stock will be registered in the name of the subscriber as that name appears
on the Subscription Offer Form. Stock ownership must be registered in one of
the following ways:
Individual Subscribers
In completing the name of the investor on the Subscription Offer Form,
please include the investor's first name in full (instead of using only an
initial), middle initial and last name. Please omit words of limitation that do
not affect ownership rights, such as "special account," "single man," and
"personal property," etc.
Joint Subscribers
Joint ownership of stock by two or more persons will be inscribed on the
certificate as either Joint Tenants, or Tenants in Common, as indicated by the
investor. On the Subscription Offer Form, names should be joined by the word
"and," and not by the word "or." Please omit titles such as "Mrs.," "Dr.," etc.
The designation "Joint Tenancy with Right of Survivorship and not as Tenants in
Common" may be specified to identify two or more owners where ownership is
intended to pass automatically to the surviving owner(s). The designation
"Tenants in Common" may also be specified to identify two or more owners. When
stock is held as tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of the
deceased co-tenant. All joint owners must agree to the transfer or sale of
shares held in this form of ownership. Please consult your attorney for full
details regarding the legal effect of joint ownership.
Entity Subscribers
Stock may be held by corporations or partnerships. In that case, please
include the entire official name of the entity, including designations such as
"Inc.," "Co.," "Ltd.," etc.
IRA and Retirement Accounts
In most cases, you may use funds in an IRA or other retirement account to
purchase the common stock. If you wish to purchase common stock through your
IRA or other retirement account, please contact your own broker-dealer.
<PAGE>
Uniform Transfers to Minors
Stock may be held in the name of a custodian for a minor under the Uniform
Transfers to Minor Act. There may only be one custodian and one minor
designated on a stock certificate. The standard abbreviation of custodian is
"CUST," while the description "Uniform Transfers to Minors Act" is abbreviated
"UTMA." For example, stock held by Mary B. Smith as custodian for John L.
Smith under the South Carolina Uniform Transfers to Minors Act will be
abbreviated: MARY B. SMITH CUST JOHN L. SMITH UTMA.
Fiduciaries
Information provided with respect to stock to be held in a fiduciary
capacity must contain the following:
1.The name(s) of the fiduciaries.
2. The fiduciary capacity, either as Administrator, Conservator, Committee,
Executor, Trustee, Personal Representative, or Custodian.
3. The type of document governing the fiduciary relationship. Generally,
the relationships are either a form of trust agreement or court order.
Without the existence of a document establishing a fiduciary
relationship, the stock may not be registered in a fiduciary capacity.
4. The date of the document governing the relationship, except with respect
to a trust created by a will.
5. Either the name of the beneficiary, or the name of the maker, donor, or
testator.
Example: JOHN Q. PUBLIC, TRUSTEE FOR MARY Q. PUBLIC
UNDER AGREEMENT DATED 9/1/95.
ALL INFORMATION REQUESTED ON THE SUBSCRIPTION OFFER FORM IS IMPORTANT AND
SHOULD BE COMPLETED.
THE SECOND COPY OF THE SUBSCRIPTION OFFER FORM SHOULD BE RETAINED FOR YOUR
RECORDS.
<PAGE>
<TABLE>
<S> <C>
For Internal Use (Do Not Fill In) Paid with Subscription $
No of Shares Requested Refund (if any) $
------------- ---------------
No. of Shares Accepted Balance Due (if any) $
------------- ---------------
</TABLE>
SUBSCRIPTION OFFER FORM
ISLANDS BANCORP
Beaufort, South Carolina
The undersigned, having received and reviewed the prospectus dated ,
2000, of Islands Bancorp (the "Bancorp"), a South Carolina corporation and the
holding company for the proposed Islands Community Bank, N.A. (in
organization), and in sole reliance on the information contained therein,
hereby subscribes for the number of shares of the common stock, no par value
per share, of the Bancorp (the "Common Stock") indicated below at a purchase
price of $10.00 per share. The minimum subscription is 100 shares. No one
person may purchase that number of shares which when added to shares of the
Bancorp already owned, would equal more than 4.99 percent of the Bancorp's
issued and outstanding shares after the offering. The Bancorp reserves the
right to waive that restriction or otherwise to limit or restrict the amount of
shares that may be purchased by any individual or group.
The subscription is payable in United States dollars by check, bank draft or
money order payable to "The Bankers Bank--Islands Bancorp Escrow Account" in
the amount indicated below, representing the payment of $10.00 per share
multiplied by the number of shares of common stock subscribed. The total
subscription price must be paid at the time this Subscription Offer Form is
executed.
In connection with this subscription, the undersigned acknowledges and
agrees that:
1. This Subscription Offer may not be withdrawn, cancelled, terminated or
revoked once it is tendered to the Bancorp, and this Subscription Offer
shall survive the death or disability of the undersigned.
2. The Bancorp shall have the right to accept or reject a subscription in whole
or in part, for any reason whatsoever. The Bancorp also reserves the right
to cancel any accepted Subscription Offer for any reason, or for no reason,
until the date the shares purchased through this offering are issued. If
this subscription is accepted in part, the undersigned agrees to purchase
the accepted number of shares subject to the terms of this Subscription
Offer. This subscription is nonassignable and nontransferable, except with
the written consent of the Bancorp.
3. All terms of the offering as described in the prospectus are incorporated
herein by reference, and this Subscription Offer is made in accordance with
and subject to those terms and conditions. The undersigned has read the
prospectus and understands it, or has had it explained to him/her by his/her
legal representative. By his/her signature below, the undersigned
acknowledges and confirms that, in making a decision to purchase common
stock of the Bancorp, the undersigned has relied solely upon the information
contained in the prospectus, and confirms that this Subscription Offer is
made in accordance therewith.
4. If the undersigned is an individual, the undersigned is a bona fide resident
of the state listed in the undersigned's address indicated below, and the
undersigned has no present intention of moving from that state of residency.
If the undersigned is an entity, the undersigned is organized and its
principal office is located in the state listed in the undersigned's address
herein, and the undersigned has no present intention of changing the state
of its organization or moving its principal office.
5. SUBSTITUTE FORM W-9: Under penalties of perjury, I certify that (1) the
Social Security Number or Taxpayer Identification Number given below is
correct; and (2) I am not subject to backup withholding. (Instruction: You
must cross out Item (2) directly above if you have been notified by the
Internal Revenue Service that you are subject to backup withholding because
of underreporting interest or dividends on your tax return and you have not
subsequently been notified by the Internal Revenue Service that you are no
longer subject to backup withholding.)
<PAGE>
The undersigned has signed this Subscription Offer on the date indicated
below, and hereby requests that certificates evidencing shares of common stock
of the Bancorp purchased pursuant to this Subscription Offer be registered in
the name and form of ownership described below.
<TABLE>
<S> <C>
- --------------------------------- --------------------------------------------
Number of Shares Subscribed: (Minimum 100 shares)
- ----------------------------------------------------------------------------------------------------------------------------
Print or type the full name or names in which stock is to be registered
- --------------------------------- --------------------------------------------
Signature of Subscriber
- --------------------------------- --------------------------------------------
Additional Signature (if required)
IF SUBSCRIBER IS AN ENTITY:
By:
- --------------------------------- --------------------------------------------
(Signature of Authorized Representative)
- --------------------------------- --------------------------------------------
Print Name of Authorized Representative
- ----------------------------------------------------------------------------------------------------------------------------
Subscriber's RESIDENCE Street Address (P.O. Box Not Acceptable)
- ----------------------------------------------------------------------------------------------------------------------------
City State
( )
Area Code and Telephone Number
Legal form of ownership desired (check one):
[ ] Individual [ ] Join Tenants With Right of Survivorship
[ ] Tenants in Common [ ] Uniform Transfers to Minors Act
<S> <C>
$
- ------------------------------------------------------------------------ ---------------------------------------------------
Number of Shares Subscribed: (Minimum 100 shares) Total subscription price at $10.00 per share
- ----------------------------------------------------------------------------------------------------------------------------
Print or type the full name or names in which stock is to be registered
- ------------------------------------------------------------------------ ---------------------------------------------------
Signature of Subscriber Date
- ------------------------------------------------------------------------ ---------------------------------------------------
Additional Signature (if required) Date
IF SUBSCRIBER IS AN ENTITY:
By:
- ------------------------------------------------------------------------ ---------------------------------------------------
(Signature of Authorized Representative) Date
- ------------------------------------------------------------------------ ---------------------------------------------------
Print Name of Authorized Representative Title of Authorized Representative
- ----------------------------------------------------------------------------------------------------------------------------
Subscriber's RESIDENCE Street Address (P.O. Box Not Acceptable)
- ----------------------------------------------------------------------------------------------------------------------------
City State Zip Code
( )
- ---------------------------------------------- ---------------------------------------------------
Area Code and Telephone Number Social Security or Federal Taxpayer I.D. Number
Legal form of ownership desired (check one):
[ ] Individual [ ] Join Tenants With Right of Survivorship [ ] Other (describe) _________________________
[ ] Tenants in Common [ ] Uniform Transfers to Minors Act
</TABLE>
If purchasing through a broker/dealer, please complete the following:
<TABLE>
<S> <C>
Name of Broker/Dealer: __________ Street Address: _____________________
Name of Account Rep: __________ City, State, Zip: ___________________
Account Number: _________________ Phone Number ( )____________________________
</TABLE>
Complete all blanks on this Subscription Offer Form, make check, draft or money
order payable in the amount of $10.00 for each share subscribed payable to "The
Bankers Bank--Islands Bancorp Escrow Account" and mail or deliver this executed
Subscription Offer Form and check, draft or money order to:
ISLANDS BANCORP
211 Charles Street, Suite 100
Beaufort, South Carolina 29902
Attention: William B. Gossett
Any questions concerning subscriptions or the offering may be directed to the
above address or to (843) 470-9962.
4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Except as hereinafter set forth, there is no statute, charter provision,
bylaw, contract or other arrangement under which any controlling person,
director or officer of the Registrant is insured or indemnified in any manner
against liability which such person may incur in such person's capacity as
such.
The bylaws of the Registrant provide that the Registrant shall indemnify its
directors to the maximum extent provided by the South Carolina Business
Corporation Act. This protection is broader than the protection expressly
mandated in Section 33-8-520 of the South Carolina Business Corporation Act.
That statutory section provides that a company must indemnify a director or an
officer only to the extent that the director has been wholly successful, on the
merits or otherwise, in the defense of any action or proceeding brought by
reason of the fact that the person was a director or officer. This requirement
would include indemnifying directors against expenses, including attorney's
fees, actually and reasonably incurred in connection with the matter.
In addition to this mandatory indemnification right, the Registrant's bylaws
make mandatory the indemnification permitted, but not mandated, by Section 33-
8-510 of the South Carolina Business Corporation Act. Accordingly, under our
bylaws, the Registrant shall indemnify a director where (a) the director
conducted himself or herself in good faith, (b) the director reasonably
believed that conduct in the director's official capacity with the Registrant
was either in the Registrant's best interest or was not opposed to the best
interest of the Registrant; and (c) in the case of any criminal proceeding, the
director had no reasonable cause to believe the director's conduct was
unlawful.
The Securities and Exchange Commission has informed the Registrant that
indemnification for officers, directors, and controlling persons for
liabilities arising under the Securities Act of 1933 is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
The Registrant has the power to purchase and maintain insurance on behalf of
any person who is or was a director or officer 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.
Item 25. Other Expenses of Issuance and Distribution.
The expenses in connection with the sale of the shares of common stock
(excluding any selling agent commissions) are estimated as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 3,365
Printing and engraving expenses................................. 30,000
Legal fees and expenses......................................... 50,000
Accounting fees and expenses.................................... 4,000
Blue Sky fees and expenses...................................... 1,000
Miscellaneous................................................... 11,635
--------
TOTAL.......................................................... $100,000
========
</TABLE>
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
In connection with its initial capitalization, on August 17, 1999, the
Registrant issued a total of 50 shares of its common stock to each of its 11
directors at a purchase price of $10.00 per share, for a total purchase price
of $5,500 for an aggregate of 550 shares. Each purchaser represented the
purchaser's intention to acquire the securities for investment purposes only
and not for resale or distribution. Each of the purchasers was a director
and/or officer of the Registrant at the time of purchase, and the Registrant
believes that each purchaser had access to detailed information with respect to
the Registrant and possessed requisite financial sophistication. All of such
shares were issued pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act, and Rule 506 under Regulation D promulgated
thereunder, as transactions, not involving a general solicitation, in which the
purchasers were purchasing for investment.
Item 27. Exhibits.
<TABLE>
<CAPTION>
Number Exhibit
- ------ -------
<S> <C>
3.1* Articles of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
4.1* Specimen common stock certificate. See Exhibits 3.1 and 3.2 for provisions in the
Articles of Incorporation and Bylaws of the Registrant defining the rights of
holders of common stock.
5.1* Opinion of Nexsen Pruet Jacobs & Pollard, LLP.
10.1* Employment Agreement dated as of July 27, 1999 between the Registrant and William
B. Gossett.
10.2* Form of Organizers Warrant Agreement.
10.3* Assignment and Assumption Agreement dated August 25, 1999, between the Registrant
and NBB General Partnership.
10.4 Contract of Sale dated January 24, 2000 between the Registrant and Edward
Marchetti.
10.5* Escrow Agreement dated November 23, 1999 between the Registrant and The Bankers
Bank.
10.6* Loan Agreement dated September 7, 1999 between the Registrant and GrandSouth
Bank, as extended on December 7, 1999, and form of Guaranty Agreement issued to
GrandSouth Bank by each of the organizers of the Registrant.
10.7 Promissory Note dated December 24, 1999 between the Registrant and The Bankers
Bank, and form of Guaranty Agreement issued to The Bankers Bank by each of the
organizers of the Registrant.
10.8 Lease Agreement dated January 7, 2000 between the Registrant and Anthony R.
Porter.
23.1* Consent of Nexsen Pruet Jacobs & Pollard, LLP. (contained in Exhibit 5.1)
23.2 Consent of Francis & Co., CPAs.
24.1* Powers 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>
Item 28. Undertakings.
The Registrant hereby undertakes to do the following:
(a) The Registrant will:
(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;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, 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 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of
Beaufort, state of South Carolina, on February 10, 2000.
ISLANDS BANCORP
/s/ William B. Gossett
By: _________________________________
William B. Gossett
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints William B. Gossett and D. Martin Goodman,
and each of them acting individually, as his attorney-in-fact, each with full
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorney to any and all amendments to said Registration
Statement.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William B. Gossett President, Chief Executive February 10, 2000
______________________________________ Officer (principal
William B. Gossett executive officer) and
Director
/s/ D. Martin Goodman Chairman of the Board February 10, 2000
______________________________________
D. Martin Goodman
* Vice President and February 10, 2000
______________________________________ Director
Martha B. Fender
* Treasurer (principal February 10, 2000
______________________________________ financial and accounting
Paul M. Dunnavant, III officer) and Director
* Secretary and Director February 10, 2000
______________________________________
Edward J. McNeil, Jr.
* Director February 10, 2000
______________________________________
Avery E. Cleland
* Director February 10, 2000
______________________________________
Louis O. Dore
* Director February 10, 2000
______________________________________
Frances K. Nicholson
* Director February 10, 2000
______________________________________
J. Frank Ward
* Director February 10, 2000
_____________________________________
Bruce K. Wyles
</TABLE>
/s/ William B. Gossett
By: ________________________
William B. Gossett
As Attorney-in-Fact
II-4
<PAGE>
Exhibit Index
Number Exhibit
- ------ -------
3.1* Articles of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
4.1* Specimen common stock certificate. See Exhibits 3.1 and 3.2 for
provisions in the Articles of Incorporation and Bylaws of the
Registrant defining the rights of holders of common stock.
5.1* Opinion of Nexsen Pruet Jacobs & Pollard, LLP.
10.1* Employment Agreement dated as of July 27, 1999 between the
Registrant and William B. Gossett.
10.2* Form of Organizers Warrant Agreement.
10.3* Assignment and Assumption Agreement dated August 25, 1999, between
the Registrant and NBB General Partnership.
10.4* Contract of Sale dated January 24, 2000 between the Registrant and
Edward Marchetti.
10.5* Escrow Agreement dated November 23, 1999 between the Registrant and
The Bankers Bank.
10.6* Loan Agreement dated September 7, 1999 between the Registrant and
GrandSouth Bank, as extended on December 7, 1999, and form of
Guaranty Agreement issued to GrandSouth Bank by each of the
organizers of the Registrant.
10.7 Promissory Note dated December 24, 1999 between the Registrant
and The Bankers Bank, and form of Guaranty Agreement issued to
The Bankers Bank by each of the organizers of the Registrant.
10.8 Lease Agreement dated January 7, 2000 between the Registrant
and Anthony R. Porter.
23.1* Consent of Nexsen Pruet Jacobs & Pollard, LLP. (contained in Exhibit
5.1)
23.2 Consent of Francis & Co., CPAs.
24.1* Powers of Attorney (filed as part of the signature page to the
registration statement).
27.1 Financial Data Schedule (for electronic filing purposes).
<PAGE>
EXHIBIT 10.4
CONTRACT OF SALE
THIS CONTRACT OF SALE is made by and between ISLANDS BANCORP, a South
Carolina corporation hereinafter referred to as "Buyer", and N. EDWARD
MARCHETTI, hereinafter referred to as "Seller". The term "Buyer" shall include
any permitted assignee of Islands Bancorp hereunder. In good consideration of
the agreements herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer
agree as follows:
ARTICLE I
The Property
1.1 Subject to the terms and provisions of this Contract, Seller agrees to
sell and convey to Buyer, and Buyer agrees to purchase from Seller, the
following property:
All that certain piece, parcel or lot of land situate, lying and
being on U.S. Hwy 21, Lady's Island, Beaufort County, State of South
Carolina, containing 2.3+/- acres, and is more particularly shown and
described on that certain plat, which is attached hereto as Exhibit
"A".
ARTICLE II
Purchase Price
2.1 Purchase Price: The purchase price for the property is FIVE HUNDRED
TWENTY THOUSAND ($520,000.00) DOLLARS.
2.2 Method of Payment: The purchase price shall be paid by Buyer in the
following manner:
(a) Escrow Deposit: Buyer shall simultaneously with the execution hereof
pay to the Seller the sum of FIFTEEN THOUSAND AND NO/100
($15,000.00) Dollars as a deposit to be applied toward the purchase
price of the property. The Escrow Deposit shall be held in an
account by Seller's attorney, Thomas C. Davis, Harvey & Battey,
P.A., attorneys at law, Beaufort, South Carolina.
(b) Balance of Purchase Price: The balance of the purchase price (after
credit for the Escrow Deposit) shall be paid at closing (as
hereinafter defined) by Buyer as FIVE HUNDRED FIVE THOUSAND AND
NO/100 ($505,000) in cash or certified bank funds.
ARTICLE III
Title and Survey
3.1 Survey: If Buyer desires to do so, within thirty (30) days from the
date hereof, Buyer may obtain a current boundary survey of the Property,
prepared by a South Carolina Registered Land Surveyor.
3.2 Review of Title Abstract and Survey: Buyer shall have a review period
(the "Review Period") ending thirty (30) days from the date hereof. Any title
encumbrances or exceptions to which Buyer does not object within the Review
Period shall be deemed to be permitted exceptions to the status of Seller's
title (the "Permitted Exceptions"). With regard to any title or survey items to
which a Buyer objects within the Review Period, Seller shall have a period of
fifteen (15) business days from the date of Buyer's notice of such objections,
in which to elect to cure or otherwise satisfy Buyer's objections. For example,
Seller may satisfy
1
<PAGE>
Buyer's objections to title by providing a title insurance binder issued by an
ALTA title insurance company at standard rates subject only to standard
exceptions for Beaufort County, and to no other exceptions or conditions
reasonably unsatisfactory to Buyer. If Seller elects not to cure said title
objections, or the same are not satisfied to Buyer's satisfaction within
Seller's 15 day cure period, then Buyer may elect to terminate this Contract by
providing written notice thereof to Seller within three (3) business days after
the end of such cure period, and receive the return of the Escrow Deposit. If
the Contract is not so terminated, Buyer will have been deemed to have fully
and completely waived any said objections and accept the status of title and
the survey "as is". Buyer shall also have the right to notify Seller of any
objectionable title matters that appear of record subsequent to the date of
Buyer's title abstract and/or title insurance binder and on or prior or date of
Closing. In such event, Seller shall have the same 15 business day cure period
as set forth above, and Buyer shall have the same rights to terminate this
Contract as set forth above.
ARTICLE IV
Inspection, Termination and Waiver
4.1 Due Diligence Period: For a period of ninety (90) days after the date
hereof (the "Due Diligence Period"), Buyer shall have the right to conduct
investigations, inspections and studies of the Property and to satisfy the
following contingencies, unless otherwise waived by Buyer:
(a) Buyer has applied for all necessary preliminary permits and approvals
from Beaufort County, DHEC/OCRM, Lady's Island Fire Department, all
utility providers in connection with the development of the property.
(b) Buyer has satisfied itself that public water and sewer is available
for service to the property.
(c) Buyer has satisfied itself that the property meets all local, state
and federal environmental regulations as evidenced by a Phase I or
Phase II Environmental Assessment, which Buyer may obtain at its
expense. If Buyer elects to obtain such Environmental Assessment,
Buyer agrees to have such study or studies prepared within sixty (60)
days after the Execution Date hereof, and Buyer agrees to provide
Seller with a copy of such studies and Buyer's written confirmation of
the acceptability or unacceptability of such studies within ten (10)
days after the receipt by Buyer of such studies.
(d) Buyer may at buyer's option obtain an (MAI) appraisal which shall
indicate a fair market value of the property at or above the Purchase
Price and said appraisal shall in all regards be acceptable to any and
all regulatory agencies involved in the chartering process for Islands
Community Bank, NA (Proposed).
(e) Buyer has applied for and obtained preliminary approval from Beaufort
County and the South Carolina Department of Transportation, or any
other governmental entity or agency providing a curb cut for ingress
and egress off of United States Highway 21 to the property.
(f) Buyer and/or Buyer's Architects and/or Engineers shall be satisfied
that the property has adequate usable land situated and configured
such that a banking main office can be located upon it. Further, Buyer
and/or Buyer's Architects and/or Engineers shall be satisfied that the
depression located in areas to be utilized in the construction of a
building, parking, or any other capacity necessary to the erection and
operation of a commercial bank may be filled at a cost acceptable to
Buyer.
4.2 Termination and Waiver: Should one or more of the above contingencies
not be satisfied, Buyer may give written notice to Seller on or before the
expiration of the Due Diligence Period that this Contract will be terminated
fifteen (15) business days after such notice (unless Seller can persuade Buyer
within such time period to rescind such notice), and the Escrow Deposit shall
be refunded to buyer upon such termination except for any portion of said
deposit that may previously become non-refundable pursuant to paragraph 4.2 (a)
herein. If such notice is given and not rescinded, neither party shall have any
further rights or obligations hereunder upon such termination, except Seller's
obligation to refund to Buyer the Escrow Deposit. Seller may however, be
granted an extension of time to satisfy any one or more of the above
contingencies as may be agreed upon by the parties to this agreement.
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(a) $5,000 of the earnest money deposit shall become non-refundable 60
days from date of this agreement and an additional $5,000 shall become
non-refundable 90 days from date of this agreement, unless the sale in
not consummated due to Seller's failure to meet its obligations and
conditions for closing under this agreement. In the event Seller fails
to meet its obligations under this agreement the entire ($15,000)
earnest money deposit shall be returned to Buyer. Additionally, no
earnest money deposits shall become non-refundable as a result of
delay or disapproval by the Federal Bankruptcy Court in the process of
approving this contract.
4.3 Inspection: Buyer and its employees and designated agents and
consultants may, before closing or termination of this Contract, have access as
Seller's invitees to enter upon the Property to inspect, examine, and survey it
and to make test borings and soil borings tests, however, no trees or
vegetation shall be cut or removed other than brush necessary to clear for
surveying or testing on the property. Buyer shall at its expense, restore
property to its former condition in the event Buyer does not acquire the
property. Buyer agrees to indemnify, save and hold harmless Seller from and
against all liens and for any damages, or any death or injury to any person,
occurring on the property and from and against any other liability, cost of
expense including attorneys fees and court costs as a result of the activities
or presence of Buyer or persons acting on its behalf in the exercise of such
inspection rights. Notwithstanding anything herein to the contrary, Buyer shall
not do anything which materially interrupts Sellers' business on the property
prior to closing date.
4.4 Cooperation: While this Contract is in effect, Seller and Buyer agree
to cooperate in good faith to achieve a closing of the sale and purchase of the
Property. Buyer agrees to keep the Seller fully informed of its efforts to
investigate the property and to otherwise perform this agreement. Seller agrees
to cooperate with Buyer in connection with obtaining any title insurance
binders and the preparation of any development plan applications submitted to
the County, State of Federal Government, and Seller agrees to provide the
necessary "consent" forms required by any governmental body or agency in
connection with such applications. Seller agrees to provide Buyer any existing
or proposed agreements, plans, information or knowledge with or from any
governmental entity(ies) or agency(ies) including, but not limited to, South
Carolina Department of Transportation and/or Beaufort County, relating to the
property as contained herein.
4.5 Wetland and Environmental Protection Matters: Seller warrants to Buyer
that during all periods prior to and including the date of the closing
hereunder (a) no ponds or other wetlands on the Property have been altered,
filled or otherwise disturbed, and (b) no matter or materials have been stored
or buried on the Property that would be in contravention of any public health
law, whether by the U.S. Environmental Protection Agency or by the South
Carolina Department of Health and Environmental Control, and (c) no other
prohibited materials have been placed or stored on the Property. With respect
to such matters, Seller agrees at Seller's expense to remove them and to bring
the property into compliance with all appropriate laws and regulations prior to
the time of closing.
ARTICLE V
Condition of the Property
5.1 Buyer hereby acknowledges its familiarity with the Property and agrees
that during the Due Diligence Period it will conduct and complete any and all
investigations, inspections, and studies considered necessary and prudent to
determine the condition of the Property, and to determine any approvals needed
from the appropriate governmental authorities for the development of the
Property. At closing Seller will convey good, marketable and insurable Fee
Simple title to the Property to Buyer "as is" without express or implied
warranties of any nature, except as contained in the Deed conveying the
Property to Buyer.
5.2 Seller shall not remove any timber, dirt materials, or otherwise affect
the condition of the Property after the signing of this Contract. All timber,
dirt, minerals, etc./shall remain with the Property and be a part of the
Property, and be transferred to the Buyer unless agreed to in writing by both
Parties. Seller shall not bring
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any trash, refuse, debris, medical or other hazardous waste, or other improper
materials upon the Property. In the event any condemnation proceedings is
brought by any governmental authority, agency, utility, etc. prior to the
closing, then Buyer may elect to rescind this Contract and receive a refund of
the Escrow Deposit and any incremental payments made to Seller under Section
7.1 hereof. Seller shall remove any and all items considered as "Merchandise
for Resale", debris, vehicles, equipment, landscaping and gardening materials,
greenhouses, and furnishings from buildings that are located on the property.
ARTICLE VI
Conditions to Closing
6.1 In addition to any other conditions set forth in this Contract, Buyer's
obligation to purchase the Property at the closing shall be subject to the
fulfillment of each of the following conditions, it being understood that Buyer
may, at its election, waive in whole or in part, any or all of said conditions:
(a) Seller shall have (i) cured or otherwise addressed to Buyer's
satisfaction any and all title and survey objections as to which Buyer
has provided proper notification to Seller pursuant to section 3.2
hereof; (ii) satisfied any contingency as to which Seller is obligated
to satisfy under Article IV hereunder; and (iii) complied with all its
other covenants and obligations under this Contract and not be in
default hereunder.
(b) Buyer shall have satisfied any objections to the purchase of the
Property which have been raised by the Office of the Comptroller of
the Currency, or any other governmental agency which may be involved
with the chartering, deposit insurance and/or operation of a bank.
(c) The minimum offering conditions for the release of offering proceeds
to Islands Bancorp from the escrow agent in the initial public
offering by Islands Bancorp of its common stock shall have been
satisfied and such proceeds shall have been delivered to Islands
Bancorp.
(d) No suit, action or other proceeding shall have been instituted before
any court or administrative agency which could result in an order or
decree enjoining the consummation of the transaction contemplated by
this Contract or the divestment of any portion of the Property, other
than any such suit, action or other proceeding instituted as a result
of the sole act of Buyer.
6.2 The Parties hereto agree that in the event Islands Bancorp shall
determine at any time prior to the end of the Due Diligence Period to terminate
its initial public offering of common stock, Buyer may terminate this Contract
by providing written notice thereof to Seller, whereupon the Escrow Deposit
shall be promptly refunded to Buyer except for any portion of said deposit that
may have previously become non-refundable pursuant to said provision pursuant
to paragraph 4.2 (a) herein.
ARTICLE VII
Closing
7.1 Time and Place of Closing: If all pre-closing contingencies and
conditions have been satisfied or waived by Buyer, the Closing of this
transaction shall take place at the office of the Buyer's attorney on or before
May 15, 2000. If such contingencies or conditions have not been satisfied
within such time period, Buyer shall have the right to extend the Due Diligence
Period and to extend the time for Closing for thirty (30) day increments up to
six (6) months for a consideration of Three Thousand ($3,000.00) Dollars for
each incremental thirty (30) day extension. The consideration paid for any
incremental extension hereunder shall be advanced directly to Seller and shall
not be applied toward the purchase price of the Property. Notwithstanding the
foregoing, no incremental payment shall be due from Buyer with respect to any
extension of the Due Diligence Period or extension of the time for Closing
resulting from the failure of Seller to satisfy its obligations with respect to
any pre-closing contingency or condition including but not limited to delays
resulting from Federal Bankruptcy Court.
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7.2 Events of Closing: At the Closing:
(a) Seller shall deliver to Buyer the following:
(i) A General Warranty Deed (in form and substance customarily used
in Beaufort County, South Carolina) duly executed and
acknowledged by Seller conveying to Buyer fee simple title to
the land which is the subject of this agreement free and clear
of any lien, encumbrances or exception other than the Permitted
Exceptions
(ii) A Seller's Affidavit attesting to the absence unless otherwise
provided for herein or for settlement at Closing, of any
financing statements, claims of liens or potential lienors known
to Seller and further attesting that (A) there have been no
improvements to the Property for ninety (90) days immediately
preceding the Closing Date for which payment in full has not
been made; (B) that to the knowledge of Seller the Property has
never been used for the storage or disposal of hazardous wastes;
and (C) that since the date of this Contract, Seller has not
caused to be placed against the Property and has no knowledge of
the placement against the Property since such date of any
easements, (except those to accommodate cross-easements for
improved traffic flow), restrictions, leases, tenancies,
encumbrances or rights affecting the Property, and has not taken
any other action, either directly or indirectly, which would
otherwise adversely affect title to the Property;
(iii) a non-foreign affidavit, and
(iv) possession of the Property.
(b) Buyer shall deliver to Seller the consideration required pursuant to
this agreement.
7.3 Expenses: Buyer shall pay the cost of the title abstract, the cost of
any title insurance, Buyer's share of the prorations, the fee to record the
Deed, and the Buyer's own attorney's fees. Except as otherwise provided in this
Section, all other expenses hereunder shall be paid by the party incurring such
expenses. Seller shall pay the cost of the statutory recording fee (formerly
called deed stamps), and Seller's own attorney's fees. Seller shall pay
Seller's proportionate share of the prorations as set forth below.
7.4 Prorations: Real estate taxes shall be prorated to the day of Closing
based upon the number of actual days involved. Seller shall be responsible for
all such taxes for any period prior to the Closing. In connection with the
proration of the real estate taxes, if actual tax figures for the year of
Closing are not available on the Closing Date, an estimated proration of taxes
shall be made using tax figures from the preceding year; provided, however that
when actual taxes for the year of Closing become available, a corrected
proration required hereunder, if such taxes for the year of Closing increase
over those for the preceding year, Seller shall pay to Buyer a pro rata portion
of such increase, computed to the Closing Date, and conversely, if such taxes
for the year of Closing decrease from those of the preceding year, Buyer shall
have to pay to Seller a pro rata portion of such decrease, computed to the
Closing Date, any such payment to be made within (15) days after notification
by either party that such adjustment is necessary.
ARTICLE VIII
Default and Remedies
8.1 Default by Seller: Seller shall be in default hereunder if Seller shall
fail to meet, comply with or perform any covenant, agreement, or obligation
required, within the time limits and in the manner required in this Contract,
for any reason other than a Permitted Termination or a default by Buyer. Upon
the failure of Seller to comply with the terms hereof within the stipulated
time, and after receipt of notice of said default with a ten (10) day right to
cure, it is understood and agreed by and between the parties hereto that Buyer
pursue any and all rights and remedies available at law or in equity against
Seller.
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8.2 Default by Buyer: Buyer shall be in default hereunder if Buyer shall
fail to deliver at the Closing the consideration required by Section 2.1 (b)
hereof, for any reason other than a default by Seller hereunder or a Permitted
Termination. Upon the failure of Buyer to comply with the terms herein within
the stipulated time, and after receipt of notice of said default with a ten
(10) day right to cure, it is understood and agreed by and between the parties
hereto that Seller may pursue any and all rights and remedies available at law
or in equity against Buyer.
8.3 Attorneys' Fees: If it is necessary for either the Buyer or Seller to
employ an attorney to enforce its rights pursuant to this Contract because of
the default of the other party, the defaulting party shall reimburse the
nondefaulting party for reasonable attorneys' fees incurred at trial or on
appeal.
ARTICLE IX
Brokerage Commission
Buyer represents to Seller that Buyer has not engaged the services of a
broker, nor is any commission or fee due from Buyer on account of the sale of
the Property. Seller represents to Buyer that Seller has listed the property
with ReMax, with the specification that Buyer is an excluded party and not
subject to any brokerage commission or fee due from Seller on account of the
sale of the Property. Each party agrees to indemnify the other party and to
hold the other party harmless from any loss, liability, damage, cost or expense
(including, without limitation reasonable attorneys' fees incurred in
negotiation, at trial or on appeal) paid or incurred by reason of any said
breach of the representation made in this Article.
ARTICLE X
Miscellaneous
10.1 Notices: All notices, demands, requests and other communications
required or permitted hereunder Shall be in writing, and shall be deemed to be
delivered and received upon the earlier or occur of actual receipt, or
regardless of whether actually received (except where receipt is specified in
this Contract), deposited in a regularly maintained receptacle for the United
States mail, registered or certified, return receipt requested, postage fully
prepaid, addressed to the address as such party may have specified theretofore
by notice delivered in accordance with this Article and actually received by
the addressee:
As to SELLER: N. Edward Marchetti
131 Sea Island Parkway
Beaufort, South Carolina 29902
As to BUYER: Martin Goodman, Chairman
Islands Bancorp
211 Charles Street, Suite 100
Beaufort, South Carolina 29902
10.2 Section 1031 Exchange: Buyer acknowledges and agrees that Seller
intends to sell the subject property pursuant to Section 1031 of the U.S.
Internal Revenue Service Code and agrees to cooperate with Seller in meeting
the requirements of such tax deferred sale and exchange.
10.3 Integration; Modification; Waiver: This Contract constitutes the
complete and final expression of the agreement of the parties relating to the
Property, and supersedes all previous contracts, agreements, and understandings
of the parties, either oral or written, relating to the Property. This Contract
cannot be modified except by an instrument in writing (referring specifically
to this Contract) executed by the party against whom enforcement of the
modification is sought.
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10.4 Counterpart; Execution: This Contract may be executed in several
counterparts, each of which shall be fully effective as an original and all of
which together shall constitute one and the same instrument.
10.5 Headings; Construction: The headings which have been used throughout
this contract have been inserted for convenience of reference only and do not
constitute matter to be construed in interpreting this Contract. Words of any
gender used in this Contract shall be construed to include any other gender and
words in the singular number shall be held to include the plural; and vice
versa, unless the context requires otherwise. The words "herein", "hereunder",
and other similar compounds of the word "here" when used in this Contract refer
to the entire Contract and not to any particular provision or section. If the
last day of any time period stated herein shall fall on a Saturday, Sunday,
legal or banking holiday, then the duration of such time period shall be
extended so that it shall end on the next succeeding day which is not a
Saturday, Sunday, legal or banking holiday. The term "business day" shall mean
any day other than a Saturday, Sunday, legal or banking holiday.
10.6 Invalid Provision: If any one or more of the provisions of this
Contract, or the applicability of any such provision to a specified situation,
shall be held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and enforceable,
and the validity and enforceability of all other provisions of this Contract
and all other applications of any such provision shall not be affected thereby.
10.7 Further Acts. In Addition to the acts recited in this Contract to be
performed by Seller arid Buyer, Seller and Buyer agree to perform at the
Closing or after the Closing any and all such further acts as may be reasonably
necessary to consummate the transactions contemplated hereby.
10.8 Date of Contract: The date of this Contract shall for all purposes be
the date of the signature of the last of the parties to sign this Contract (the
"Execution Date").
10.9 Assignment of Contract: This Contract may not be assigned by either
party hereto without the prior written consent of the other party; provided,
however, that the parties hereto agree that this Contract may be assigned at
any time by Islands Bancorp to Islands Community Bank, N.A. (Proposed). Seller
may assign this contract to a qualified intermediary in connection with
discharging the requirements of IRS Section 1031.
10.10 Time for Acceptance: This offer shall expire on January 26, 2000 at
1:00 p.m. Eastern Standard Time.
10.11 Restriction of Use: Buyer agrees that Buyer or assigns shall not
operate a retail landscape or garden center upon the property subject to this
contract for a period of five (5) years from date hereof.
10.12 Approval by Federal Bankruptcy Court: Buyer and Seller acknowledge
that this agreement is subject to approval by Federal Bankruptcy Court. Seller
shall submit to Federal Bankruptcy Court and petition made for approval to the
Court within fifteen (15) days of the signing of this agreement with a copy of
petition to be provided to Seller.
<TABLE>
<CAPTION>
EXECUTED BY BUYER ON: EXECUTED BY SELLER ON:
<S> <C>
January 24, 2000 (Date) 1-24-00 (Date)
________________________________ __________________________
ISLANDS BANCORP EDWARD MARCHETTI
By: /s/ D. Martin Goodman /s/ Edward Marchetti
________________________________ __________________________
D. Martin Goodman, Chairman Edward Marchetti
</TABLE>
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PROMISSORY NOTE
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Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$500,000.00 12-24-1999 12-24-2000 MB
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References in the shaded area are for Lender's use and do not limit the applicability of this document to any particular loan
or item.
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</TABLE>
Borrower: ISLANDS BANCORP Lender: The Bankers Bank
500 CARTERET STREET, SUITE A 2410 Paces Ferry Road
BEAUFORT, SC 29902 600 Paces Summit
Atlanta, GA 30339
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Principal Amount: $500,000.00 Initial Rate: 8.000% Date of Note: December 24, 1999
</TABLE>
PROMISE TO PAY. ISLANDS BANCORP ("Borrower") promises to pay to The Bankers
Bank ("Lender"), or order, in lawful money of the United States of America, the
principal amount of Five Hundred Thousand & 00/100 Dollars ($500,000.00) or so
much as may be outstanding, together with Interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from the date
of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on December 24, 2000. In addition,
Borrower will pay regular quarterly payments of accrued unpaid Interest
beginning March 24, 2000, and all subsequent interest payments are due on the
same day of each quarter after that. Borrower will pay Lender at Lender's
address shown above or at such other place as Lender may designate in writing.
Unless otherwise agreed or required by applicable law, payments will be applied
first to accrued unpaid interest, then to principal, and any remaining amount to
any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from lime to time based on changes in an index which is the Prime rate as
published in the Money Rates section of the Wall Street Journal. (the "Index").
If two or more rates exist, then the highest rate will prevail. Lender will
tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. The Index
currently is 8.500% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 0.500 percentage points
under the Index, resulting in an initial annual rate of simple interest of
8.000%. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to make
payments of accrued unpaid interest. Rather, they will reduce the principal
balance due.
LATE CHARGE. If a payment is 15 days or more late, Borrower will be charged
$100.00.
DEFAULT. Borrower will be In default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished. (d) Borrower
becomes insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the, benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (e) Any creditor tries to take any of Borrower's property on
or in which Lender has a lien or security interest. This includes a garnishment
of any of Borrower's accounts with Lender. (f) Any guarantor dies or any of the
other events described in this default section occurs with respect to any
guarantor of this Note. (g) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance
of the Indebtedness is Impaired. (h) Lender in good faith deems itself
insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note 3.000
percentage points. The interest rate will not exceed the maximum rate permitted
by applicable law. Lender may hire or pay someone else to help collect this
Note if Borrower does not pay. Borrower also will pay Lender that amount. This
includes, subject to any limits under applicable law. Lender's, costs of
collection, including court costs and fifteen percent (15%) of the principal
plus accrued interest as attorneys' fees, if any sums owing under this Note are
collected by or through an attorney-at-law, whether or not there is a lawsuit,
and legal expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated post-
judgment collection services. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by law.
This Note has been delivered to Lender and accepted by Lender In the State of
Georgia. Subject to the provisions on arbitration, this Note shall be governed
by and construed In accordance with the laws of the State of Georgia.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of twenty dollars
($20.00) or five percent (5%) of the face amount of the check, whichever is
greater, if Borrower makes a payment on Borrower's loan and the check or
preauthorized charge with which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to further loan
advances. Advances under this Note may be requested only in writing by Borrower
or by an authorized person. All communications, instructions, or directions by
telephone or otherwise to Lender are to be directed to Lender's office shown
above. The following party or parties are authorized to request advances under
the line of credit until Lender receives from Borrower at Lender's address shown
above written notice of revocation of their authority: BILL GOSSETT, PROPOSED
PRESIDENT. Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to any
of Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
iniernal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (e) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (e) Lender in good faith
deems itself Insecure under this Note or any other agreement between Lender and
Borrower.
ARBITRATION. Lender and Borrower agree that all disputes, claims and
controversies between them, whether Individual, joint. or class in nature,
arising from this Note or otherwise, including without limitation contract and
tort disputes, shall be arbitrated pursuant to the Rules of the American
Arbitration Association upon request of either party. No act to take or dispose
of any collateral securing this Note shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or mortgage;
obtaining a writ of attachment or imposition of a receiver; or exercising any
rights relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the Uniform
Commercial Code. Any disputes, claims, or controversies concerning the
lawfulness or reasonableness of any act, or exercise of any right, concerning
any collateral securing this Note, including any claim to rescind, reform, or
otherwise modify any agreement relating to the collateral securing this Note,
shall also be arbitrated, provided however that no arbitrator shall have the
right or the power to enjoin or restrain any act of any party. Judgment upon
any award rendered by any arbitrator may be entered in any court having
jurisdiction. Nothing in this Note shall preclude any party from seeking
equitable relief from a court of competent jurisdiction. The statute of
limitations, estoppel, waiver, laches, and similar doctrines which would
otherwise be applicable in an action brought by a party shall be applicable in
any arbitration proceeding, and the commencement of an arbitration proceeding
shall be deemed the commencement of an action for these purposes. The Federal
Arbitration Act shall apply to the construction, interpretation, and enforcement
of this arbitration provision.
ACCRUAL METHOD. Interest will be calculated on an Actual/360 basis.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties waive any right to require Lender to take action against any other party
who signs this Note as provided in O.C.G.A. Section 10-7-24 and agree that
Lender may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
<PAGE>
12-24-1999 PROMISSORY NOTE Page 2
Loan No (Continued)
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IN WITNESS WHEREOF, THIS NOTE HAS BEEN SIGNED AND SEALED BY THE UNDERSIGNED, WHO
ACKNOWLEDGES A COMPLETED COPY HEREOF.
BORROWER:
ISLANDS BANKCORP
By: /S/ WILLIAM S. GOSSETT (SEAL)
---------------------------------
BILL GOSSETT, PROPOSED PRESIDENT
LENDER:
The Bankers Bank
By:
--------------------------------
Authorized Officer
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Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat.& T.M.Off Ver.
3.24a(c)1999CFI ProServices, Inc, All rights reserved. (GA-D20 E3.241SLANDS.LN
C1.OVL)
<PAGE>
COMMERCIAL GUARANTY
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Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
MB
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References in the shaded area are for Lender's use and do not limit the applicability of this document to any particular loan
or item.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Borrower: ISLANDS BANCORP Lender: The Bankers Bank
500 CARTERET STREET, SUITE A 2410 Paces Ferry Road
BEAUFORT, SC 29202 600 Paces Summit
Atlanta, GA 30339
</TABLE>
Guarantor:
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AMOUNT OF GUARANTY. The principal amount of this Guaranty is 100.000% of all
amounts due now or later from Borrower to Lender as provided below, however in
no event to exceed Five Hundred Thousand & 00/100 Dollars ($500,000.00).
CONTINUING GUARANTY. In consideration of the sum of Five Dollars ($5.00) and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged by Guarantor and to induce Lender to make loans or otherwise
extend credit to Borrower, or to renew or extend In whole or in part any
existing indebtedness of Borrower to Lender, or to make other financial
accommodations to Borrower, ______________________________________ ("Guarantor")
absolutely and unconditionally guarantees and promises to pay to The Bankers
Bank ("Lender") or its order, in legal tender of the United States of America,
100.000% of the Indebtedness (as that term is defined below) of ISLANDS BANCORP
("Borrower") to Lender on the terms and conditions set forth in this Guaranty.
The obligations of Guarantor under this Guaranty are continuing. Guarantor
agrees that Lender, in its sole discretion, may determine which portion of
Borrower's indebtedness to Lender is covered by Guarantor's percentage guaranty.
DEFINITIONS. The following words shall have the following meanings when used in
this Guaranty:
Borrower. The word "Borrower" means ISLANDS BANCORP.
Guarantor. The word "Guarantor" means ______________________________.
Guaranty. The word "Guaranty" means this Guaranty made by Guarantor for
the benefit of Lender dated December 24, 1999.
Indebtedness. The word "Indebtedness" is used in its most comprehensive
sense and means and includes any and all of Borrower's liabilities, obligations,
debts, and indebtedness to Lender, now existing or hereinafter incurred or
created, including, without limitation, all loans, advances, interest, costs,
debts, overdraft indebtedness, credit card indebtedness, lease obligations,
other obligations, and liabilities of Borrower, or any of them, and any present
or future judgments against Borrower, or any of them; and whether any such
Indebtedness is voluntarily or involuntarily incurred, due or not due, absolute
or contingent, liquidated or unliquidated, determined or undetermined; whether
Borrower may be liable individually or jointly with others, or primarily or
secondarily, or as guarantor or surety; whether recovery on the Indebtedness may
be or may become barred or unenforceable against Borrower for any reason
whatsoever; and whether the Indebtedness arises from transactions which may be
voidable on account of Infancy, insanity, ultra vires, or otherwise.
Lender. The word "Lender" means The Bankers Bank, its successors and
assigns.
Related Documents. The wards "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, security deeds,
mortgages, deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the Indebtedness.
MAXIMUM LIABILITY. The maximum liability of Guarantor under this Guaranty shall
not exceed at any one time the sum of the principal amount of $500,000.00, plus
all interest thereon, plus all of Lender's costs, expenses, and attorneys' fees
incurred in connection with or relating to (a) the collection of the
Indebtedness, (b) the collection and sale of any collateral for the Indebtedness
or this Guaranty, or (c) the enforcement of this Guaranty. Attorneys' fees
include, without limitation, attorneys' fees whether or not there is a lawsuit,
and if there is a lawsuit, any fees and costs for trial and appeals.
The above limitation on liability is not a restriction on the amount of the
Indebtedness of Borrower to Lender either in the aggregate or at any one time.
If Lender presently holds one or more guaranties, or hereafter receives
additional guaranties from Guarantor, the rights of Lender under all guaranties
shall be cumulative. This Guaranty shall not (unless specifically provided
below to the contrary) affect or invalidate any such ether guaranties. The
liability of Guarantor will be the aggregate liability of Guarantor under the
terms of this Guaranty and any such other unterminated guaranties.
NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and
continuous for so long as this Guaranty remains in force. Guarantor intends to
guarantee at all times the performance and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of all Indebtedness
within the limits set forth in the preceding section of this Guaranty.
Accordingly, no payments made upon the Indebtedness will discharge or diminish
the continuing liability of Guarantor in connection with any remaining portions
of the Indebtedness or any of the Indebtedness which subsequently arises or is
thereafter incurred or contracted.
DURATION OF GUARANTY. This Guaranty will take effect when received by Lender
without the necessity of any acceptance by lender, or any notice to Guarantor or
to Borrower, and will continue in full force until all Indebtedness incurred or
contracted before receipt by Lender of any notice of revocation shall have been
fully and finally paid and satisfied and all other obligations of Guarantor
under this Guaranty shall have been performed in full. If Guarantor elects to
revoke this Guaranty, Guarantor may only do so in writing. Guarantor's written
notice of revocation must be mailed to Lender, by certified mail, at the address
of Lender listed above or such other place as Lender may designate in writing.
Written revocation of this Guaranty will apply only to advances or new
Indebtedness created after actual receipt by Lender of Guarantor's written
revocation. For this purpose and without limitation, the term "new
Indebtedness" does not include Indebtedness which at the time of notice of
revocation is contingent, unliquidated, undetermined or not due and which later
becomes absolute, liquidated, determined or due. This Guaranty will continue to
bind Guarantor for all Indebtedness incurred by Borrower or committed by Lender
prior to receipt of Guarantor's written notice of revocation, including any
extensions, renewals, substitutions or modifications of the Indebtedness. All
renewals, extensions, substitutions, and modifications of the Indebtedness
granted after Guarantor's revocation, are contemplated under this Guaranty and,
specifically will not be considered to be new Indebtedness. This Guaranty shall
bind the estate of Guarantor as to Indebtedness created both before and after
the death or incapacity of Guarantor, regardless of Lender's actual -notice of
Guarantor's death. Subject to the foregoing, Guarantor's executor or
administrator or other legal representative may terminate this Guaranty in the
same manner in which Guarantor might have terminated it and with the same
effect. Release of any other guarantor or termination of any other guaranty
<PAGE>
12-24-99 COMMERCIAL GUARANTY PAGE 2
Loan No (Continued)
- --------------------------------------------------------------------------------
of the Indebtedness shall not affect the liability of Guarantor under this
Guaranty. A revocation received by Lender from any one or more Guarantors shall
not affect the liability of any remaining Guarantors under this Guaranty. It is
anticipated that fluctuations may occur in the aggregate amount of Indebtedness
covered by this Guaranty, and it is specifically acknowledged and agreed by
Guarantor that reductions in the amount of Indebtedness, even to zero Dollars
($0.00), prior written revocation of this Guaranty by Guarantor shall not
constitute a termination of this Guaranty. This Guaranty Is binding upon
Guarantor and Guarantor's heirs, successors and assigns so long as any of the
guaranteed Indebtedness remains unpaid and even though the Indebtedness
guaranteed may from time to time be zero dollars ($0.00).
GUARANTOR'S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before
or after any revocation hereof, without notice or demand and without lessening
Guarantor's liability under this Guaranty, from time to time: (a) prior to
revocation as set forth above, to make one or more additional secured or
unsecured loans to Borrower, to lease equipment or other goods to Borrower, or
otherwise to extend additional credit to Borrower; (b) to alter, compromise,
renew, extend, accelerate, or otherwise change one or more times the time for
payment or other terms of the Indebtedness or any part of the Indebtedness,
including increases and decreases of the rate of Interest on the Indebtedness;
extensions may be repeated and may be for longer than the original loan term;
(c) to take and hold security for the payment of this Guaranty or the
Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to
perfect, and release any such security, with or without the substitution of new
collateral; (d) to release, substitute, agree not to sue, or deal with any one
or more of Borrower's sureties, endorsers, or other guarantors on any terms or
in any manner Lender may choose; (e) to determine how, when and what application
of payments and credits shall be made on the Indebtedness; (f) to apply such
security and direct the order or manner of sale thereof, including without
limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine;
(g) to sell, transfer, assign, or grant participations in all or any part of the
Indebtedness; and (h) to assign or transfer this Guaranty in whole or in part.
GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants
to Lender that (a) no representations or agreements of any kind have been made
to Guarantor which would limit or qualify in any way the terms of this Guaranty;
(b) this Guaranty is executed at Borrower's request and not at the request of
Lender; (c) Guarantor has full power, right and authority to enter into this
Guaranty; (d) the provisions of this Guaranty do not conflict with or result in
a default under any agreement or other instrument binding upon Guarantor and do
not result in a violation of any law, regulation, court decree or order
applicable to Guarantor; (e) Guarantor has not and will not, without the prior
written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor's assets, or any
interest (herein; (f) upon Lender's request, Guarantor will provide to Lender
financial and credit information in form acceptable to Lender, and all such
financial information which currently has been, and all future financial
information which will be provided to Lender is and will be true and correct in
all material respects and fairly present the financial condition of Guarantor as
of the dates the financial information is provided; (g) no material adverse
change has occurred in Guarantor's financial condition since the dale of the
most recent financial statements provided to Lender and no event has occurred
which may materially adversely affect Guarantor's financial condition; (h) no
litigation claim, Investigation, administrative proceeding or similar action
(Including those for unpaid taxes) against Guarantor is pending or threatened;
(I) Lender has made no representation to Guarantor as to the creditworthiness of
Borrower, and (1) Guarantor has established adequate means of obtaining from
Borrower on a continuing basis information regarding Borrower's financial
demotion. Guarantor agrees to keep adequately Informed from such means of any
facts, events, or circumstances which might In any way affect Guarantor's s
risks under this Guaranty, and Guarantor further agrees that, absent a request
for information, Lender shall have no obligation to disclose to Guarantor any
information or documents acquired by Lender in the course of its relationship
with Borrower.
GUARANTOR'S WAIVERS. Except as prohibited by applicable law, Guarantor waives
any right to require Lender (a) to command landing money or to extend other
credit to Borrower; (b) to make any presentment, protest, demand, or notice of
any kind, including notice of any nonpayment of the Indebtedness or of any
nonpayment related to any collateral, or notice of any action or correction on
the part of Borrower, Lender, any surely, endorser, or other guarantor in
connection with the Indebtedness or in connection with the creation of new or
additional loans of obligations; of to resort for payment or to proceed directly
or al once against any person, Including Borrower or any other guarantor; (d) to
proceed directly against or exhaust any collateral held by Lander Tram Borrower,
any other guarantor, or any ether person; (e) to give notice of the terms, lime,
and place of any public or private sale of personal properly security held by
Lender from Borrower or to comply with any other applicable provisions of the
Uniform Commercial Code; (f) to pursue any other remedy within Lender's power;
or (g) to commit any act or omission of any kind, or at any time, with respect
to any matter whatsoever.
If now or hereafter (a) Borrower shall be or become insolvent, and (b) the
Indebtedness shall not at all times until paid be fully secured by collateral
pledged by Borrower, Guarantor hereby forever waives and relinquishes in favor
of Lender and Borrower, and their respective successors, any claim or right to
payment Guarantor may now have or hereafter have or acquire against Borrower, by
subrogation or otherwise, so that al no lime shall Guarantor be or become a
"creditor" of Borrower within the meaning of 11 U.S.C. section 547(b), or any
successor provision of the Federal bankruptcy laws.
Guarantor also waives any and all rights or defenses arising by reason of (a)
the provisions of O.C.G.A. Section 10-7-24 concerning Guarantor's right to
require Lender to lake action against Borrower or any Aone action@ or Aanti-
deficiency@ law or any other law which may prevent Lender from bringing any
action, including a claim for deficiency, against Guarantor, before or after
Lender's commencement or completion of any foreclosure action, either judicially
or by exercise of a power of sale; (b) any election of remedies by Lender which
destroys or otherwise adversely affects Guarantor's subrogation rights or
Guarantor's rights to proceed against Borrower for reimbursement, including
without limitation, any loss of rights Guarantor may suffer by reason of any law
limiting, qualifying, or discharging the Indebtedness; (c) any disability or
other defense of Borrower, of any other guarantor, or of any ether person, or by
reason of the cessation of Borrower's liability from any cause whatsoever, other
than payment in full in legal tender, of the Indebtedness; (d) any right to
claim discharge of the Indebtedness on the basis of unjustified impairment of
any collateral for the Indebtedness; (e) any statute of limitations, if at any
time any action or suit brought by Lender against Guarantor is commenced there
is outstanding Indebtedness of Borrower to Lender which is not barred by any
applicable statute of limitations; or (f) any defenses given to guarantors allow
or in equity other than actual payment and performance of the Indebtedness. If
payment is made by Borrower, whether voluntarily or otherwise, or by any third
party, on the Indebtedness and thereafter Lender is forced to remit the amount
of that payment to Borrower's trustee in bankruptcy or to any similar person
under any federal or state bankruptcy law or law for the relief of debtors, the
Indebtedness shall be considered unpaid for the purpose of enforcement of this
Guaranty.
Guarantor further waives and agrees not to assert or claim at any time any
deductions to the amount guaranteed under this Guaranty for any claim of setoff,
counterclaim, counter demand, recoupment or similar right, whether such claim,
demand or right may be asserted by the Borrower, the Guarantor, or both.
GUARANTOR'S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees
that each of the waivers set forth above is made with Guarantor's full knowledge
of its significance and consequences and that, under the circumstances, the
waivers are
<PAGE>
12-24-99 COMMERCIAL GUARANTY PAGE 3
Loan No (Continued)
- --------------------------------------------------------------------------------
reasonable and not contrary to public policy or law. It any such waiver is
determined to be contrary to any applicable law or public policy, such waiver
shall be effective only to the extent permitted by law or public policy.
LENDER'S RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the moneys, securities or other properly of Guarantor given to Lender by
law, Lender shall have, with respect to Guarantor's obligations to Lender under
this Guaranty and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and Guarantor hereby
assigns, conveys, delivers, pledges, and retailers to Lender all of Guarantor's
right, title and interest in and to, all deposits, moneys, securities and other
properly of Guarantor now or hereafter in the possession of or on deposit with
Lender, whether held in a general or special account or deposit, whether held
jointly with someone else, or whether held for safekeeping or otherwise,
excluding however all IRA, Keogh, and trust accounts. Every such security
interest and right of setoff may be exercised without demand upon or notice to
Guarantor. No security interest or right of setoff shall be deemed to have been
waived by any act or conduct on the part of Lender or by any neglect to exercise
such right of setoff or to enforce such security interest or by any delay In so
doing. Every right of setoff and security interest shall continue in lull force
and effect until such right of setoff or security interest is specifically
waived or released by an instrument In writing executed by Lender.
SUBORDINATION OF BORROWER'S DEBTS TO GUARANTOR. Guarantor agrees that the
Indebtedness of borrower to Lender, whether now existing or hereafter created,
shall be prior to any claim that Guarantor may now have or hereafter acquire
against Borrower, whether or not Borrower becomes Insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any
account whatsoever, to any claim that Lender may now or hereafter have against
Borrower. In the event of insolvency and consequent liquidation of the assets of
Borrower, through bankruptcy, by an assignment for the benefit of creditors, by
voluntary liquidation, or otherwise, the assets of Borrower applicable to the
payment of the claims of both Lender and Guarantor shall be paid to Lender and
shall be first applied by Lander to the Indebtedness of Borrower to Lender.
Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee In bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose
of assuring to Lender full payment in legal tender of the Indebtedness. If
Lender so requests, any notes or credit agreements now or hereafter evidencing
any debts or obligations of Borrower to Guarantor shall be marked with a legend
that the same are subject to this Guaranty and shall be delivered to Lender
Guarantor agrees, and Lender hereby is authorized, in the name of Guarantor,
from time to time to execute and file financing statements and continuation
statements and to execute such other documents and to take such other actions as
Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Guaranty:
Amendments. This Guaranty, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Guaranty. No alteration of or amendment to this Guaranty shall be effective
unless given in writing and signed by the party or parties sought to be charged
or bound by the alteration or amendment.
Applicable Law. This Guaranty has been delivered to Lender and accepted by
Lender in the Stale of Georgia. Subject to the provisions an arbitration, this
Guaranty shall be governed by and construed in accordance with the laws of the
Stale of Georgia.
Arbitration. Lender and Guarantor agree that all disputes, claims and
controversies between them, whether Individual, joint, or class In nature,
arising from this Guaranty or adherents, including without limitation contract
and tort disputes, shall be arbitrated personal to the Rules of the American
Arbitration Association, upon request of either party. No act to take or dispose
of any Collateral shall constitute a waiver of this arbitration agreement or be
prohibited by this arbitration agreement. This includes, without limitation,
obtaining injunctive relief or a temporary restraining order; invoking a power
of sale under any deed of trust or mortgage; obtaining a writ of attachment or
imposition of a receiver, or exercising any rights relating to personal
properly, including taking or disposing of such property with or without
judicial process pursuant to Article 9 of the Uniform Commercial Code. Any
disputes, claims, or controversies concerning the lawfulness or reasonableness
of any act, or exercise of any right, concerning any Collateral, including any
claim to rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator shall
have the right or the power to enjoin or restrain any act of any party. Judgment
upon any award rendered by any arbitrator may be entered in any court having
jurisdiction Nothing in this Guaranty shall preclude any party from seeking
equitable relief from a court of competent jurisdiction. The statute of
limitations, estoppel, waiver, aches, and similar doctrines which would
otherwise be applicable in an action brought by a party shall be applicable in
any monarch proceeding, and the commencement of an arbitration proceeding shall
be deemed the commencement of an action for these purposes. The Federal
Arbitration Act shall apply to the construction, interpretation, and enforcement
of this arbitration provision.
Attorneys' Fees; Expenses. Guarantor agrees to pay upon demand all of Lender's
costs and expenses, including attorneys' lees and Lender's legal expenses,
incurred in connection with the enforcement of this Guaranty. Lender may pay
someone else to help enforce this Guaranty, and Guarantor shall pay the costs
and expenses of such enforcement. Costs and expenses include all costs and
expenses of collection, including fifteen percent (15%) of the principal plus
accrued interest as attorneys' lees, if any sums awing under this Guaranty are
collected by or through an attorney-at-law, whether or not there is a lawsuit,
including attorney's fees and legal expenses for bankruptcy proceedings (and
including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Guarantor also
shall pay all court costs and such additional lees as may be directed by the
court.
Notices. All notices required to be given by either party to the other under
this Guaranty shall be in writing, may be sent by telefacsimile (unless
otherwise required by law), and, except for revocation notices by Guarantor,
shall be effective when actually delivered or when deposited with a nationally
recognized overnight courier, or when deposited in the United States mail, first
class postage prepaid, addressed to the party to whom the notice is to be given
al the address shown above or to such other addresses as either party may
designate to the ether in writing. All revocation notices by Guarantor shall be
in writing and shall be effective only upon delivery to Lender as provided above
in the section titled "ADURATION OF GUARANTY." If there is more than one
Guarantor, notice to any Guarantor will constitute notice to all Guarantors. For
notice purposes, Guarantor agrees to keep Lender informed at all times of
Guarantor's current address.
Interpretation. In all cases where there is more then one Borrower or Guarantor,
then all words used in this Guaranty in the singular shall be deemed to have
been used in the plural where the context and construction so require; and where
there is more than one Borrower named in this Guaranty or when this Guaranty is
executed by more than one Guarantor, the words "Borrower" and "Guarantor"
respectively shall mean all and any one or more of them. The words "Guarantor,"
"Borrower," and "Lender" include the heirs, successors, assigns, and transferees
of each of them. Caption headings in this Guaranty are for convenience purposes
only and are not to be used to interpret or define the provisions of this
Guaranty. If a court of competent jurisdiction finds any provision of this
Guaranty to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances, and all provisions of this Guaranty in all other
respects shall remain valid and enforceable. If any one or more of Borrower or
Guarantor are corporations or partnerships, it is not necessary for Lender to
inquire into the powers of Borrower or Guarantor or of the officers, directors,
partners, or agents acting or purporting to act an their behalf, and any
Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed under this Guaranty.
<PAGE>
12-24-99 COMMERCIAL GUARANTY PAGE 4
Loan No (Continued)
- --------------------------------------------------------------------------------
Waiver. Lender shall not be deemed to have waived any rights under this Guaranty
unless such waiver is given in writing and signed by Lender. No delay or
omission on the part of Lender in exercising any right shall operate as a waiver
of such right or any other right. A waiver by Lender of a provision of this
Guaranty shall not prejudice or constitute a waiver of Lender's right otherwise
to demand strict compliance with that provision or any other provision of this
Guaranty. No prior waiver by Lender, nor any course of dealing between Lender
and Guarantor, shall constitute a waiver of any of Lender's rights or of any of
Guarantor's obligations as to any future transactions. Whenever the consent of
Lender is required under this Guaranty, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent instance,
where such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT
THIS GUARANTY IS EFFECTIVE UPON GUARANTOR'S EXECUTION AND DELIVERY OF THIS
GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE
MANNER SET FORTH IN THE SECTION TITLED "DURATION OF GUARANTY." NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY
IS DATED DECEMBER 24, 1999.
IN WITNESS WHEREOF, THIS GUARANTY HAS BEEN SIGNED AND SEALED BY THE UNDERSIGNED,
WHO ACKNOWLEDGES A COMPLETED COPY HEREOF.
GUARANTOR:
X______________________________________________________________ (SEAL)
(NAME OF GUARANTOR)
Signed, Sealed and Delivered in the presence of:
X__________________________________________________________________________
Unofficial Witness
- --------------------------------------------------------------------------------
Notary Public, _________________________________________County
(NOTARY SEAL)
My Commission expires: ____________________________________
LENDER:
The Bankers Bank
By: ____________________________________________________________________
Authorized Officer
INDIVIDUAL ACKNOWLEDGMENT
STATE OF_________________________________)
) SS
COUNTY OF _______________________________)
PERSONALLY appeared before me
__________________________________________________________________________ who,
being duly sworn, says that he or she saw the within-named
_____________________________________________________ sign, seal, and, as his or
her act and deed, deliver the within-written Guaranty; and that he or she with
________________________________________________________________________________
________________ witnessed the execution thereof.
--------------------------------------
(Witness)
SWORN to before me this______________________
day of _________________________A.D. 19___________.
______________________________________________(Seal)
Notary Public
My Commission expires:_____________________________
- --------------------------------------------------------------------------------
LASER PRO. Reg. U.S. Pat & T. M. Off., Ver. 3.24a (c) 1999 CFI ProServices, Inc.
All rights reserved. [GA-E20 E3.24 F3.24 ISLANDS, LN C1.OVL]
<PAGE>
EXHIBIT 10.8
STATE OF SOUTH CAROLINA
LEASE AGREEMENT
COUNTY OF BEAUFORT
This is a Lease Agreement (hereinafter LEASE) between Anthony R. Porter
hereinafter LANDLORD), and Islands Bancorp (hereinafter TENANT) upon the terms
and conditions set forth herein.
1. LANDLORD leases the real property (hereinafter PREMISES), which is
described below, and hereby subleases to the TENANT the PREMISES, to wit:
211 Charles Street, Suite 100
(southernmost four offices and reception area)
2. TENANT acknowledges that (a) it has examined the PREMISES and will accept
them together with the fixtures, appurtenances and improvements thereto in
their existing state and condition, (b) that no representations, warranties or
guarantees have been made by the LANDLORD, and, (c) that the LEASE is subject
to the following, to wit:
(a) All zoning regulations, past or future, which have or may affect the
PREMISES; and,
(b) The right of eminent domain; and,
(c) All ordinances, statutes or regulations of any governmental or
regulatory body thereof, whether or not of public record.
3. The term of the LEASE will be for three (3) months beginning February 1,
2000 and ending April 30, 2000, both dates inclusive, unless sooner terminated
as herein provided. In the event the TENANT fails to vacate the PREMISES at the
end of the term, all terms and conditions of this LEASE will continue except
TENANT will be considered a holdover tenant at will. This LEASE will not
terminate nor will the obligation for the rent terminate until TENANT has (a)
cleaned and washed the PREMISES to the same state and condition as when
received, (b) completely locked and secured the PREMISES, (c) returned all keys
to the PREMISES to the LANDLORD, and (d) obtained the written signature of the
LANDLORD that the terms hereof and all rent payments have been fully and
completely complied with.
4. The TENANT shall pay rent to the LANDLORD in the total amount of
$3,750.00 Dollars to be payable by the month in the sum of $1,250.00 per month
in advance beginning on February 1, 2000 to the LANDLORD at
and thereafter on the same day of each month.
TENANT will pay $500.00 deposit in advance as a breakage and damage deposit
to be refunded should there be no breakage or damage at the end of the LEASE.
The breakage or damage deposit is not part of the rent and may not be deducted
from the last month's rent.
Any payment not paid within five (5) days of the first day of each month
will incur a late charge of $3.00 per day.
LANDLORD may withhold any portion of the deposit for unpaid rent.
5. TENANT agrees to the following use and occupancy of the leased PREMISE
during the term hereof, to wit:
(a) To use the PREMISES solely for the purpose of a commercial office
space.
(b) PREMISES will at all times be kept in a clean manner so as not to
permit any offensive noise, odor or visual disturbance or other
undesirable nuisance or anything which might unreasonably interfere
with the safety, comfort or convenience of the LANDLORD or other
Tenants.
1
<PAGE>
(c) All garbage, refuse and rubbish will be promptly removed from the
PREMISES at the expense of the TENANT and they will not allow any
burning, burying or other disposal of the same on the PREMISES.
(d) Upon the expiration of this term, the TENANT shall surrender the
PREMISES in the same order and condition as when received, normal wear
and tear excepted, and shall remove from the PREMISES all properties
not owned by the LANDLORD.
(e) TENANT will not use or allow the use of the PREMISES for any illegal or
unlawful purpose or permit the use or sale of drugs thereon.
6. LANDLORD agrees that they are responsible for and will make all necessary
repairs, improvements and replacements of the appurtenances, including but not
limited to, the water lines, water system, sewer system, heating system,
plumbing system, cooling system, electrical system and wiring if such is in
excess of $50.00 per occurrence with such amount acting as a deductible from
the total bill. No TENANT incurred expenses shall be deducted from the monthly
rent under any circumstances.
7. LANDLORD will be responsible for all utilities and services of any kind
which are provided to the PREMISES, such as, but not limited to, water, heat,
gas, and electricity. TENANT to pay its own telephone bills.
8. TENANT will not make any alterations, additions or remodel the PREMISES
in any manner without the written consent of the LANDLORD.
9. TENANT will insure itself against any and all personal injuries to TENANT
and TENANT'S guests or invitees and also for any damage of any kind or nature
to any property owned by TENANT and TENANT'S invitees or guests. LANDLORD shall
be named payee in all such policies. TENANT shall hold LANDLORD harmless and
indemnify LANDLORD for such personal injuries or damages to property as are
referred to herein.
10. The following events will constitute a default by the TENANT and will
entitle the LANDLORD to enter the PREMISES upon five (5) days' written notice
and to assume possession thereof and will immediately terminate their LEASE, to
wit:
(a) A failure to comply with any of the terms or conditions of the LEASE;
or,
(b) A failure to pay the rent within five (5) days after it is due; or,
(c) The desertion or vacating of the PREMISES for thirty (30) days; or,
(d) The allowance of any pet or animal on the PREMISES without the written
consent of the LANDLORD.
(e) The institution by or against the TENANT or any bankruptcy or
insolvency proceedings; or,
(f) The assignment or subletting of the PREMISES or any portion thereof
except by the written permission of the LANDLORD.
11. LANDLORD or his designated representative may enter the PREMISES at any
reasonable time for the purpose of inspecting the leased PREMISES or to correct
and enforce any default by the TENANT.
12. This Agreement shall be construed, interpreted and enforced by the laws
of the State of South Carolina.
13. The covenants and conditions of this LEASE shall be binding on the
heirs, executors or legal representatives of the respective parties and shall
be construed as covenants running with the land.
14. This LEASE constitutes the entire agreement between the parties and may
not be modified or changed except in writing and signed by all parties hereto.
15. TENANT shall pay and be liable for all legal costs and charges
including reasonable attorney's fees, which may be lawfully incurred by the
LANDLORD (a) in obtaining a correction ion or enforcement of any default of
this LEASE, (b) in obtaining possession upon default of this LEASE, or (c) in
obtaining possession after the termination of the LEASE.
2
<PAGE>
Executed on January 7, 2000.
LANDLORD
/s/ Anthony R. Porter
_____________________________________
Anthony R. Porter
TENANT
Islands Bancorp
/s/ William B. Gossett
By___________________________________
William B. Gossett
3
<PAGE>
EXHIBIT 23.2
ACCOUNTANTS' CONSENT
We consent to the inclusion in Form SB-2 of our report dated February 8,
2000 on our audit of the financial statements of Islands Bancorp as of and for
the year ended December 31, 1999 and as of December 31, 1998 and for the period
from December 10, 1998 through December 31, 1998.
Atlanta, Georgia
February 9, 2000
/s/ Francis & Co., CPAs
Francis & Co., CPAs
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ISLANDS
BANCORP'S UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1999
AND 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 24,061 4,750
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 0 0
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 0
<INVESTMENTS-CARRYING> 0 0
<INVESTMENTS-MARKET> 0 0
<LOANS> 0 0
<ALLOWANCE> 0 0
<TOTAL-ASSETS> 100,234 4,750
<DEPOSITS> 0 0
<SHORT-TERM> 230,524 10,000
<LIABILITIES-OTHER> 21,607 0
<LONG-TERM> 16,858 0
0 0
0 0
<COMMON> 5,500 0
<OTHER-SE> (174,255) (5,250)
<TOTAL-LIABILITIES-AND-EQUITY> 100,234 4,750
<INTEREST-LOAN> 0 0
<INTEREST-INVEST> 0 882
<INTEREST-OTHER> 0 0
<INTEREST-TOTAL> 0 882
<INTEREST-DEPOSIT> 0 0
<INTEREST-EXPENSE> 1,387 0
<INTEREST-INCOME-NET> (1,387) 0
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 167,618 5,250
<INCOME-PRETAX> (169,005) (5,250)
<INCOME-PRE-EXTRAORDINARY> (169,005) (5,250)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (169,005) (5,250)
<EPS-BASIC> (307.28) 0
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 0 0
<LOANS-NON> 0 0
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 0 0
<CHARGE-OFFS> 0 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 0 0
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
