<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 11, 2000
REGISTRATION NO. 333-32786
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
SOUTHERNBANK HOLDINGS, INC.
(Name of Small Business Issuer in its Charter)
<TABLE>
<S> <C> <C>
GEORGIA 6021 58-2481524
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
2090 BUFORD HIGHWAY, SUITE 2A,
BUFORD, GEORGIA 30518 (678) 482-4488
(Address and Telephone Number of Principal Executive Offices and Principal Place
of Business)
GEORGIA HIGHWAY 20 AT THE MALL OF GEORGIA,
BUFORD, GEORGIA 30519-4929
(Address and Principal Place of Business or Intended Principal Place of
Business)
M. LAUCH MCKINNON
SOUTHERNBANK HOLDINGS, INC.
P.O. BOX 967
BUFORD, GEORGIA 30515
(678) 482-4488
(Name, Address, and Telephone Number of Agent for Service)
---------------------
WITH COPIES TO:
<TABLE>
<S> <C>
THOMAS O. POWELL, ESQUIRE KATHRYN L. KNUDSON, ESQUIRE
TROUTMAN SANDERS LLP POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
600 PEACHTREE STREET, N.E. 191 PEACHTREE STREET, N.E.
SUITE 5200 16TH FLOOR
ATLANTA, GEORGIA 30308-2216 ATLANTA, GEORGIA 30303
(404) 885-3294 (404) 572-6952
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: as soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
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 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,
check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
The information contained in this prospectus is not complete and may be
changed. We may not sell these 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.
PRELIMINARY PROSPECTUS DATED MAY 11, 2000; SUBJECT TO COMPLETION
1,250,000 SHARES
SOUTHERNBANK HOLDINGS, INC.
A PROPOSED BANK HOLDING COMPANY FOR
(SOUTHERNBANK LOGO)
(IN ORGANIZATION)
COMMON STOCK
$10.00 PER SHARE
------------------------
We are offering common stock to raise capital to form SouthernBank, N.A.,
a national bank in organization in Gwinnett County, Georgia. SouthernBank
Holdings, Inc. will be the holding company and sole shareholder of SouthernBank
after it is organized. This is a firm commitment underwriting. You may purchase
a minimum of 100 and a maximum of 50,000 shares, although we may waive these
limits and accept subscriptions for more or less shares. We expect that
quotations for our common stock will be reported on the Nasdaq OTC Bulletin
Board under the symbol "SBHG."
Our organizers will receive warrants to purchase one share of our common
stock for each share they purchase in the offering. Once vested, our organizers
may exercise their warrants and purchase up to 227,500 additional shares of our
common stock at an exercise price of $10.00 per share. See "Description of
SouthernBank Holdings' Capital Stock - Organizers' Warrants" on page 38.
OUR COMMON STOCK IS NOT A DEPOSIT, SAVINGS ACCOUNT, OR OTHER OBLIGATION OF
A BANK OR SAVINGS ASSOCIATION AND IS NOT INSURED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
AN INVESTMENT IN OUR COMMON STOCK INVOLVES RISKS. YOU SHOULD NOT INVEST IN
THE OFFERING UNLESS YOU CAN AFFORD TO LOSE ALL OF YOUR INVESTMENT. WE HAVE
DESCRIBED WHAT WE BELIEVE TO BE THE MATERIAL RISKS OF THIS INVESTMENT UNDER THE
HEADING "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF SOUTHERNBANK HOLDINGS' SECURITIES OR
PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----------
<S> <C> <C>
Public offering price...................................... $10.00 $12,500,000
Underwriting discount...................................... $ 0.68 $ 846,500
Proceeds to SouthernBank Holdings before expenses.......... $ 9.32 $11,653,500
</TABLE>
We will pay an underwriting discount of $0.35 per share on shares sold to
our officers and organizers, up to 375,000 shares, and $0.75 per share on all
other shares sold. The underwriting discount shown in the table above reflects a
blended rate that assumes 227,500 shares will be sold to our officers and
organizers in the offering. Wachovia Securities has the right to purchase up to
an additional 187,500 shares at the public offering price, less an underwriting
discount of $0.75 per share, within 30 days from the date of this prospectus to
cover over-allotments.
THE UNDERWRITER EXPECTS TO DELIVER THE SHARES OF COMMON STOCK ON
, 2000.
------------------------
WACHOVIA SECURITIES, INC.
, 2000
<PAGE> 3
SOUTHERNBANK HOLDINGS, INC.
AND
SOUTHERNBANK, N.A. (IN ORGANIZATION)
(MAP OF PRIMARY SERVICE AREA)
<PAGE> 4
SUMMARY
This summary provides a brief overview of the key aspects of this
offering. Accordingly, this summary does not contain all of the information
contained in this prospectus that you should consider before investing in our
common stock. We encourage you to read the entire prospectus carefully before
investing, including the risk factors and the financial statements. Unless
otherwise stated, all of the information in this prospectus assumes the
underwriter will not exercise its over-allotment option.
SOUTHERNBANK HOLDINGS AND SOUTHERNBANK
SouthernBank Holdings, Inc. is a Georgia corporation that was incorporated
on July 13, 1999 to organize and serve as the holding company for SouthernBank,
N.A., a national bank in organization. SouthernBank will operate as a community
bank emphasizing personalized banking relationships with individuals and
businesses predominantly located within the Gwinnett County, Georgia area.
On November 17, 1999, we filed an application with the Office of the
Comptroller of the Currency to organize SouthernBank as a national bank in
Gwinnett County. We received preliminary approval of SouthernBank's charter
application on March 15, 2000. In order to receive final approval of our
application to organize SouthernBank, we will be required to raise a minimum of
$8,500,000 in capital and implement appropriate banking policies and procedures.
We received conditional approval of our application for deposit insurance from
the FDIC on March 17, 2000 and, on March 31, 2000, we filed an application with
the Board of Governors of the Federal Reserve System and the Georgia Department
of Banking and Finance to become a bank holding company and to acquire all of
the capital stock of SouthernBank. After receiving all necessary regulatory
approvals, we anticipate beginning operations at a temporary facility in the
second quarter of 2000, and we expect to move to our permanent facility in the
second quarter of 2001.
WHY WE ARE ORGANIZING A NEW BANK IN GWINNETT COUNTY
We believe the communities that make up our primary service area present a
growing and highly diversified economic environment that will support the
formation of SouthernBank. Situated approximately 35 miles from downtown
Atlanta, our primary service area includes the communities of Buford, Dacula,
Duluth, Lawrenceville, Lilburn, Sugar Hill and Suwanee in Gwinnett County, as
well as the communities of Flowery Branch in Hall County and Braselton in
Jackson County. According to estimates, Gwinnett County experienced the largest
increase in population of any county in the nation over the past decade, and is
expected to experience continued population growth over the next five years.
With our proposed main office location neighboring the 1.7 million square
foot Mall of Georgia, the largest shopping mall in the state, we believe that
our physical location within our primary service area will provide us with an
opportunity to successfully expand and grow our banking operations. Already, the
recently opened mall has attracted over 170 retailers and restaurant operators
to the heart of our primary service area and is expected to draw additional
business into northern Gwinnett County. By strategically placing our main office
in the center of this development, we believe that we will be able to capitalize
on the influx of new residents and businesses locating to the area, as well as
the core residents and businesses already established in our market.
The following were also major factors in our selection of our primary
service area:
- Estimated median income in 1999 was $62,501 compared to the 1998 U.S.
median income of $38,885 and 1998 Georgia median income of $38,665;
- The area's population grew by 60.9% from 1990 to 1999;
- The area's population is projected to increase by 21.7% from 1999 to
2004;
- Nearly 60% of Gwinnett County's population is of working age;
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<PAGE> 5
- Nearly 30% of Gwinnett County's population over age 25 has at least a
bachelor's degree, a factor in successfully attracting high-tech firms
to the area; and
- Gwinnett County's employment base is highly diversified, representing
the high-tech, service, retail trade, manufacturing, wholesale and
construction industries.
In addition to the economic and population growth experienced within our
primary service area, we believe that consolidation within the financial
services industry may further enhance our opportunity to establish a banking
presence in northern Gwinnett County. Over the last decade, a number of large
national and regional banks have entered or expanded in the Gwinnett County
market through the acquisition of smaller community banks. Although several
large financial institutions, including Bank of America, Wachovia, SunTrust and
First Union, are well established in Gwinnett County, these institutions
experienced only a 15.7% growth rate in deposits compared to a 34.1% growth in
the overall deposit market between June 1996 and June 1999. The slower relative
growth of these large banks resulted in their combined relative deposit market
share falling from 65.3% to 56.3%. Bank and thrift deposits in our primary
service area, which is smaller than the overall Gwinnett County market, totaled
more than $3.0 billion in June 1999. Bank of America, Wachovia, SunTrust and
First Union control 57.5% of the deposits in our primary service area. Four of
the largest community banks in our primary service area together hold 16.1% of
the area's deposits. We will compete directly with many of these institutions.
Acquisitions of community banks by large national and regional banks often
result in the dissolution of local boards of directors and in significant
turnover in management and customer service personnel who possess extensive
banking experience and strong ties to the local community. Accordingly, we
intend to hire experienced and talented individuals who will complement the
community banking experience and management style of our proposed executive
officers. As a locally-owned community bank based in Gwinnett County, we expect
to take advantage of this talent to help us offer convenient service, local
decision-making and competitive banking products. Additionally, by focusing our
operations on the communities we serve, we believe that we will be able to
respond to changes in our market more quickly than large, centralized
institutions.
DIRECTORS AND OFFICERS
M. Lauch McKinnon currently serves as the president of SouthernBank
Holdings, and is the proposed president and chief executive officer of
SouthernBank. Mr. McKinnon has held numerous senior banking positions in both
Georgia and Tennessee during his 20-year career in banking and banking-related
industries, including president and chief executive officer at both North
Georgia National Bank in Calhoun, Georgia and Volunteer Bank and Trust Company
in Chattanooga, Tennessee. Rita B. Gray, is our proposed chief financial officer
and has 30 years of banking experience, including service as chief financial
officer at both North Georgia National Bank in Calhoun, Georgia and
Dalton/Whitfield Bank & Trust in Dalton, Georgia. See "Management" on page 28.
Our directors intend to utilize their diverse backgrounds and their local
business relationships to attract customers from all segments of the communities
we serve. Currently, the board of directors of SouthernBank Holdings consists of
the following individuals:
<TABLE>
<S> <C>
- - James O. Andrews - M. Lauch McKinnon
- - James E. Hinshaw, Sr. - D. Alan Najjar
- - Donald F. Jackson - D. Arnold Tillman, Jr.
- - Lewis A. Massey - Jeffery S. Tucker
- - Tyler C. McCain
</TABLE>
Upon approval by the Office of the Comptroller of the Currency, we
anticipate these individuals will also be the directors of SouthernBank. See
"Management" on page 28.
2
<PAGE> 6
PHILOSOPHY AND STRATEGY
Initially, our business strategy will be carried out through the
operations and growth of SouthernBank. At the bank level, our management
philosophy will be to deliver exceptional customer service through highly
trained personnel who understand and care about the banking needs of our
customers. We believe that this philosophy will distinguish SouthernBank from
its competitors and will enable us to be successful.
To carry out our philosophy, our business strategy will involve:
- Hiring and retaining highly experienced and qualified key banking
personnel, preferably with established client relationships;
- Cross-training our entire staff to answer questions about all of our
products and services so that each employee can not only resolve
banking-related customer questions, but can also suggest products and
services that may be of interest to our customers;
- Implementing on a comprehensive and on-going basis an active call
program involving all of our officers, directors and employees, and
monitoring the results and productivity of the program, with specific
goals required of our officers and directors;
- Providing individualized attention with local decision-making
authority;
- Capitalizing on our directors' diverse community involvement and
business experience;
- Implementing an aggressive marketing program;
- Utilizing sophisticated financial services technology and strategic
outsourcing to provide a broad array of banking products and services;
and
- Establishing a community identity by positioning ourselves as a
locally-owned bank that is responsive to the banking needs of the
communities we serve.
PRODUCTS AND SERVICES
We plan to offer quality products and personalized services while
providing our customers with the financial sophistication and array of products
typically offered by a larger bank. We intend to offer our services through a
variety of channels, including internet banking, automated teller machines,
telephone banking and in the future, branch offices. Our lending services will
include commercial loans to small- to medium-sized businesses and professional
concerns, real estate-related loans and consumer loans to individuals.
SouthernBank will offer a broad array of competitively priced deposit services
including demand deposits, regular savings accounts, money market deposits,
certificates of deposit and individual retirement accounts. To complement our
lending and deposit services, we intend to also provide debit cards, travelers
checks, direct deposit, savings bonds, night depository, collection services,
wire transfers, overdraft protection and automatic drafts for various accounts.
We also plan to offer courier deposit services to our business customers, and
will market the convenience and advantages of our internet banking services,
which will include on-line bill paying, money transfer and cash management
services. We believe these services will further enhance our ability to be
competitive with larger banks, without losing the personal touch of a
locally-owned community bank.
THE OFFERING AND OWNERSHIP BY OUR ORGANIZERS AND DIRECTORS
We are offering 1,250,000 shares of our common stock for $10.00 per share.
Our directors and organizers intend to purchase approximately 227,500 shares of
our common stock, representing 18.2% of the 1,250,000 shares of our common stock
to be outstanding upon the close of the offering. The 227,500 shares of common
stock anticipated to be purchased by our directors and organizers are being
offered by this prospectus. We believe the intended purchases of our directors
and organizers demonstrate, as is required to be disclosed to the OCC, their
substantial financial commitment to SouthernBank's organization. In recognition
of their additional financial risks undertaken during our formation and
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<PAGE> 7
organization process, our organizers are also being offered by this prospectus
warrants to purchase one share of our common stock, at $10.00 per share, for
each share they purchase in the offering. Accordingly, warrants will be offered
only to our organizers and not to the public. Given the intent of our organizers
to purchase 227,500 shares in this offering, we expect that they will be granted
warrants to purchase an aggregate of 227,500 shares. The one-to-one ratio
between the anticipated number of shares to be purchased by our organizers and
the number of warrants to be issued to them was determined after considering a
number of factors. The principal factors we considered were prevailing market
conditions, comparable de novo bank holding company capitalizations and
regulatory restrictions imposed by the OCC. Because our organizers will be able
to purchase shares subject to the warrants at $10.00 per share, if the market
price of our common stock rises, our organizers will be able to purchase a
significant amount of our common stock in the future for less than its then
prevailing market value. We believe our directors' and organizers' financial
interest in SouthernBank Holdings will encourage their active participation in
growing our business. See "Description of SouthernBank Holdings' Capital
Stock - Organizers' Warrants" on page 38 and "Management's Discussion and
Analysis of Financial Condition and Plan of Operations" on page 15.
USE OF PROCEEDS
We will use $8,500,000 raised in this offering to capitalize SouthernBank.
We anticipate that this is the amount of capital that our banking regulators
will require us to invest in SouthernBank prior to the bank's opening. We will
use the remaining net proceeds of this offering to repay the amount drawn on our
line of credit, to provide SouthernBank Holdings with working capital and for
other general business purposes. Additionally, SouthernBank will use the funds
it receives from SouthernBank Holdings to repay the amount drawn on the line of
credit it plans to establish to purchase the site for its main office, to
construct and furnish the facility and to provide working capital to operate
SouthernBank. See "Use of Proceeds" on page 11.
LOCATION OF OFFICES
The address and phone number of our temporary executive offices that we
are using prior to SouthernBank's opening are:
2090 BUFORD HIGHWAY, SUITE 2A
BUFORD, GEORGIA 30518
(678) 482-4488
Our permanent main office and executive offices will be located at:
GEORGIA HIGHWAY 20 AT THE MALL OF GEORGIA
BUFORD, GEORGIA 30519-4929
Our main office will be a building of approximately 7,000 square feet
neighboring the recently opened Mall of Georgia on an approximately 1.2 acre
site in the Mill Creek area of northern Gwinnett County. We anticipate that
construction of our main office will begin in the third quarter of 2000 and will
be completed in the second quarter of 2001. Until our main office is completed,
we plan to operate out of a temporary facility that will be located
approximately 2.6 miles from the permanent site for our main office, and within
our primary service area. We anticipate opening for business in our temporary
facility in the second quarter of 2000.
4
<PAGE> 8
RISK FACTORS
The following paragraphs describe what we believe are the material risks
of an investment in our common stock. We may face other risks as well, which we
have not anticipated. 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. Before deciding to invest in our common stock,
please carefully read the entire prospectus, including the cautionary statement
following this Risk Factors section regarding our use of forward-looking
statements.
WE HAVE NO OPERATING HISTORY UPON WHICH TO BASE AN ESTIMATE OF OUR FUTURE
FINANCIAL PERFORMANCE.
SouthernBank, which initially will be our sole subsidiary, is in
organization, and neither SouthernBank Holdings nor SouthernBank has any
operating history on which to base any estimate of our future financial
performance. Because we lack an operating history, you do not have access to
either the type or amount of information that would be available to a purchaser
of securities of a financial institution with an operating history. Accordingly,
the financial statements presented in this prospectus may not be as meaningful
as those of a company which does have a history of operations. In addition, the
success of our operations must be considered in light of the expenses,
complications and delays frequently encountered in connection with the opening
and development of a new bank.
IF WE FAIL TO BEGIN BANKING OPERATIONS, YOU COULD LOSE ALL OR A PORTION OF YOUR
INVESTMENT.
If we do not receive final approval for SouthernBank to start its banking
operations by September 15, 2001, we anticipate that we will solicit shareholder
approval for the dissolution and liquidation of SouthernBank Holdings. If we
dissolve and liquidate after the close of the offering, shareholders will
receive only a portion, if any, of their original investment because we will
have used the proceeds of the offering to pay all expenses and capital costs
incurred. These expenses include the expenses of the offering, our
organizational and pre-opening expenses and the claims of our creditors. We will
distribute to our shareholders the net assets remaining after payment or
provision for payment of all claims against SouthernBank Holdings. Although we
have applied for all regulatory approvals required to begin operations, final
approval from the Office of the Comptroller of the Currency may not be granted
in a timely manner, if at all. The close of the offering is not conditioned upon
the receipt of the OCC's final approval to begin business.
IF WE DO NOT RECEIVE REGULATORY APPROVALS IN A TIMELY MANNER, IT COULD DELAY THE
DATE ON WHICH SOUTHERNBANK OPENS FOR BUSINESS, RESULTING IN INCREASED
PRE-OPENING EXPENSES AND INITIAL LOSSES.
Although we expect to receive all regulatory approvals and to open for
business in the second quarter of 2000, we can give you no assurance as to when,
if at all, these events will occur. Any delay in beginning SouthernBank's
operations will increase our pre-opening expenses and postpone our realization
of potential revenues. Additionally, a delay will cause our accumulated deficit
to increase as a result of continuing operating expenses, such as salaries and
other administrative expenses, and our lack of revenue.
WE EXPECT TO INCUR SUBSTANTIAL START-UP EXPENSES, CAUSING US TO HAVE INITIAL
LOSSES, AND YOU MAY NOT RECOVER ALL OR ANY PART OF YOUR INVESTMENT IF WE DO NOT
BECOME PROFITABLE IN THE FUTURE.
Typically, new banks incur substantial start-up expenses, are not
profitable in the first year of operation and, in some cases, are not profitable
for several years. Because SouthernBank Holdings will initially act as the sole
shareholder of SouthernBank, our profitability will depend upon the bank's
successful operation. Consequently, you may not recover all or any part of your
investment in our common stock. We will incur substantial expenses in
establishing SouthernBank, and we can give you no assurance that the bank will
be profitable or that future earnings, if any, will meet the levels of earnings
prevailing in the banking industry. See "Management's Discussion and Analysis of
Financial Condition and Plan of Operations" on page 15.
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<PAGE> 9
FAILURE TO IMPLEMENT KEY ELEMENTS OF OUR BUSINESS STRATEGY MAY ADVERSELY AFFECT
OUR FINANCIAL PERFORMANCE.
If we cannot implement key elements of our business strategy, our
financial performance may be adversely affected. Our organizers have developed a
business plan that details the strategy that we intend to implement in our
efforts to achieve profitable operations. The strategy includes hiring and
retaining experienced and qualified employees and attracting individuals and
business customers primarily from the Gwinnett County area. Even if the key
elements of our business strategy are successfully implemented, they may not
have the favorable impact on operations that we anticipate. See "Our Proposed
Business - Philosophy and Strategy" on page 21.
DEPARTURES OF OUR KEY PERSONNEL OR DIRECTORS MAY IMPAIR OUR OPERATIONS.
M. Lauch McKinnon and Rita B. Gray are important to our success and if we
were to lose either of their services our financial condition and results of
operations could be adversely affected. Mr. McKinnon has been instrumental in
our organization and will be the key management official in charge of
SouthernBank's daily business operations. Ms. Gray will be the key officer in
charge of our financial and accounting operations. In addition, if either Mr.
McKinnon or Ms. Gray were to leave SouthernBank, we would incur additional costs
in our search for new personnel. Although we have entered into a one-year
employment agreement with Mr. McKinnon and a letter agreement with Ms. Gray, we
cannot be assured of their continued service.
Additionally, our directors' community involvement, diverse backgrounds
and extensive business relationships are important to our success. Our growth
could be adversely affected if the composition of our board of directors changes
significantly. See "Management" on page 28.
OUR ORGANIZERS, DIRECTORS AND OFFICERS COULD HAVE THE ABILITY TO INFLUENCE
SHAREHOLDER ACTIONS, AND THEY MAY HAVE INTERESTS THAT ARE DIFFERENT FROM YOURS
AS AN INVESTOR.
Our organizers, directors and officers will be able to influence the
outcome of director elections or block a significant transaction that might
otherwise be approved by our shareholders and, as a result, will exercise
significant influence over our management and affairs. These persons,
individually or as a group, may have interests that are different from yours as
an investor. Our organizers intend to purchase 227,500 shares of our common
stock which will equal 18.2% of the 1,250,000 shares to be outstanding upon the
close of the offering. See "Management" on page 28.
WE INTEND TO GRANT WARRANTS TO OUR ORGANIZERS AND STOCK OPTIONS TO SOME OF
SOUTHERNBANK'S EMPLOYEES WHICH, IF EXERCISED, WOULD REDUCE YOUR PERCENTAGE
OWNERSHIP IN SOUTHERNBANK HOLDINGS.
Our organizers, directors, officers and employees may exercise their
warrants and options to purchase our common stock, which would result in the
dilution of your proportionate interest in SouthernBank Holdings. Upon the close
of the offering, we will grant to our organizers warrants to purchase one
additional share of our common stock for each share purchased in the offering in
recognition of the financial risks undertaken by them in forming SouthernBank
Holdings and SouthernBank. We anticipate that our organizers will purchase
227,500 shares in this offering. Accordingly, we expect that our organizers will
be granted warrants to purchase an aggregate of 227,500 shares. If all of these
warrants were exercised, our organizers would own 30.8% of the shares
outstanding after the offering, on a fully diluted basis. See "Description of
SouthernBank Holdings' Capital Stock - Organizers' Warrants" on page 38 and
"Management's Discussion and Analysis of Financial Condition and Plan of
Operations" on page 15.
In addition, we have established a stock option plan which will allow us
to grant stock options to employees who are contributing significantly to the
management or operation of SouthernBank. We have reserved 100,000 shares of our
common stock for issuance under our stock option plan, of which Mr. McKinnon
will receive an option to purchase up to 25,000 shares and Ms. Gray will receive
an option to purchase up to 10,000 shares. If these options and all of the
warrants granted to our organizers were
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<PAGE> 10
exercised in full, our organizers, directors and executive officers would own
32.4% of the shares outstanding after the offering, on a fully diluted basis.
See "Executive Compensation - Stock Option Plan" on page 34.
WE WILL FACE STRONG COMPETITION FOR CUSTOMERS, ESPECIALLY FROM LARGE AND MORE
ESTABLISHED FINANCIAL INSTITUTIONS, WHICH MAY HINDER US FROM OBTAINING CUSTOMERS
AND MAY CAUSE US TO PAY HIGHER INTEREST RATES ON OUR DEPOSITS OR CHARGE LOWER
INTEREST RATES ON OUR LOANS THAN OUR COMPETITORS' RATES FOR AN EXTENDED PERIOD.
We anticipate offering very competitive loan and deposit rates as we
establish ourselves in the market, but if excessive competition forces us to
offer more aggressive pricing indefinitely, our net interest margin will suffer
and our financial performance will be negatively impacted. SouthernBank 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. With multiple financial institutions already doing business in
our primary service area, and given the chance that additional competitors may
enter the market in the future, we will be faced with continuous competition.
Moreover, some of these competitors are not subject to the same degree of
regulation as we will be and may have greater resources than will be available
to us. Competition from non-traditional financial institutions may also affect
our success due to the Gramm-Leach-Bliley Act. See "Supervision and
Regulation - Gramm-Leach-Bliley Act" on page 45.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
Our lending limit will be significantly less than the limits for most of
our competitors, and may hinder our ability to establish relationships with
larger businesses in our market area. A national bank's legal lending limit to a
single borrower is roughly equal to 15.0% of its capital and surplus plus an
additional 10.0%, if the amount that exceeds 15.0% is fully secured by readily
marketable collateral. Based on SouthernBank's proposed capitalization and
pre-opening expenses, SouthernBank's initial legal lending limit will be
approximately $1,200,000 for loans not fully secured plus an additional
$800,000, or an estimated total of $2,000,000, for loans that meet the federal
guidelines. These legal limits will increase or decrease as SouthernBank's
capital increases or decreases as a result of its earnings or losses, among
other reasons. Based on our legal lending limit, SouthernBank will need to sell
participations in its loans to other financial institutions in order to meet the
lending needs of our customers requiring extensions of credit above these
limits. However, our strategy to accommodate larger loans by selling
participations in those loans to other financial institutions may not be
successful. See "Our Proposed Business - Lending Services" on page 22.
OUR SUCCESS WILL DEPEND SIGNIFICANTLY UPON GENERAL ECONOMIC CONDITIONS IN THE
GWINNETT COUNTY AREA.
Our operations and profitability may be more adversely affected by a local
economic downturn than those of our larger competitors who are more
geographically diverse. Since the majority of SouthernBank's borrowers and
depositors are expected to be individuals and businesses located and doing
business in the Gwinnett County area, our success will depend significantly upon
the general economic conditions in and around Gwinnett County. For example, an
adverse change in the local economy could make it more difficult for borrowers
to repay their loans, which could lead to loan losses for SouthernBank. In
addition, because many of our shareholders are likely to be residents of the
Gwinnett County area, a prolonged downturn in the general economic conditions in
the area could result in sales of large amounts of our common stock.
OUR ABILITY TO PAY DIVIDENDS TO OUR SHAREHOLDERS IS LIMITED AND DEPENDS ON
SOUTHERNBANK'S LEGAL ABILITY TO PAY DIVIDENDS, AS WELL AS THE JUDGMENT OF OUR
BOARD OF DIRECTORS.
SouthernBank Holdings will initially have limited sources of income other
than dividends it receives from SouthernBank. SouthernBank Holdings' ability to
pay dividends will therefore depend largely on
7
<PAGE> 11
SouthernBank's ability to pay dividends to it, which will be based primarily on
its earnings, capital requirements and financial condition, among other factors.
Bank holding companies and national banks are both subject to significant
regulatory restrictions on the payment of cash dividends. In light of these
restrictions and our need to retain and build capital, it will be our policy to
reinvest earnings for the period of time necessary to help support the success
of our operations. As a result, we do not plan to pay dividends until
SouthernBank is cumulatively profitable. See "Dividends" on page 13.
THE OFFERING PRICE FOR OUR COMMON STOCK WAS ARBITRARILY DETERMINED AND OUR
FUTURE STOCK PRICE MAY FLUCTUATE BELOW THE INITIAL PUBLIC OFFERING PRICE ONCE
THE SHARES BECOME FREELY TRADEABLE.
SouthernBank Holdings and the underwriter arbitrarily set the public
offering price after considering prevailing market conditions and the price of
comparable publicly traded companies. Because we were only recently formed and
SouthernBank is in the process of being organized, the public offering price
could not be set by referencing historical measures of the bank's financial
performance. Therefore, the public offering price may not indicate the market
price for our common stock after this offering. Several factors will cause the
market price to fluctuate after the offering, and the price for our common stock
may drop below the public offering price. The factors include our results of
operations, financial analysts' future estimates of our earning potential,
economic conditions in our market and trends in the banking industry. See
"Underwriting" on page 51.
IF AN ACTIVE TRADING MARKET DOES NOT DEVELOP, IT MAY BE DIFFICULT FOR YOU TO
SELL YOUR SHARES OF OUR COMMON STOCK.
Prior to the offering, there has been no public market for our common
stock, and an active trading market may not develop. If an active trading market
does not develop or continue after the offering, you may not be able to sell
your shares at or above the price at which these shares are being offered to the
public. Although we have applied to list our common stock on the Nasdaq OTC
Bulletin Board, an active trading market may not develop or continue after the
offering. You should consider carefully the limited liquidity of your investment
before purchasing any shares of our common stock.
OUR PROFITABILITY AND GROWTH COULD BE ADVERSELY AFFECTED BY CHANGES IN THE LAW,
ESPECIALLY CHANGES AFFECTING THE BANKING INDUSTRY.
We will be subject to extensive federal government supervision and
regulation. Our ability to achieve profitability and to grow could be adversely
affected by federal and state banking laws and regulations. These and other
restrictions limit the manner in which we may conduct our business and obtain
financing, including SouthernBank's ability to attract deposits, make loans and
achieve satisfactory interest spreads. Many of these regulations are intended to
protect depositors, the public, and the FDIC, not shareholders. In addition, the
burden imposed by federal and state regulations may place us at a competitive
disadvantage compared to competitors who are less regulated. Applicable laws,
regulations, interpretations and enforcement policies have been subject to
significant, and sometimes retroactively applied, changes in recent years, and
may be subject to significant future changes. Future legislation or government
policy may also adversely affect the banking industry or our operations. We
cannot predict the effects of any potential changes, but they could adversely
affect our future operations. See "Supervision and Regulation" on page 44.
THE OPERATION OF SOUTHERNBANK MAY, IN THE FUTURE, REQUIRE MORE CAPITAL THAN
SOUTHERNBANK HOLDINGS WILL RAISE IN THIS OFFERING, AND WE MAY NOT BE ABLE TO
OBTAIN ADDITIONAL CAPITAL ON TERMS WHICH ARE FAVORABLE TO INVESTORS.
In the future, should we need additional capital, we may not be able to
raise additional funds through the issuance of additional shares of our common
stock or other securities. Even if we were able to obtain additional capital
through the issuance of additional shares of our common stock or other
securities,
8
<PAGE> 12
we may not be able to issue these securities at prices or on terms better than
or equal to the public offering price and terms of this offering. The issuance
of new securities could dilute your ownership interest in SouthernBank Holdings.
GEORGIA LAW AND PROVISIONS OF OUR ARTICLES OF INCORPORATION AND BYLAWS COULD
DETER OR PREVENT TAKEOVER ATTEMPTS BY A POTENTIAL PURCHASER OF OUR COMMON STOCK
THAT WOULD BE WILLING TO PAY YOU A PREMIUM FOR YOUR SHARES OF OUR COMMON STOCK.
In many cases, shareholders receive a premium for their shares when a
company is acquired by another company. Under Georgia law, however, no bank
holding company may acquire control of SouthernBank Holdings until SouthernBank
has been incorporated for five years. As a result, your ability to receive a
premium over market for your shares of our common stock may be severely limited
during the first five years of SouthernBank's operations. In addition, our
articles of incorporation and bylaws contain provisions that may deter or
prevent an attempt to change or gain control of SouthernBank Holdings. These
provisions include the potential existence of preferred stock, staggered terms
for directors, restrictions on the ability to change the number of directors or
to remove a director, special provisions regarding combinations with
"interested" shareholders and the price at which an acquirer may purchase your
shares of our common stock, and our board of directors' flexibility in
evaluating acquisition proposals. As a result, you may be deprived of
opportunities to sell some or all of your shares of our common stock at prices
that represent a premium over the market. See "Important Provisions of
SouthernBank Holdings' Articles of Incorporation and Bylaws" on page 38.
FUTURE RESALES OF OUR COMMON STOCK MAY ADVERSELY AFFECT THE MARKET PRICE OF YOUR
SHARES OF OUR COMMON STOCK.
After the close of this offering, 1,250,000 shares of our common stock
will be outstanding, assuming the underwriter does not exercise its
over-allotment option. The sale of a large block of the shares outstanding after
the close of the offering could adversely affect the market price of our common
stock. All of the outstanding shares will be freely tradable without restriction
except for 227,500 shares that we anticipate our organizers and executive
officers will purchase in the offering. Our organizers and executive officers
have agreed, for a period of 180 days from the date of this prospectus, not to
sell or otherwise transfer, either directly or indirectly, any shares of our
common stock without the prior consent of the underwriter. As a result,
1,022,500 shares of our common stock, or 81.8% of the outstanding shares of our
common stock will be freely tradable without restriction upon the close of the
offering. Additionally, 227,500 shares of our common stock held by our
organizers and executive officers will be eligible for sale beginning 180 days
from the date of this prospectus under resale limitations of Rule 144 of the
Securities Act. See "Shares Eligible for Future Sale" on page 50.
WE MAY NOT ALLOCATE ALL OF THE NET PROCEEDS IN THE MOST PROFITABLE MANNER.
After capitalizing SouthernBank with $8,500,000 our board of directors and
management will have broad discretion in allocating a total of approximately
$2,903,500 or approximately 23.2% of the net proceeds of the offering. We cannot
predict the extent to which we will allocate these funds to income-generating
assets, capital assets or liquidity. Because the allocation of these proceeds
will directly affect our earnings, it will be difficult to predict our results
of operations. Although we intend to utilize the funds to serve SouthernBank
Holdings' best interests, we cannot assure you that our allocation will
ultimately reflect the most profitable application of these proceeds. See "Use
of Proceeds" on page 11.
9
<PAGE> 13
A WARNING ABOUT FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus are "forward-looking
statements." Forward-looking statements include statements about the
competitiveness of the banking industry, potential regulatory obligations,
potential economic growth in our primary service area, our strategies and other
statements that are not historical facts. When we use in this prospectus words
like "anticipate," "believe," "expect," "estimate" and similar expressions, you
should consider them as identifying forward-looking statements. Because
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ significantly from those
expressed or implied by the forward-looking statements. Some of these factors
are set forth above in the section entitled "Risk Factors" on page 5.
10
<PAGE> 14
USE OF PROCEEDS
We estimate that we will receive net proceeds of $11,518,500 from the sale
of 1,250,000 shares of our common stock in the offering, after deducting the
estimated underwriting discount of $846,500 and estimated offering expenses of
$135,000. If the underwriter exercises its over-allotment option in full, we
will receive $1,734,375 in additional net proceeds, after deducting an
additional underwriting discount of $140,625. The following two sections
describe our proposed use of proceeds based on our present plans and business
conditions.
USE OF PROCEEDS BY SOUTHERNBANK HOLDINGS
The following table shows the anticipated use of the proceeds by
SouthernBank Holdings. We describe SouthernBank's anticipated use of proceeds in
the following section.
<TABLE>
<S> <C>
Gross proceeds from the offering............................ $12,500,000
Underwriting discount....................................... 846,500
Offering expenses........................................... 135,000
Organizational expenses..................................... 85,000
Land purchase deposit....................................... 30,000
Investment in common stock of SouthernBank.................. 8,500,000
-----------
Remaining Proceeds.......................................... $ 2,903,500
===========
</TABLE>
SouthernBank Holdings has established a line of credit with The Bankers
Bank. The line of credit, which as of December 31, 1999 was for an amount up to
$250,000, is being used to pay SouthernBank Holdings' offering and
organizational expenses prior to the close of the offering. In addition, this
line of credit has been used to fund a $30,000 earnest money deposit on the
property on which our main office will be located. The line of credit, which is
due on June 28, 2000, bears interest at 1.0% less than the prime rate as
published in the Money Rates section of The Wall Street Journal. On March 6,
2000, SouthernBank Holdings increased the line of credit to $750,000, and, as of
March 31, 2000, approximately $235,000 was outstanding. This line of credit will
be repaid in full after the close of the offering.
As shown, we intend to capitalize SouthernBank with $8,500,000. Additional
funds from this offering are expected to be held by SouthernBank Holdings and
reserved for general corporate purposes at the holding company level. For
example, a portion of the net proceeds of this offering will be retained by
SouthernBank Holdings for the purpose of funding any required additions to the
capital of SouthernBank. Since national banks are regulated with respect to the
ratio that their total assets may bear to their total capital, if SouthernBank
experiences greater growth than anticipated, it may require the infusion of
additional capital to support that growth. We anticipate, however, that the
proceeds of this offering will be sufficient to support SouthernBank's immediate
capital needs and we will seek, if necessary, additional long- and short-term
financing to support any additional needs. However, we can give you no assurance
that such financing, if needed, will be available or, if available, will be on
terms acceptable to us.
We anticipate that the net proceeds received upon the exercise of the
underwriter's over-allotment option, if any, or the proceeds received upon the
exercise of the warrants, if any, will be used for working capital purposes.
11
<PAGE> 15
USE OF PROCEEDS BY SOUTHERNBANK
The following table shows the anticipated use of the proceeds allocated to
SouthernBank. These proceeds will be in the form of an investment in
SouthernBank's common stock by SouthernBank Holdings. During the period between
the opening of SouthernBank and the completion of our permanent facility, we
will be conducting operations from a temporary facility approximately 2.6 miles
from the permanent site for our main office. The following table shows the
rental and leasehold improvement costs of the temporary facility for a period of
15 months from the date of occupancy. Construction, furniture, fixtures and
equipment costs will be capitalized and amortized over the estimated useful life
of the asset. SouthernBank will use the remaining proceeds to make loans,
purchase securities and otherwise conduct business operations. We believe that
the net proceeds of this offering will satisfy our capital requirements for at
least the next 24 months following the opening of SouthernBank.
<TABLE>
<S> <C>
Investment by SouthernBank Holdings in SouthernBank's common
stock..................................................... $8,500,000
Reimbursement to SouthernBank Holdings for land purchase
deposit................................................... 30,000
Purchase price of land, less deposit........................ 827,000
Construction of bank facility............................... 1,143,000
Furniture, fixtures and equipment........................... 250,000
Rental payments and leasehold improvements for temporary
facility (15 months)...................................... 44,880
----------
Remaining proceeds.......................................... $6,205,120
==========
</TABLE>
Land South Properties, LLC, a real estate development company owned by two
of our organizers, has entered into an agreement to acquire the property on
which SouthernBank's main office will be located for a purchase price of
$857,000. Land South plans to assign its rights under the agreement to
SouthernBank and is expected to receive $10.00 as consideration for the
assignment. To pay for the property, SouthernBank plans to enter into a line of
credit with The Bankers Bank for an amount up to $860,000. The line of credit is
expected to be due on June 30, 2000 and is anticipated to bear interest at 1.0%
less than the prime rate as published in the Money Rates section of The Wall
Street Journal. SouthernBank expects to repay the line of credit immediately
after its capitalization by SouthernBank Holdings. See "Our Proposed
Business - Offices" on page 27 and "Related Party Transactions" on page 37.
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<PAGE> 16
CAPITALIZATION
The following table shows SouthernBank Holdings' capitalization as of
March 31, 2000 and its pro forma consolidated capitalization, as adjusted to
give effect to the receipt of the net proceeds from the sale of 1,250,000 shares
of our common stock in this offering.
Upon SouthernBank Holdings' incorporation, D. Arnold Tillman, Jr.,
chairman of our board of directors and chief executive officer of SouthernBank
Holdings, purchased one share of our common stock at a price of $10.00. We will
redeem this share for $10.00 upon the issuance of shares in this offering. The
number of shares shown as outstanding after giving effect to this offering, and
the book value of those shares, do not include shares of our common stock
issuable upon the exercise of warrants that will be granted to our organizers or
stock options that may be granted under our stock option plan. For additional
information regarding the number and terms of those warrants and options, see
"Description of SouthernBank Holdings' Capital Stock - Organizers' Warrants" on
page 38 and "Executive Compensation - Stock Option Plan" on page 34.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00 per share;
10,000,000 shares authorized; no shares issued
and outstanding.................................. $ -0- $ -0-
Common stock, par value $1.00 per share;
100,000,000 shares authorized; one share issued
and outstanding; 1,250,000 shares issued and
outstanding as adjusted.......................... 1 1,250,000
Additional paid-in capital(1)...................... 8,509 10,279,000
Accumulated deficit during development stage....... (181,494)(2) (380,500)(3)
Total shareholders' equity (deficit)............... $(172,984) $11,148,500
========= ===========
Book value per share(4)............................ N/A $ 8.92
========= ===========
</TABLE>
- ---------------
(1) The expenses of the offering will be charged against additional paid-in
capital. We estimate that the offering expenses will be $981,500, which
includes $846,500 in underwriting discounts and $135,000 in other offering
expenses, including legal, accounting and printing expenses and registration
fees.
(2) This deficit reflects pre-opening expenses incurred through March 31, 2000,
consisting primarily of salaries, employee benefits and legal and consulting
fees.
(3) The "As Adjusted" accumulated deficit results from estimated organizational
and pre-opening expenses of $380,500 incurred through SouthernBank's target
opening date in May 2000. Actual organizational and pre-opening expenses may
be higher and may therefore increase the deficit accumulated during the
pre-opening stage and further reduce shareholders' equity.
(4) After giving effect to the receipt of the net proceeds from this offering,
there is an immediate dilution in the book value per share of $1.08,
resulting from recognition of organizational and pre-opening expenses and
charging the offering expenses against our paid-in capital.
DIVIDENDS
We will initially have limited sources of income other than dividends paid
by SouthernBank. Our ability to pay dividends to our shareholders will therefore
depend largely on SouthernBank's ability to pay dividends. In the future, we may
begin income-producing operations independent from those of SouthernBank, which
may provide alternative sources of income from which we may pay dividends.
However, we can give you no assurance as to when, if at all, these operations
may begin or whether they will be profitable.
Bank holding companies and national banks are both subject to significant
regulatory restrictions on the payment of cash dividends. In light of these
restrictions and the need for SouthernBank Holdings and
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<PAGE> 17
SouthernBank to retain and build capital, our boards of directors plan to
reinvest earnings for the period of time necessary to support successful
operations. As a result, we do not plan to pay dividends until we recover any
losses incurred and become profitable. Our future dividend policy will depend on
our earnings, capital requirements and financial condition and on other factors
that our board of directors considers relevant.
Regulatory authorities may determine, under circumstances relating to the
financial condition of SouthernBank Holdings or SouthernBank, that the payment
of dividends would be an unsafe or unsound practice and may prohibit dividend
payment. See "Supervision and Regulation - Payment of Dividends" on page 45.
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<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND PLAN OF OPERATIONS
GENERAL
SouthernBank Holdings was organized on July 13, 1999 to serve as a holding
company for SouthernBank. Since it was organized, SouthernBank Holdings' main
activities have been:
- seeking, interviewing and selecting its directors;
- preparing its business plan;
- 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.
Since July 13, 1999, our operations have been, and will continue to be,
funded through a line of credit from The Bankers Bank. The total amount
available on the line of credit is $750,000, of which approximately $235,000 was
outstanding at March 31, 2000. This loan has been guaranteed by our organizers,
bears interest at 1.0% less than the prime rate as published in the Money Rates
section of The Wall Street Journal, and is due on June 28, 2000. We plan to
repay the line of credit after the close of the offering using a portion of the
proceeds of this offering. See "Use of Proceeds" on page 11 .
FINANCIAL RESULTS
From July 13, 1999 through March 31, 2000, our net loss amounted to
$181,494. The estimated net loss for the period from July 13, 1999 through May
2000, the anticipated opening date of SouthernBank, is $380,500 which is
attributable to the following estimated expenses:
<TABLE>
<S> <C>
Officer compensation........................................ $117,500
Legal, consulting and professional fees..................... 68,000
Equipment and occupancy expenses............................ 23,000
Other pre-opening expenses.................................. 172,000
--------
Total............................................. $380,500
========
</TABLE>
Our organizers will be issued up to an aggregate of 227,500 warrants in
connection with this offering. Once issued, these warrants will be treated as
common stock for purposes of SouthernBank Holdings' earnings per share
calculation. Therefore, as the warrants are issued, SouthernBank Holdings'
earnings per share may be diluted. See "Description of SouthernBank Holdings'
Capital Stock - Organizers' Warrants" on page 38.
SouthernBank Holdings' financial statements and related notes, which are
included in this prospectus, provide additional information relating to the
discussion of its financial condition. See "Index to Financial Report" on page
F-1.
OFFICES
Land South Properties, LLC, a real estate development company owned by two
of our organizers, entered into an agreement to purchase an approximately 1.2
acre lot neighboring the Mall of Georgia on Highway 20 in the Mill Creek area of
northern Gwinnett County for a purchase price of approximately $857,000. The
property will be the site for our main office, which is expected to have
approximately 7,000 square feet of office space. Construction of the permanent
facility is expected to begin in the third quarter of 2000. Land South plans to
assign its rights under the agreement to SouthernBank and is expected to receive
$10.00 as consideration for the assignment. To pay for the property,
SouthernBank plans to
15
<PAGE> 19
establish a line of credit with The Bankers Bank for an amount up to $860,000.
The line of credit is expected to be guaranteed by our organizers, bear interest
at 1.0% less than the prime rate as published in the Money Rates section of The
Wall Street Journal, and be due on June 30, 2000. Costs of constructing our
permanent facility are estimated at $1,143,000, and will be paid by SouthernBank
after it is capitalized. See "Our Proposed Business - Offices" on page 27 and
"Related Party Transactions" on page 37.
Until our permanent facility is completed, we plan to conduct our
operations in a temporary facility located approximately 2.6 miles from the site
of our permanent facility, and within our primary service area. The lease for
our temporary facility is for a term of 15 months from the date of occupancy.
SouthernBank will pay monthly rent of approximately $2,600 for the temporary
facility. We expect to be open for business in our temporary facility in the
second quarter of 2000.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Since SouthernBank Holdings has been in the development stage, there are
no results to present at this time. Nevertheless, once SouthernBank begins
operations, net interest income, its primary source of earnings, will fluctuate
with significant interest rate movements. To lessen the impact of these margin
swings, we intend to structure the balance sheet so we will have regular
opportunities to "reprice" or change the interest rates on SouthernBank's
interest-bearing assets and liabilities. Imbalance in these repricing
opportunities at any point in time constitutes interest rate sensitivity.
Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to change in market interest rates. The rate sensitive
position, or gap, is the difference in the volume of rate sensitive assets and
liabilities at a given time interval. The general objective of gap management is
to actively manage rate sensitive assets and liabilities in order to reduce the
impact of interest rate fluctuations on the net interest margin. We will
generally attempt to maintain a balance between rate sensitive assets and
liabilities as the exposure period is lengthened to minimize overall interest
rate risks.
We will regularly evaluate our balance sheet's asset mix in terms of
several variables:
- yield;
- credit quality;
- appropriate funding sources; and
- liquidity.
To effectively manage the balance sheet's liability mix, we plan to focus
on expanding our deposit base and converting assets to cash as necessary.
As SouthernBank continues to grow, we will continuously structure its rate
sensitivity position in an effort to hedge against rapidly rising or falling
interest rates. SouthernBank's asset/liability and investment management
committee will meet on a quarterly basis to develop a strategy for the upcoming
period.
Liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities, as well as to maintain sufficient
funds to cover deposit withdrawals and payment of debt and operating
obligations. SouthernBank can obtain these funds by converting assets to cash or
by attracting new deposits. SouthernBank's ability to maintain and increase
deposits will serve as its primary source of liquidity.
Other than this offering, we know of no trends, demands, commitments,
events or uncertainties that should result in, or are reasonably likely to
result in, SouthernBank's or SouthernBank Holdings' liquidity increasing or
decreasing in any material way in the foreseeable future.
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<PAGE> 20
CAPITAL ADEQUACY
There are now two primary measures of capital adequacy for banks and bank
holding companies: (1) risk-based capital guidelines and (2) the leverage ratio.
The risk-based capital guidelines measure the amount of a bank's required
capital in relation to the degree of risk perceived in its assets and its
off-balance sheet items. Under the risk-based capital guidelines, capital is
divided into two "tiers." Tier 1 capital consists of common shareholders'
equity, noncumulative and cumulative perpetual preferred stock and minority
interests. Goodwill is subtracted from the total. Tier 2 capital consists of the
allowance for loan losses, hybrid capital instruments, term subordinated debt
and intermediate term preferred stock. Banks are required to maintain a minimum
risk-based capital ratio of 8.0%, with at least 4.0% consisting of Tier 1
capital.
The second measure of capital adequacy relates to the leverage ratio. The
OCC has established a 3.0% minimum leverage ratio requirement. The leverage
ratio is computed by dividing Tier 1 capital into total assets. In the case of
SouthernBank and other banks that are experiencing growth or have not received
the highest regulatory rating from their primary regulator, the minimum leverage
ratio should be 3.0% plus an additional cushion of at least 1.0% to 2.0%,
depending upon risk profiles and other factors.
We believe that the net proceeds of this offering will satisfy our capital
requirements for at least the next 24 months following the opening of
SouthernBank. Accordingly, we do not anticipate that it will be necessary to
raise additional funds to operate SouthernBank Holdings or SouthernBank for at
least the next 24 months after SouthernBank opens. All anticipated material
expenditures for this period have been identified and provided for out of the
proceeds of this offering. For additional information about planned
expenditures, see "Use of Proceeds" on page 11. For additional information about
our plan of operations, see "Our Proposed Business" on page 18.
17
<PAGE> 21
OUR PROPOSED BUSINESS
BACKGROUND
SouthernBank Holdings. SouthernBank Holdings was incorporated as a
Georgia corporation on July 13, 1999 to serve as a bank holding company for
SouthernBank. On March 31, 2000 we applied to the Federal Reserve and the
Georgia Department of Banking and Finance for approval to capitalize
SouthernBank. Upon receiving all necessary regulatory approvals, we will become
a bank holding company within the meaning of the Bank Holding Company Act when
we purchase SouthernBank's common stock. We plan to use $8,500,000 of the net
proceeds of this offering to capitalize SouthernBank. In return, SouthernBank
will issue all of its common stock to us, and we will be its sole shareholder.
Initially, SouthernBank will be our sole operating subsidiary. See "Supervision
and Regulation - General" on page 44.
SouthernBank Holdings has been organized to make it easier for
SouthernBank to serve its future customers. The holding company structure
provides flexibility for expanding our banking business by allowing us to expand
into other banking related services, make potential future acquisitions of other
financial institutions and invest additional capital into SouthernBank. A
holding company structure will make it easier for us to raise capital for
SouthernBank because we will be able to issue securities without the need for
prior banking regulatory approval, and the proceeds of debt securities issued by
the holding company can be invested in the bank as primary capital.
SouthernBank. On November 17, 1999, our organizers filed applications on
behalf of SouthernBank with the OCC to organize as a national bank and with the
FDIC to obtain insurance for SouthernBank's deposits. SouthernBank will not be
authorized to conduct its banking business until it obtains a charter from the
OCC and deposit insurance coverage from the FDIC. The issuance of the charter
will depend, among other things, upon SouthernBank's receipt of at least
$8,500,000 in capital from SouthernBank Holdings and upon compliance with other
standard conditions expected to be imposed by the OCC. These conditions are
generally designed to familiarize SouthernBank with national bank operating
requirements and to prepare it to begin business operations. The OCC requires
that a new national bank obtain a charter and open for business within 18 months
after receipt of its preliminary approval from the OCC. SouthernBank received
preliminary approval of its charter application from the OCC on March 15, 2000.
The FDIC granted conditional approval of SouthernBank's FDIC deposit insurance
application on March 17, 2000. Obtaining FDIC deposit insurance coverage will
depend, among other things, upon SouthernBank's receipt of a charter from the
OCC and the FDIC's approval of the bank's management team. Accordingly,
SouthernBank is awaiting final approval from the OCC and the FDIC. We expect
that SouthernBank will receive all regulatory approvals and open for business in
the second quarter of 2000. However, if we are unable to receive final approval
for SouthernBank to begin banking operations by September 15, 2001, we
anticipate that we will seek shareholder approval for the dissolution and
liquidation of SouthernBank Holdings. Upon dissolution, we will distribute to
shareholders the proceeds of the offering, less all expenses incurred by us,
including the expenses of this offering and our organization and pre-opening
expenses.
MARKET OPPORTUNITIES
Primary Service Area. Situated approximately 35 miles from downtown
Atlanta, our primary service area will consist of the approximately 12-mile
radius surrounding our main office location neighboring the Mall of Georgia on
Georgia Highway 20 in the Mill Creek area of northern Gwinnett County.
Accordingly, our primary service area will include the communities of Buford,
Dacula, Duluth, Lawrenceville, Lilburn, Sugar Hill and Suwanee in Gwinnett
County, as well as the communities of Flowery Branch in Hall County and
Braselton in Jackson County.
With our proposed main office location neighboring the 1.7 million square
foot Mall of Georgia, the largest shopping mall in the state according to
Georgia Trend Magazine, we believe that our physical location will provide us
with an opportunity to successfully expand and grow our banking operations. Thus
18
<PAGE> 22
far, the recently opened mall has attracted over 170 retailers and restaurant
operators to the heart of our primary service area, and is expected to draw
additional business interests into northern Gwinnett County. By strategically
placing our main office in the center of this development, we believe that we
will be able to capitalize on the influx of new residents and businesses
locating to the area, as well as the core residents and businesses already
established in our market.
Population. The communities that represent our primary service area have
experienced substantial population growth over the past several decades. During
the period from 1990 to 1999, the U.S. Census Bureau estimates that Gwinnett
County had the largest population increase of any county in the nation.
According to estimates of CACI Marketing Systems, the population for our primary
service area was 438,430 in 1999, representing an increase of 60.9% from 1990.
CACI further expects the area to continue its rapid growth, projecting a
population increase of 21.7% for the period from 1999 to 2004. This growth in
population has also fueled a comparable demand for housing. For example, the
Atlanta Regional Commission estimates that 69,200 housing units were constructed
from 1990 to 1999, increasing the number of housing units in Gwinnett County by
50.3%. Additionally, CACI projects the number of households within our primary
service area to increase from 129,581 in 1999 to 160,263 by 2004. Accordingly,
we believe that this increase in population will provide significant deposit
base growth for our targeted market area, as well as a strong demand for
consumer, commercial and real estate-related loans and services.
Industry, Labor and Employment. Job growth has played an important role
in facilitating the population growth in Gwinnett County. According to the
Georgia Department of Labor, an estimated 103,058 jobs have been created in
Gwinnett County since 1990, an increase of 49.9%. According to the Gwinnett
Chamber of Commerce, more than 20,000 businesses are located in Gwinnett County,
with approximately 20% of the Fortune 500 companies, more than 480 high-tech
firms, and more than 270 international firms conducting operations in the
county. With nearly 60% of the residents in Gwinnett County being between the
ages of 25 and 64, and nearly 30% of the county's residents over age 25 having
earned at least a bachelor's degree, we believe that Gwinnett County's large,
well-educated labor pool has helped attract these employers to the county, and
will continue to attract additional employers to the area.
Gwinnett County's employment base is highly diversified, representing the
service, retail trade, manufacturing, wholesale trade and construction
industries. According to the Georgia Department of Labor, the service industry
represents the largest employment sector, providing 29.2% of Gwinnett County's
jobs, followed by retail trade at 22.0%, manufacturing and wholesale trade, each
at 14.4%, and construction at 7.0%.
According to the Gwinnett Chamber of Commerce, the largest private sector
employers in Gwinnett County are Lucent Technologies and Scientific-Atlanta.
Gwinnett County's top ten employers are listed below and illustrate the
diversification of business and trade in the area.
<TABLE>
<CAPTION>
GWINNETT COUNTY'S TOP TEN EMPLOYERS TOTAL EMPLOYEES INDUSTRY
- ----------------------------------- --------------- ---------------
<S> <C> <C>
Gwinnett County Public Schools................. 11,239 Education
Lucent Technologies............................ 3,500 Technology
Scientific-Atlanta............................. 3,375 Technology
Gwinnett County Government..................... 3,091 Public Service
Gwinnett Health System......................... 2,400 Health Care
Ciba Vision Corporation........................ 1,600 Health Products
Primerica Financial Services................... 1,550 Financial
Motorola....................................... 1,400 Manufacturing
Ikon Office Solutions.......................... 1,300 Retail Trade
Boeing North American.......................... 1,200 Manufacturing
</TABLE>
Gwinnett County also presently enjoys a low rate of unemployment.
According to the Georgia Department of Labor, Gwinnett County's 1999
unemployment rate was estimated at 2.4%, well below Georgia's estimated
unemployment rate of 3.8% and the national estimated unemployment rate of 4.2%.
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The estimated median household income for our primary service area, according to
CACI, was $62,501 in 1999, and is projected to grow to $76,403 by 2004. The
median household income in our primary service area compares favorably with the
median income for all households in the United States, which was $38,885 in
1998, and the median income for all households in Georgia, which was $38,665 in
1998, according to the U.S. Census Bureau.
We believe that our primary service area presents a growing and
diversified economic environment that will support SouthernBank's formation. By
positioning ourselves as a community bank focused on serving the needs of the
citizens and businesses located within Gwinnett County, we believe that we will
be successful within this growing economy.
Competition. According to the FDIC, bank and thrift deposits in Gwinnett
County grew from approximately $3.8 billion in June 1996 to more than $5.1
billion in June 1999. This growing deposit base is primarily controlled by large
national and super-regional banks, which include Bank of America, Wachovia,
SunTrust and First Union. Although most of these large financial institutions
are well established in the county, local community banks have been successful
in competing for deposits. According to the FDIC, the following trends occurred
in Gwinnett County deposit market share from June 1996 to June 1999:
- Total deposits for the large national and super-regional banks
described above grew 15.7%, compared to 34.1% growth in the overall
deposit market.
- The slower relative growth of these large banks results in their
combined relative deposit market share falling from 65.3% to 56.3%.
- Five community banks based in Gwinnett County and operating in the area
during the entire three-year period from June 1996 to June 1999
experienced total deposit growth of 69.0%. These banks include The
Brand Banking Company, Peoples Bank & Trust, First Capital Bank,
Eastside Bank & Trust Company and Quantum National Bank.
- These five community banks increased their combined relative deposit
market share from 12.0% to 15.1%.
Our primary service area represents a subset of the overall Gwinnett
County market and includes the communities of Buford, Dacula, Duluth,
Lawrenceville, Lilburn, Sugar Hill and Suwanee. Additionally, our primary
service area extends to encompass Flowery Branch in Hall County and Braselton in
Jackson County. According to the FDIC, bank and thrift deposits in these
communities totaled more than $3.0 billion in June 1999. Bank of America,
Wachovia, SunTrust and First Union control 57.5% of the deposits in our primary
service area. SouthTrust has a 6.6% deposit market share and Atlanta-based
Premier Bancshares (now BB&T) holds an additional 6.2% of the deposits. Local
banks with a significant presence include Peoples Bank & Trust at 6.1%, The
Brand Banking Company at 5.3%, Quantum National Bank at 2.4% and Tucker Federal
Bank at 2.3%. No other community bank holds more than 2.0% of the deposits in
our primary service area.
We will compete directly with many of the institutions previously named.
Additionally, we anticipate further competition as existing institutions in the
market expand their branch networks or as institutions from other markets branch
into our primary service area. Since 1996, one additional community banks has
opened and two are presently organizing in Gwinnett County. Gwinnett Banking
Company opened in October 1997 in Lawrenceville, approximately 10 miles from our
proposed main office. Two other groups are also presently organizing banks in
the Lawrenceville community. The community banks and thrifts operating within
our market area will compete with SouthernBank for banking products and
services.
We recognize that most of our competitors have substantially greater
resources and lending limits than SouthernBank will have and provide other
services, such as extensive and established branch networks and trust services,
that SouthernBank does not expect to provide initially. As a result of these
competitive factors, SouthernBank may have to pay higher interest rates to
attract depositors or extend credit with
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lower interest rates to attract borrowers. However, we will attempt to minimize
these competitive facts and attract new banking relationships by offering our
customers a personalized approach to banking. For example, we intend to
differentiate SouthernBank from our competitors primarily through our active
calling programs for directors and employees, our involvement in the communities
we serve, the quality and experience of our staff and our convenient location
near the Mall of Georgia.
We also believe that recent acquisitions of several local banks in the
metropolitan Atlanta market, including BB&T's acquisition of Premier Bancshares,
may diminish the quality of banking services available to small- and
medium-sized businesses and consumers in the market. Further consolidation is
likely to create additional opportunities for community banks to capture
deposits and other banking business from affected customers who may be
dissatisfied with their new financial institutions.
PHILOSOPHY AND STRATEGY
SouthernBank's philosophy will be to deliver aggressive customer service
that will create a banking experience that will motivate our customers to tell
others about SouthernBank. SouthernBank has adopted this philosophy in order to
attract customers and acquire market share now controlled by other financial
institutions in its primary service area. Accordingly, to carry out our
philosophy we have developed a business strategy involving the following key
elements:
- Sales and Service-Oriented Employees. We will strive to hire highly
trained and seasoned key employees, preferably with existing customer
relationships established through prior banking experience. By hiring
key employees with established customer relationships, SouthernBank
will be able to grow more rapidly than if we hired individuals who
required more time to develop a sufficient customer base. We also plan
to cross-train our staff to answer questions about all of our products
and services so that the first employee a customer encounters can not
only resolve all of the customer's banking-related questions, but can
also suggest products and services that may be of interest to the
customer.
- Experienced Senior Management. SouthernBank's senior management
possesses extensive experience in the banking industry. For example,
SouthernBank's principal executive officer, M. Lauch McKinnon, has over
20 years of banking and banking-related experience, and the bank's
principal financial officer, Rita B. Gray, has 30 years of banking
experience. In addition, we plan to hire an experienced senior lending
officer with established business contacts in SouthernBank's primary
service area. See "Management" on page 28.
- Call Program. To promote SouthernBank, we will implement an active
call program involving all of our officers, directors and employees.
The purpose of this call program will be to visit prospective
customers, to describe SouthernBank's products and services and to
invite them to do business with us. The results and productivity of our
mandatory call program will be monitored by our board of directors,
with specific goals required of our officers and directors.
- Individual Customer Focus. We will focus on providing individualized
service and attention to our target customers, which may include
individuals and small- to medium-sized businesses. As our employees,
officers and directors become familiar with our customers, we will be
able to respond to credit requests quickly and be more flexible in
approving loans based on collateral quality and personal knowledge of
the customer's needs.
- Local Decision Making. We plan to position SouthernBank as a
locally-owned, community bank focused on being more responsive to
customer requests and to the banking needs of individuals and
businesses within the communities we serve.
- Community-Oriented Board of Directors. A majority of the members of
our board of directors are residents of, or individuals operating
businesses in, the Gwinnett County area. Consequently, we believe our
board members will be sensitive and responsive to the needs of the
communities we serve. Additionally, our board of directors represents a
wide array of business experience and
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community involvement, and, as a result, we expect that our directors
will bring substantial business and banking contacts to SouthernBank.
- Highly Visible Site. SouthernBank's main office location, neighboring
the Mall of Georgia in the Mill Creek area of northern Gwinnett County,
is highly visible and easily accessible from Georgia Highway 20 and
Interstate Highways 85 and 985. As a result, we believe that our
location will enhance SouthernBank's ability to compete successfully.
- Marketing and Advertising. We plan to promote SouthernBank and to
develop its image as a community-oriented bank with an emphasis on
quality service and personal contact. We will also use media services
such as local newspapers, drive-time radio, direct mail campaigns and
television to promote its products and services. Additionally, we plan
to sponsor community activities on an ongoing basis.
- Offer Fee-Generating Products and Services. SouthernBank's range of
services, pricing strategies, interest rates paid and charged, and
hours of operation will be structured to attract its target customers
and increase its market share. SouthernBank will offer creative loan
services to small businesses, professionals, entrepreneurs and
consumers superior loan services while charging appropriate fees for
such services and using technology and engaging third-party service
providers to perform some functions at a lower cost to increase fee
income. Further, since our staff will be trained to suggest products
and services that may be of interest to our customers, we expect our
sales and service-oriented culture to help grow SouthernBank's market
share and increase fee income.
- Capitalize on the Trend Toward Consolidation. We believe that
consolidation in the banking industry will continue, resulting in many
individuals and small- to medium-sized businesses being dissatisfied
with the upheaval in their banking relationships. We expect to
capitalize on continued industry consolidation. By positioning
ourselves as a community bank that is interested in delivering
unparalleled personal service, we believe that we will draw many of
those dissatisfied customers to us.
LENDING SERVICES
Lending Policy. SouthernBank is being established to support the
communities in Gwinnett County, as well as the portions of Hall and Jackson
Counties that fall within the bank's primary service area. Consequently,
SouthernBank will aggressively seek opportunities to lend money to creditworthy
borrowers in this geographic area. SouthernBank will emphasize commercial loans
to small- and medium-sized businesses and professional concerns, as well as real
estate-related loans, including construction and acquisition and development
loans for residential and commercial properties, and primary and secondary
mortgage loans for the acquisition or improvement of personal residences.
SouthernBank will also emphasize consumer loans to individuals.
SouthernBank intends to maintain a balanced loan portfolio. Our strategy
will vary from time to time based on the business cycle, economic forecasts and
available interest rate spreads. While there may be adjustments based on
changing economic conditions, SouthernBank's initial plan is to have its loan
portfolio be comprised of the following:
<TABLE>
<CAPTION>
LOAN CATEGORY RATIO
- ------------- -----
<S> <C>
Commercial loans to small- and medium-sized businesses...... 40%
Real estate-related loans................................... 35%
Consumer loans.............................................. 25%
</TABLE>
SouthernBank plans to avoid concentrations of loans to a single industry
or based on a single type of collateral. SouthernBank will not make loans
secured by restricted stock or property held in trust for a minor, loans to
enable a borrower to speculate in the futures market, single payment loans with
a maturity of longer than one year, or loans to borrowers currently classified
as doubtful or substandard. In addition,
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<PAGE> 26
SouthernBank will not make loans to political candidates for campaign expenses
or loans on which interest is capitalized, unless additional security is taken
by the bank. Further, SouthernBank will avoid loans secured by an assignment
against an undistributed estate, loans to borrowers who have previously declared
bankruptcy, the origination of mortgage loans secured by property outside of the
bank's primary service area, and loans dependent upon borrowing from other
sources for repayment, except for certain construction loans. Additionally,
unless guaranteed by a government agency, SouthernBank will avoid crop loans
dependent upon successful marketing of the crop and working capital loans to new
enterprises dependent upon the profitable operation of the new enterprise.
To address the risks inherent in making loans, SouthernBank will maintain
an allowance for loan losses based on, among other things, management's previous
experience with similar loan portfolios, an evaluation of the bank's loan loss
experience, the amount of past due and nonperforming loans, current and
anticipated economic changes and the values of loan collateral. Based upon these
factors, SouthernBank's management will make various assumptions and judgments
about the ultimate collectibility of the loan portfolio and provide an allowance
for potential loan losses based upon a percentage of the outstanding balances
and for specific loans. However, because there are risks that cannot be
precisely quantified, management's judgment of the appropriate loan loss
allowance is only an approximation and may be over or understated. The adequacy
and methodology of our allowance for loan losses will be subject to regulatory
examination and compared to a peer group of financial institutions identified by
regulatory agencies.
Loan Approval and Review. SouthernBank's loan approval policies will
provide for various levels of officer lending authority. When the amount of
total loans to a single borrower exceed the Senior Loan Officer's lending
authority of $150,000, the loan request must be approved by the Chief Executive
Officer as well. If the loan request exceeds the Chief Executive Officer's
lending limit, which is $250,000, the loan must be approved by SouthernBank's
loan committee. Loan requests in excess of $1,200,000 must be approved by
SouthernBank's board of directors. In addition, loan requests from borrowers
outside of SouthernBank's primary service area, or loans that will be secured by
collateral located outside of SouthernBank's primary service area, must be
approved by the bank's loan committee. SouthernBank will not make any loans to
any of our directors or executive officers unless a majority of its
disinterested board members approve the loan, the terms of the loan are no more
favorable than would be available to an unaffiliated applicant similarly
situated, and the loan otherwise complies with applicable law.
Lending Limits. SouthernBank's lending activities will be subject to a
variety of lending limits imposed by law. Differing limits apply in some
circumstances based on the type of loan or the nature of the borrower, including
the borrower's relationship to SouthernBank. In general, however, SouthernBank
will be able to loan any one borrower a maximum amount equal to either: (1)
15.0% of its capital and surplus or (2) 25.0% of its capital and surplus if the
excess over 15.0% is within federal guidelines, which provide an exception to
the 15.0% limit for some types of secured debt. Based on its proposed minimum
capitalization and projected pre-opening expenses, SouthernBank's initial
lending limit will be approximately $1,200,000 for loans not fully secured plus
an additional $800,000, or a total of approximately $2,000,000, for loans that
meet the federal guidelines. These statutory limits will increase or decrease as
SouthernBank's capital increases or decreases as a result of its earnings or
losses, among other reasons. However, SouthernBank may sell participations in
its loans to other financial institutions in order to meet all of the lending
needs of loan customers.
Credit Risks. The principal economic risk associated with each category
of loans that SouthernBank expects to make is the creditworthiness of the
borrower. Borrower creditworthiness is affected by general economic conditions
such as interest, inflation and employment rates.
Well-established financial institutions in our primary service area are
likely to make proportionately more loans to large-sized businesses than
SouthernBank will make. Many of SouthernBank's commercial loans are expected to
be made to small- to medium-sized businesses that may be less able to withstand
competitive, economic and financial pressures than larger borrowers. Our
commercial loan portfolio is expected to consist of loans to individual,
partnership and corporate borrowers that are primarily located in
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our primary service area. Accordingly, we anticipate that our commercial
borrowers will reflect the diversified businesses of our primary service area,
and will principally include service, manufacturing and high tech firms. The
risks associated with commercial loans depend to a large extent upon various
economic factors, including the strength of the economy in our primary service
area, and the ability of our commercial borrowers to properly evaluate and
respond to a changing marketplace. In addition, SouthernBank's commercial
borrowers will likely face risks related specifically to the unique nature of
their businesses. For example, service firms may incur risks associated with
labor shortages and consumer preference changes. Manufacturing firms may incur
risks associated with raw material and labor shortages, as well as currency
fluctuations. High tech firms may incur risks associated with rapid
technological changes and intense competition.
With respect to real estate loans generally, the ability of a borrower to
repay a real estate loan will depend upon a number of economic factors,
including employment levels and fluctuations in the value of real estate. In the
case of a real estate purchase loan, the borrower may be unable to repay the
loan at the end of the loan term and may thus be forced to refinance the loan at
a higher interest rate, or, in some cases, the borrower may default as a result
of an inability to refinance the loan. In either case, the risk of nonpayment by
the borrower is increased. In the case of a real estate construction loan, there
is generally no income from the underlying property during the construction
period, and the developer's personal obligations under the loan are typically
limited. Each of these factors increases the risk of nonpayment by the borrower.
SouthernBank will also face additional credit risks to the extent that it
engages in adjustable rate mortgage loans. In the case of an adjustable rate
mortgage loan, as interest rates increase, the borrower's required payments
increase, thus increasing the potential for default. The marketability of all
real estate loans, including adjustable rate mortgage loans, is also generally
affected by the prevailing level of interest rates.
Consumer loans generally involve more credit risks than other loans
because of the type and nature of the underlying collateral or because of the
absence of any collateral. Consumer loan repayments depend on the borrower's
continuing financial stability and are likely to be adversely affected by, among
other things, job loss, divorce and illness. Furthermore, the application of
various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans in
the case of default. In most cases, any repossessed collateral will not provide
an adequate source of repayment of the outstanding loan balance. Although the
underwriting process for consumer loans includes a comparison of the value of
the security, if any, to the proposed loan amount, SouthernBank cannot predict
the extent to which the borrower's ability to pay, and the value of the
security, will be affected by prevailing economic and other conditions.
Commercial Loans. A primary component of SouthernBank's loan portfolio
will be loans for commercial purposes. Our commercial loan portfolio is expected
to consist of loans principally to service, manufacturing and high tech firms
located in our primary service area. The terms of these loans will vary by
purpose and by type of underlying collateral, if any. SouthernBank will
typically make equipment loans for a term of five years or less at fixed or
variable rates, with the loan fully amortized over a term not to exceed the
useful life of the equipment. Equipment loans generally will be secured by the
financed equipment, and the ratio of the loan principal to the value of the
financed equipment or other collateral will generally be 75.0% or less. Loans to
support working capital will typically have terms not exceeding one year and
variable interest rates based on the prime interest rate. Additionally, these
working capital loans will generally be secured by accounts receivable,
inventory, or other appropriate collateral, as well as personal guarantees of
the principals of the business. For loans secured by accounts receivable or
inventory, principal will typically be repaid as the assets securing the loan
are converted into cash, and for loans secured with other types of collateral,
principal will typically be due at maturity. The quality of the commercial
borrower's management and its ability both to evaluate properly changes in the
supply and demand for its products and services and to respond effectively to
such changes are significant factors in a commercial borrower's
creditworthiness.
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Real Estate Loans. SouthernBank will make commercial real estate loans,
construction and acquisition and development loans, and residential real estate
loans. These loans will include some commercial loans where SouthernBank will
take 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.
- Commercial Real Estate. Commercial real estate loan terms generally
will be limited to five years or less, although payments may be
structured on a longer amortization basis. Interest rates may be fixed
or adjustable with an origination fee generally being charged on each
loan funded. The interest rate on commercial real estate loans will
generally be adjusted every 12 months or at maturity. We will attempt
to reduce credit risk on our commercial real estate loans by
emphasizing loans on owner-occupied office and retail buildings where
the ratio of the loan principal to the value of the collateral as
established by independent appraisal, does not exceed 80.0% and net
projected cash flow available for debt service equals 115.0% of the
debt service requirement. In addition, SouthernBank may require
personal guarantees from the principal owners of the property supported
by a review by SouthernBank's management of the principal owners'
personal financial statements. Risks associated with commercial real
estate loans include fluctuations in the value of real estate, new job
creation trends, tenant vacancy rates and the quality of the borrower's
management. SouthernBank will limit its risk by analyzing the
borrower's cash flow and collateral value on an ongoing basis.
- Construction and Acquisition and Development Loans. Construction and
acquisition and development loans will be made both on a pre-sold and
speculative basis. If the borrower has entered into an agreement to
sell the property prior to beginning construction, then the loan is
considered to be on a pre-sold basis. If the borrower has not entered
into an agreement to sell the property prior to beginning construction,
then the loan is considered to be on a speculative basis. Construction
and acquisition and development loans are generally made with a term of
nine months and interest is paid periodically. The interest rate on
construction and acquisition and development loans will be adjusted
every six months or at maturity. The ratio of the loan principal to the
value of the collateral, as established by independent appraisal, will
not generally exceed 75.0%. Additionally, 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. Risks associated with construction
loans include fluctuations in the value of real estate and new job
creation trends.
- Residential Real Estate. SouthernBank's residential real estate loans
will consist of residential first and second mortgage loans and
residential construction loans. SouthernBank will offer fixed and
variable rates on our mortgages with the amortization of first
mortgages being three years or greater. These loans will be made
consistent with SouthernBank's appraisal policy and with the ratio of
the loan principal to the value of collateral, as established by
independent appraisal, generally not to exceed 80.0%. 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. Immediately upon
opening, SouthernBank plans to open a mortgage department to process
home loans, which will allow it to originate long term mortgage loans.
We do not intend to hold long-term mortgage loans in SouthernBank's
loan portfolio. These loans will be approved based upon commitments
from end lenders, and will be sold to these lenders after closing.
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Consumer Loans. SouthernBank will make a variety of loans to individuals
for personal, family and household purposes, including secured and unsecured
installment and term loans, home equity loans and home equity lines of credit.
Consumer loan repayments depend upon the borrower's financial stability and are
more likely to be adversely affected by divorce, job loss, illness and personal
hardships. Because many consumer loans are secured by depreciable assets such as
boats, cars, and trailers, the loan should be amortized over the useful life of
the asset. We will generally require that the borrower be employed for at least
12 months prior to obtaining the loan. The loan officer will review the
borrower's past credit history, past income level, debt history and, when
applicable, cash flow to determine the impact of all of these factors on the
borrower's ability to make future payments as agreed. Consumer loans will
generally be made with a fixed rate of interest. However, home equity lines of
credit will be made with a variable rate of interest based on the prime interest
rate.
INVESTMENTS
In addition to loans, SouthernBank will make other investments primarily
in obligations of the United States or obligations guaranteed as to principal
and interest by the United States and other taxable securities. These
investments will include U.S. treasury bills and treasury notes, as well as
investments in securities of federally sponsored agencies, such as Federal Home
Loan Bank bonds. In addition, SouthernBank may also invest in federal funds,
negotiable certificates of deposit, banker's acceptances, mortgage backed
securities, corporate bonds and municipal or other tax-free bonds. No investment
in any of those instruments will exceed any applicable limitation imposed by law
or regulation. The asset/liability and investment management committee will
review the investment portfolio on an ongoing basis in order to ensure that the
investments conform to our policy as set by our board of directors.
ASSET AND LIABILITY MANAGEMENT
The asset/liability and investment management committee will manage
SouthernBank's assets and liabilities and will strive to provide an optimum and
stable net interest margin, a profitable after-tax return on assets and return
on equity and adequate liquidity. The committee will conduct these management
functions within the framework of written loan and investment policies that
SouthernBank has adopted. The committee will attempt to maintain a balanced
position between rate sensitive assets and rate sensitive liabilities.
Specifically, it will chart assets and liabilities on a matrix by maturity,
effective duration and interest adjustment period and attempt to manage any gaps
in maturity ranges.
DEPOSIT SERVICES
We will seek to establish solid core deposits, including checking
accounts, money market accounts, a variety of certificates of deposit and IRA
accounts. To attract deposits, we will employ an aggressive marketing plan in
our primary service area and will feature a broad product line and competitive
services. The primary sources of deposits will be residents of, and businesses
and their employees located in, our primary service area. We plan to obtain
these deposits through personal solicitation by our directors, officers and
employees, direct mail solicitations and advertisements published in the local
media. In order to attract our initial deposit base, we may offer higher
interest rates on various deposit accounts.
OTHER BANKING SERVICES
Other anticipated banking services include internet banking, debit cards,
travelers checks, direct deposit of payroll and social security checks, savings
bonds, night depository, collection services, wire transfer services, overdraft
protections and automatic drafts for various accounts. SouthernBank plans to
become associated with the CIRRUS and Maestro nationwide networks of automated
teller machines that its customers will be able to use throughout Georgia and
other regions. SouthernBank may offer annuities, mutual funds and other
financial services through a third party that has not yet been chosen.
SouthernBank also plans to offer Mastercard(R) and VISA(R) credit card services
through a correspondent bank as an agent for the bank. SouthernBank will not
exercise trust powers during its early years of
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operation. It may in the future offer a full-service trust department, but
cannot do so without the prior approval of the OCC.
SouthernBank will also offer its targeted commercial customers a courier
service that will pick up non-cash deposits from the customer's place of
business and deliver them to the bank. We believe that this will be an important
service for our customers because SouthernBank will initially have only one
location. Additionally, we will market the convenience and advantages of our
internet banking services, which will include on-line bill payment, money
transfer and cash management services. We believe these internet banking
services will encourage customers to retain their total banking relationships
with SouthernBank.
EMPLOYEES
When it begins operations, SouthernBank will have approximately 12
full-time employees. We do not expect SouthernBank Holdings to have any
employees who are not also employees of SouthernBank.
OFFICES
SouthernBank's main office will neighbor the Mall of Georgia on Georgia
Highway 20, in the Mill Creek area of northern Gwinnett County. After
considering a number of sites within the Mill Creek area, Land South Properties,
LLC, a real estate development company owned by two of our organizers, entered
into an agreement to purchase the proposed site for SouthernBank's main office
for a purchase price of approximately $857,000, or $16.00 per square foot. The
purchase price resulted from arms-length negotiations between Land South and
Mall Developers, LLC, the owner of the property, and was based on comparable
transactions in the area surrounding the Mall of Georgia which ranged from
$15.50 to $21.00 per square foot. Land South plans to assign its rights under
the agreement to SouthernBank and is expected to receive $10.00 as consideration
for the assignment. See "Related Party Transactions" on page 37. To pay for the
property, SouthernBank plans to establish a line of credit with The Bankers Bank
for an amount up to $860,000. The line of credit is expected to be guaranteed by
our organizers, bear interest at 1.0% less than the prime rate, as published in
the Money Rates section of The Wall Street Journal, and be due on June 30, 2000.
Construction of our main office is expected to begin in the third quarter
of 2000 with completion anticipated to occur in the second quarter of 2001. The
building will be approximately 7,000 square feet and will include two vaults, a
loan operations area, four teller stations, three drive in windows and one
automated teller machine. The estimated construction costs of the building are
projected to total $1,143,000.
SouthernBank's main office location neighboring the Mall of Georgia will
be highly visible, having ample parking and easy accessibility from Georgia
Highway 20 and Interstate Highways 85 and 985.
SouthernBank will operate initially out of a temporary facility located
approximately 2.6 miles from the site of the permanent facility, and within our
primary service area. The lease rate for the temporary facility will be
approximately $2,600 per month for 15 months.
LEGAL PROCEEDINGS
As of the date of this prospectus, there were no material legal
proceedings to which we, or any of our properties, were subject.
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<PAGE> 31
MANAGEMENT
GENERAL
The following table sets forth, for the directors and executive officers
of SouthernBank Holdings, (1) their names, addresses and ages at March 31, 2000,
(2) their respective positions with us, (3) the number of shares of our common
stock they intend to purchase in the offering, (4) the percentage of outstanding
shares such number will represent, and (5) the number of shares subject to
warrants and options that they will receive when we complete this offering.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES SUBJECT TO
NUMBER OF OUTSTANDING OPTIONS AND
NAME AND ADDRESS AGE POSITION HELD SHARES SHARES WARRANTS
- ---------------- --- --------------------- --------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
CLASS I DIRECTORS:
(TERM EXPIRING IN 2003)
James O. Andrews 48 Director 25,000 2.0 25,000
6604 Gaines Ferry Road
Flowery Branch, Georgia 30542
James E. Hinshaw, Sr. 74 Director 10,000 0.8 10,000
5262 Legends Drive
Braselton, Georgia 30517
Donald F. Jackson 35 Director 17,500 1.4 17,500
1258 Burnt Hickory Road
Cartersville, Georgia 30120
CLASS II DIRECTORS:
(INITIAL TERM EXPIRING IN 2001)
Lewis A. Massey 37 Director 7,500 0.6 7,500
4060 Blue Iris Hollow
Norcross, Georgia 30092
Tyler C. McCain 31 Director 35,000 2.8 35,000
1129 North Highland Avenue
Atlanta, Georgia 30306
M. Lauch McKinnon 57 President, Director 25,000 2.0 50,000(1)
337 Mount Vernon Drive
Calhoun, Georgia 30701
CLASS III DIRECTORS:
(INITIAL TERM EXPIRING 2002)
D. Alan Najjar 48 Director 7,500 0.6 7,500
1835 Vintage Drive
Snellville, Georgia 30078
D. Arnold Tillman, Jr. 38 Chief Executive 50,000 4.0 50,000
4 Attaway Drive Officer, Chairman of
Cartersville, Georgia 30120 the Board of
Directors
Jeffery S. Tucker 37 Director 25,000 2.0 25,000
5895 Rivoli Drive
Macon, Georgia 31210
EXECUTIVE OFFICER
Rita B. Gray 49 Chief Financial - - 10,000(2)
2029 Shields Road Officer
Dalton, Georgia 30720
------- ---- -------
All Proposed Directors and Executive Officers 202,500 16.2 237,500
as a Group (10 persons)
</TABLE>
- ---------------
(1) Includes 25,000 shares subject to warrants, and an additional 25,000 shares
issuable under an incentive stock option to be granted to Mr. McKinnon under
his employment agreement. See "Executive Compensation - Employment
Agreements" on page 33.
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<PAGE> 32
(2) Includes 10,000 shares issuable pursuant to an incentive stock option to be
granted to Ms. Gray under the letter agreement regarding Ms. Gray's
employment with SouthernBank. See "Executive Compensation - Employment
Agreements" on page 33.
In addition to the individuals listed in the table above, James H. Daws,
an organizer of SouthernBank, intends to purchase 25,000 shares of our common
stock in the offering. As an organizer, Mr. Daws also will receive warrants to
purchase an additional 25,000 shares of our common stock. The common stock to be
purchased by our directors and organizers, as well as the warrants to be
received by them, are being offered by this prospectus. The OCC requires
proposed banks to disclose in their charter applications the anticipated number
of shares of common stock to be purchased by organizers, as well as the number
of warrants to be issued to them. We believe that our organizers' intended
purchases exhibit the substantial financial commitment to SouthernBank expected
by the OCC.
Each person listed in the table above, with the exception of Mr. McKinnon
and Ms. Gray, has been a director of SouthernBank Holdings since July 13, 1999.
Mr. McKinnon became a director of SouthernBank Holdings on December 1, 1999. Our
directors serve staggered terms, which means that one-third of the directors
will be elected each year at our annual meeting of shareholders. The initial
term of our Class I directors expired in February 2000. Each Class I director
was elected to serve an additional three-year term that will expire in 2003. The
initial term of our Class II directors expires in 2001, and the initial term of
our Class III directors expires in 2002. Thereafter, each Class II and Class III
director will serve for a term of three years. Our officers are appointed by our
board of directors and hold office at the will of our board. See "Important
Provisions of SouthernBank Holdings' Articles of Incorporation and Bylaws" on
page 38.
Each of our directors listed above is also a proposed director of
SouthernBank. Each of SouthernBank's proposed directors will, upon approval of
the OCC, serve until SouthernBank's first shareholders' meeting, which will
convene shortly after SouthernBank receives its charter. SouthernBank Holdings,
as the sole shareholder of SouthernBank, will nominate each proposed director to
serve as director of the bank at that meeting. After the first shareholders'
meeting, directors of SouthernBank will serve for a term of one year and will be
elected by SouthernBank Holdings each year at SouthernBank's annual meeting of
shareholders. SouthernBank's officers will be appointed by its board of
directors and will hold office at the will of its board of directors.
The following is a biographical summary of each of our directors and
executive officers:
James O. Andrews is chairman and founder of J.O.A. Distributors, Inc., one
of the largest inland marine dealerships in the Southeast. The company's
subsidiaries include J.O.A. Marine, Marietta, Georgia; J.O.A.'s Lake Lanier
Boating Center, Buford, Georgia; and J.O.A.'s Yacht Division at Lazy Days
Marina, Buford, Georgia. Mr. Andrews has served on the executive council of
Bombardier Capital, the advisory council of Genmar Yachts, Carver Division,
MasterCraft and Donzi Marine, as well as the Supra Stearing Committee and
Correct Craft's Dealer Council. Mr. Andrews is also a registered pharmacist. Mr.
Andrews lives in Flowery Branch, Georgia, and is a graduate of West Georgia
College and Mercer University's School of Pharmacy. Individually, and through
his companies, Mr. Andrews has been actively involved with a number of charities
including the Make a Wish Foundation and is a past presenting sponsor for the
Georgia Chapter of the March of Dimes.
James E. Hinshaw, Sr. is the president and founder of Precision Molding,
Inc., a manufacturing firm. For the past eight years, Mr. Hinshaw has served as
chairman of Gwinnett Health System in Gwinnett County, Georgia, and for the past
year, he has been chairman of Promina Health Systems, Inc. Since 1990, Mr.
Hinshaw has served on the board of directors of Waverly Inn, Inc. - Historic
Inns, Inc. In 1987, Mr. Hinshaw helped to organize The Bank of Gwinnett County
in Lawrenceville, Georgia and served as chairman of the bank's board of
directors from 1987 until 1989. Mr. Hinshaw has been a resident of Gwinnett
County for more than 30 years, having lived the last ten years within one mile
of SouthernBank's proposed main office. He has served on the board of directors
of Gwinnett Hospital for 15 years and is currently serving on the board of
directors of Gwinnett County's Children's Shelter.
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<PAGE> 33
Mr. Hinshaw is active in the Gwinnett County Rotary Club, having served as
president as well as district governor. Mr. Hinshaw has also served as vice
president of the Gwinnett Chamber of Commerce.
Donald F. Jackson is president of Georgia Vinyl Products, Inc., a fence,
decking and handrail company that he founded in July of 1999. Customers of
Georgia Vinyl Products are represented throughout the north Atlanta metropolitan
area, including Gwinnett County. Prior to establishing Georgia Vinyl Products,
Mr. Jackson was co-owner and operations manager of Jackson Dairy Farm in Bartow
County. Mr. Jackson graduated from the University of Georgia in 1986. Mr.
Jackson has served on the board of directors of the Bartow County Chamber of
Commerce, as an officer of the Cartersville Elks Lodge, and as a member of the
Cartersville Country Club Golf Course Committee. Mr. Jackson is a former member
of the Cartersville Exchange Club, and also served for two years as an alternate
on the Farm Services Agency Governing Board.
Lewis A. Massey is president and chief executive officer of Directo, Inc.,
a direct deposit payroll services company that acts as an intermediary between
employers and non-banked employees. From January 1996 to January 1999, Mr.
Massey served as Secretary of State of the State of Georgia. Prior to his
service as Secretary of State, Mr. Massey was vice president of Bank South
Securities, from April 1995 to January 1996, and Mr. Massey served as chief of
staff for Lieutenant Governor Pierre Howard from January 1991 to April 1995. Mr.
Massey graduated from the University of Georgia in 1984, and is a resident of
Gwinnett County. He serves on the boards of directors of the Georgia Special
Olympics and the Georgia Council on Child Abuse. He is also a member of the
Georgia Census 2000 Committee. Mr. Massey has been named the Outstanding Young
Alumnus of the University of Georgia Business School and as one of the 100 Most
Influential Georgians by Georgia Trend Magazine.
Tyler C. McCain is a partner with the McCain Law Firm, which specializes
in residential and commercial real estate. He is a life-long resident of
Cartersville, Georgia, and has lived in Atlanta for the last two years. Mr.
McCain has represented a broad base of clients located throughout metropolitan
Atlanta, including Gwinnett County. Mr. McCain graduated from the University of
Georgia in 1990 and received his law degree from Cumberland School of Law in
1993. Mr. McCain has been a volunteer for Habitat for Humanity.
M. Lauch McKinnon is the president of SouthernBank Holdings and the
proposed president and chief executive officer of SouthernBank. Mr. McKinnon has
over 20 years of banking or banking-related experience, 14 of which were spent
as a resident of Gwinnett County. Most recently, from April 1998 to November
1999, Mr. McKinnon was president and chief executive officer, as well as an
organizing director, of North Georgia National Bank in Calhoun, Georgia, which
successfully opened in February 1999. From September 1995 to April 1998, Mr.
McKinnon worked as an independent consultant, providing consulting services in
the areas of strategic planning, performance management, acquisitions and
executive selection to the banking industry. From September 1991 to September
1995, Mr. McKinnon was president and chief executive officer of Volunteer Bank &
Trust Co. in Chattanooga, Tennessee. From 1981 to 1991, Mr. McKinnon resided in
Gwinnett County and provided independent management consulting services to the
banking and financial services industries in and around the county. From 1977 to
1981, Mr. McKinnon was president of Lawrence Collateral Management, where he
operated out of Gwinnett County and was responsible for a portfolio in excess of
$1 billion. Mr. McKinnon began his career in 1967 as a commercial lending
officer with First Union National Bank in Charlotte, North Carolina. He
graduated from Guilford College and received a Masters in Business
Administration from the University of South Carolina. He is active in the
Georgia Bankers Association's CEO Academy and has been active in a number of
civic organizations.
D. Alan Najjar is the chief operating officer for BrightLane.com, Inc., an
internet "super-site" offering various products and services to small business
owners. Mr. Najjar has over 27 years of banking and data processing experience.
He began his banking career in Atlanta, Georgia with Trust Company Bank in 1974,
where he held numerous officer level positions in banking, operations,
administration and data processing. From 1985 to 1988, he was president and
chief executive officer of SunTrust Data Systems, Inc. In 1988, Mr. Najjar
founded Eastside Bank & Trust Company in Snellville, Georgia, and
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<PAGE> 34
served as a director and its chief executive officer from 1988 to 1992. Most
recently, from 1994 to 1999, Mr. Najjar was southeastern regional manager for
Bisys, Inc., a national data processing company for financial institutions. Mr.
Najjar has been a resident of Gwinnett County since 1975. He graduated from the
University of Georgia in 1974 and from Stonier Graduate School of Banking in
1982. Mr. Najjar has served as a director and chairman of the finance committee
of the Gwinnett Hospital System for the past nine years.
D. Arnold Tillman, Jr. is the chief executive officer and chairman of
SouthernBank Holdings. Mr. Tillman is also a physician in Cartersville, Georgia.
In addition to his medical practice, Mr. Tillman is president of Steada, Inc., a
real estate development firm that he founded in 1985. Mr. Tillman also has
experience in organizing and serving as a director of a de novo bank. From its
inception in 1989 through 1998, Mr. Tillman served as a director of First
Community Bancorp, Inc. and First Community Bank & Trust of Bartow County in
Cartersville, Georgia. In 1998, Mr. Tillman was instrumental in the sale of the
bank to National Commerce Bank, Memphis, Tennessee. Mr. Tillman graduated from
Kennesaw State University and received his medical degree from Mercer
University. Mr. Tillman is a founding member of the Bartow County Rotary Club
and is a member of AIDS Alliance, the Bartow County Community Clinic and a
volunteer for Habitat for Humanity.
Jeffery S. Tucker is a partner, along with organizer James H. Daws, in
Land South Development, Inc., Land South Investments, Inc., Land South
Properties, LLC, and Land South Construction LLC. Through these companies, Mr.
Tucker and Mr. Daws have been involved in all phases of real estate development,
construction and property management. Since 1986, Mr. Tucker's and Mr. Daws'
companies have developed 3,000 multi-family apartment units with a value in
excess of $200 million, commercial property, office buildings and a 200-acre
mixed use development and residential subdivision. These real estate projects
are represented throughout Georgia, including Gwinnett County. Land South
Construction currently is developing projects totaling $40 million, including a
346-unit luxury apartment complex in Forsyth County located within five miles of
SouthernBank's proposed main office in Mill Creek. Land South Construction
recently completed a 464-unit luxury apartment complex located within one mile
of SouthernBank's proposed main office. Mr. Tucker's and Mr. Daws' companies
manage all of the property they develop. Additionally, Mr. Tucker is active in a
number of civic organizations, including the Macon Civic Club.
ADDITIONAL EXECUTIVE OFFICER
Rita B. Gray is our chief financial officer. Ms. Gray has 30 years of
banking experience, primarily in the areas of finance and operations. From 1998
to 2000, Ms. Gray served as chief financial officer of North Georgia National
Bank in Calhoun, Georgia. From 1997 to 1998, Ms. Gray served as executive vice
president of Colonial Bank in Dalton, Georgia (formerly, Dalton/Whitfield Bank &
Trust) after the bank was acquired in 1997 by Montgomery, Alabama-based Colonial
BancGroup, Inc. In her capacity as executive vice president of Colonial Bank,
Ms. Gray was responsible for branch administration and customer service for the
North Georgia region. Prior to 1997, Ms. Gray served as chief financial officer
of the Dalton/Whitfield Bank and, among other things, was responsible for
selecting and purchasing all forms and equipment, policy creation, human
resources and assisting in the bank's organization in 1989. From 1987 to 1989,
Ms. Gray was employed by First Union National Bank, where she served as vice
president and compliance manager for the bank's Georgia branches. From 1968 to
1987, Ms. Gray served as vice president and controller of First Union Bank of
Dalton, formerly, The Bank of Dalton.
ADDITIONAL ORGANIZER
James H. Daws is a partner, along with organizer and director Jeffrey S.
Tucker, in Land South Development, Inc., Land South Investments, Inc., Land
South Properties LLC, and Land South Construction LLC. These companies have
developed, constructed and managed real estate projects throughout Georgia,
including Gwinnett County. Mr. Daws is a graduate of Georgia Tech, and
subsequently earned a masters degree from the University of Georgia.
Additionally, Mr. Daws is an
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<PAGE> 35
associate of the Macon Heritage Foundation, which is involved in the
preservation of historic homes and neighborhoods.
COMMITTEES OF THE BOARDS OF DIRECTORS
We have established the following committees. Other committees may be
established as needed once we begin banking operations.
Executive Committee. The executive committee will be authorized, between
meetings of the board of directors, to perform all duties and exercise all
authority of the board of directors, except for those duties and authorities
specifically granted to other committees or which are exclusively reserved to
the full board of directors. Additionally, the committee will make
recommendations to the board of directors regarding matters relating to the
overall management and expansion of SouthernBank. The committee also will be
responsible for recommending nominations for expired board seats and for
additional board members. The committee will also be responsible for
establishing compensation levels for our officers. The committee will be chaired
by Mr. Tillman, and will also include Mr. Andrews, Mr. McKinnon and Mr. Tucker.
Audit, Compliance and CRA Committee. The audit, compliance and CRA
committee will recommend to the board of directors of SouthernBank Holdings the
independent public accountants to be selected to audit SouthernBank Holdings'
and SouthernBank's annual financial statements and will approve any special
assignments given to the independent public accountants. The committee will also
review the planned scope of the annual audit, any changes in accounting
principles and the effectiveness and efficiency of SouthernBank's internal
accounting staff. Additionally, the committee will provide oversight to
SouthernBank Holdings' and SouthernBank's compliance staff for adherence with
regulatory rules and regulations, including the Community Reinvestment Act. The
committee will also establish appropriate levels of directors and officers
insurance and blanket bond insurance. The committee will be chaired by Mr.
Andrews, and will also include Mr. Hinshaw, Mr. Massey and Mr. Najjar.
Loan Committee. The loan committee will review any loan request made by a
potential borrower over an established credit threshold for compliance with
SouthernBank's lending policies and federal and state rules and regulations
governing extensions of credit. After making this review, the committee will
decide whether to extend credit to the potential borrower. In addition, the
committee will have the responsibility for establishing and approving, in
conjunction with management, all major policies and procedures pertaining to
loan policy. The committee will also review all past due reports, non-accrual
reports, and other indicators of overall loan portfolio quality, and will
establish measurements for determining the adequacy of SouthernBank's loan loss
reserve. The committee will be chaired by Mr. Najjar, and will also include Mr.
Hinshaw, Mr. McCain, Mr. McKinnon and Mr. Tillman.
Asset/Liability and Investment Management Committee. The asset/liability
and investment management committee will provide guidance to our boards of
directors in balancing the yields and maturities of SouthernBank's loans and
investments to those of its deposits. Additionally, the committee will work
closely with the board of directors to plan annual budgets and develop three to
five year strategic plans. The committee will be chaired by Mr. Najjar, and will
also include Mr. Hinshaw, Mr. Jackson and Mr. McKinnon.
Marketing Committee. The marketing committee will consult with the entire
board of directors regarding the development of safe and sound banking business
through the board members' contacts within the communities we serve. Members of
the committee will regularly contact other board members for their assistance in
introducing high quality potential customers to SouthernBank. The committee will
also aid SouthernBank's CRA officer in ascertaining the credit needs of the
communities we serve. The committee will be chaired by Mr. Tucker, and will also
include Mr. Andrews, Mr. Massey and Mr. McKinnon.
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<PAGE> 36
EXECUTIVE COMPENSATION
1999 COMPENSATION
The following table shows information for 1999 with regard to compensation
for services rendered in all capacities to SouthernBank Holdings by its chief
executive officer and its president. No other executive officer earned more than
$100,000 in salary and bonus in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------
OTHER ANNUAL
NAME AND SALARY BONUS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)
------------------ ------ ------ ----- ----------------
<S> <C> <C> <C> <C>
D. Arnold Tillman, Jr.
Chief Executive Officer............ 1999 $5,500 -0- 1,900(1)
M. Lauch McKinnon,
President.......................... 1999(2) 7,500 -0- 2,958(3)
</TABLE>
- ---------------
(1) Mr. Tillman receives no actual compensation for services rendered to
SouthernBank Holdings in his capacity as chief executive officer other than
a private club membership and health insurance benefits. In 1999, Mr.
Tillman was provided with a private club membership at a cost of $1,900, but
received no health insurance benefits. The salary compensation shown above
has been included solely to reflect the amount expensed ($1,000 per month)
in SouthernBank Holdings' financial statements to account for Mr. Tillman's
contribution to the Company and all of the costs of doing business as
required by financial reporting requirements.
(2) Mr. McKinnon's employment with SouthernBank Holdings and SouthernBank
commenced on December 1, 1999.
(3) In 1999, Mr. McKinnon was provided an automobile allowance of $583, as well
as a private club membership at a cost of $2,375.
EMPLOYMENT AGREEMENTS
Effective December 1, 1999, we entered into an employment agreement with
M. Lauch McKinnon regarding Mr. McKinnon's employment as president and chief
executive officer of SouthernBank, and as president of SouthernBank Holdings.
Under the terms of the agreement, Mr. McKinnon will receive a base salary of
$90,000 per year until SouthernBank opens for business, at which time his base
salary will increase to $120,000 per year. The agreement provides that at the
end of each year, Mr. McKinnon will be entitled to receive a cash bonus, to be
awarded by SouthernBank's board of directors, based on the bank's performance.
In addition, Mr. McKinnon will receive a one-time bonus of $15,000 on June 30,
2000 if SouthernBank has opened for business on or before May 31, 2000. The
agreement also provides that SouthernBank Holdings will grant Mr. McKinnon an
incentive stock option to purchase 25,000 shares of our common stock, or 25.0%
of the shares reserved for issuance under our stock option plan, at $10.00 per
share. The option will become exercisable in 20.0% annual increments beginning
on the one-year anniversary of the date of Mr. McKinnon's employment.
SouthernBank will also provide an automobile allowance to Mr. McKinnon in the
amount of $7,000 per year, as well as various club membership fees.
The initial term of the employment agreement commenced on December 1,
1999, and will continue for a period of one year. At the end of the initial term
of the agreement, and at the end of each year thereafter, the agreement will be
extended for a successive one-year period unless one of the parties to the
agreement notifies the other parties of his or its intent not to extend the
agreement. Employment under the agreement may be terminated:
- by SouthernBank for cause (as defined in the employment agreement);
- by Mr. McKinnon if SouthernBank breaches any material provision of the
employment agreement or there is a material diminution in his duties or
responsibilities; and
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<PAGE> 37
- upon Mr. McKinnon's death or disability.
If SouthernBank terminates Mr. McKinnon's employment without cause or if
Mr. McKinnon terminates employment with cause, SouthernBank will be required to
pay the compensation and provide the health and dental insurance coverage due
under the agreement for a period of 12 months from the date of termination. If
the employment of Mr. McKinnon is terminated for any reason other than by non-
renewal of the agreement by SouthernBank Holdings or SouthernBank, Mr. McKinnon
will be prohibited from competing with SouthernBank or soliciting its customers
or employees within the 50-mile radius of SouthernBank's main office for one
year after the date of termination.
In addition, we have entered into a letter agreement with Rita B. Gray
regarding her employment as chief financial officer of Southern Bank Holdings
and SouthernBank. Under the agreement, Ms. Gray will receive an annual salary of
$80,000, payable in monthly installments. The agreement provides that Ms. Gray
will receive a signing bonus of $5,000 as well as another $5,000 bonus after she
has been employed for six months. Additionally, the agreement provides that
SouthernBank Holdings will grant Ms. Gray an incentive stock option to purchase
10,000 shares of our common stock, or 10.0% of the shares reserved for issuance
under our stock option plan, at $10.00 per share. The option will become
exercisable in 20.0% annual increments beginning on the one-year anniversary of
the date of Ms. Gray's employment. Under the agreement, Ms. Gray will be
entitled to participate in SouthernBank's employee benefit plans, including
SouthernBank Holding's stock option plan. Ms. Gray will also be provided various
club memberships. Employment under the agreement is terminable at the will of
either party upon advance written notice of one month.
DIRECTOR COMPENSATION
Our directors will not be compensated separately for their services as
directors until we become cumulatively profitable. Thereafter, we will adopt
directors compensation policies that conform to applicable law.
STOCK OPTION PLAN
General. We have adopted a stock option plan that provides us with the
flexibility to grant the stock incentives described in this section of the
prospectus to our key employees, officers, directors, consultants and advisers
for the purpose of giving them a proprietary interest in, and to encourage them
to remain in the employ or service of, SouthernBank Holdings and SouthernBank.
Our board of directors has reserved 100,000 shares of our common stock, an
amount equal to 8.0% of the amount of shares of our common stock to be sold in
this offering, for issuance under the plan. However, the number of shares
reserved for issuance may change in the event of a stock split, recapitalization
or other similar event as described in the plan.
Administration. It is expected that a committee, which will be comprised
of at least two disinterested directors, will administer the plan. Our board of
directors will consider the standards contained in both Section 162(m) of the
Internal Revenue Code and Rule 16b-3 under the Securities Exchange Act, when
appointing members to the committee. The committee and our board of directors
will have the authority to grant awards under the plan, to determine the terms
of each award, to interpret the provisions of the plan and to make all other
determinations that they may deem necessary or advisable to administer the plan.
The plan permits the committee or our board of directors, to grant stock
options to eligible persons. Options may be granted on an individual basis or to
a group of eligible persons. Accordingly, the committee or our board of
directors, will determine, within the limits of the plan, the number of shares
of our common stock subject to an option, to whom an option is granted and the
exercise price and forfeiture or termination provisions of each option. A holder
of a stock option generally may not transfer the option during his or her
lifetime.
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<PAGE> 38
Option Terms. The plan provides for incentive stock options and
non-qualified stock options. The committee or our board of directors, will
determine whether an option is an incentive stock option or a non-qualified
stock option when it grants the option, and the option will be evidenced by an
agreement describing the material terms of the option.
The committee or our board of directors will determine the exercise price
of an option. The exercise price of an incentive stock option may not be less
than the fair market value of our common stock on the date of the grant, or less
than 110.0% of the fair market value if the participant owns more than 10.0% our
outstanding common stock. When the incentive stock option is exercised,
SouthernBank Holdings will be entitled to place a legend on the certificates
representing the shares of our common stock purchased upon exercise of the
option to identify them as shares of our common stock purchased upon the
exercise of an incentive stock option. The exercise price of non-qualified stock
options may be greater than, less than or equal to the fair market value of our
common stock on the date that the option is awarded, based upon any reasonable
measure of fair market value. The committee may permit the exercise price to be
paid in cash or by the delivery of previously owned shares of our common stock,
and, if permitted in the applicable option agreement, through a cashless
exercise executed through a broker or by having a number of shares of our common
stock otherwise issuable at the time of exercise withheld.
The committee or our board of directors, will also determine the term of
an option. The term of an incentive stock option or non-qualified stock option
may not exceed ten years from the date of grant, provided that any incentive
stock option granted to a participant who owns more than 10.0% of our
outstanding common stock will not be exercisable after the expiration of five
years after the date the option is granted. Subject to any further limitations
in the applicable agreement, if a participant's employment terminates, an
incentive stock option will terminate and become unexercisable no later than
three months after the date of termination of employment. If, however,
termination of employment is due to death or disability, one year will be
substituted for the three-month period. Incentive stock options are also subject
to the further restriction that the aggregate fair market value, determined as
of the date of the grant, of our common stock as to which any incentive stock
option first becomes exercisable in any calendar year is limited to $100,000 per
recipient. If incentive stock options covering more than $100,000 worth of our
common stock first become exercisable in any one calendar year, the excess will
be non-qualified options. For purposes of determining which options, if any,
have been granted in excess of the $100,000 limit, options will be considered to
become exercisable in the order granted.
Termination of Options. The terms of particular options may provide that
they terminate, among other reasons, upon the holder's termination of employment
or other status with SouthernBank Holdings or SouthernBank, upon a specified
date, upon the holder's death or disability, or upon the occurrence of a change
in control of SouthernBank Holdings. An agreement may provide that if the holder
dies or becomes disabled, the holder's estate or personal representative may
exercise the option. The committee or our board of directors, may, within the
terms of the plan and the applicable agreement, cancel, accelerate, pay or
continue an option that would otherwise terminate for the reasons discussed
above.
Reorganizations. The plan provides for an appropriate adjustment in the
number and kind of shares subject to unexercised options in the event of any
change in the outstanding shares of our common stock by reason of a stock split,
stock dividend, combination or reclassification of shares, recapitalization,
merger or similar event. In the event of some types of corporate
reorganizations, the committee or our board of directors, may, within the terms
of the plan and the applicable agreement, substitute, cancel, accelerate, cancel
for cash or otherwise adjust the terms of an option.
Amendment and Termination of the Plan. Our board of directors has the
authority to amend or terminate the plan. Our board of directors is not required
to obtain shareholder approval to terminate the plan or, generally, to amend the
plan, but may condition any amendment or termination of the plan upon
shareholder approval if it determines that shareholder approval is necessary or
appropriate under tax, securities, or other laws. However, any action by our
board of directors may not adversely affect the rights of a holder of a stock
option without the holder's consent.
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Federal Income Tax Consequences. The following discussion outlines
generally the federal income tax consequences of participation in the plan.
Individual circumstances may vary and each participant should rely on his or her
own tax counsel for advice regarding federal income tax treatment under the
plan.
- Incentive Stock Options. A participant will not recognize income upon
the grant of an incentive stock option, nor will he or she be taxed
when exercising all or a portion of the option. Instead, the
participant will be taxed when he or she sells the shares of our common
stock purchased upon exercise of the incentive stock option. The
participant will be taxed on the difference between the price he or she
paid for the our common stock and the amount for which he or she sells
the stock. If the participant does not sell the shares of our common
stock prior to two years from the date of grant of the incentive stock
option and one year from the date the stock is transferred to him or
her, the gain will be a capital gain and SouthernBank Holdings will not
get a corresponding deduction. If the participant sells the shares of
our common stock at a gain before that time, the difference between the
amount the participant paid for the stock and the lesser of its fair
market value on the date of exercise or the amount for which the stock
is sold will be taxed as ordinary income and SouthernBank Holdings will
be entitled to a corresponding tax deduction. If the participant sells
the shares of our common stock for less than the amount he or she paid
for the stock prior to the one- or two-year period indicated, no amount
will be taxed as ordinary income and the loss will be taxed as a
capital loss. Exercise of an incentive stock option may subject a
participant to, or increase a participant's liability for, the
alternative minimum tax.
- Non-Qualified Options. A participant will not recognize income upon
the grant of a non-qualified option or at any time before the exercise
of the option or a portion of the option. When the participant
exercises a non-qualified option or portion of the option, he or she
will recognize compensation taxable as ordinary income in an amount
equal to the excess of the fair market value of our common stock on the
date the option is exercised over the price paid for the stock, and
SouthernBank Holdings will then be entitled to a corresponding
deduction.
Depending upon the time period for which shares of our common stock are
held after exercising an option, the sale or other taxable disposition of shares
acquired by exercising a non-qualified option generally will result in a short-
or long-term capital gain or loss equal to the difference between the amount
realized on the disposition and the fair market value of such shares when the
non-qualified option was exercised.
Special rules apply to a participant who exercises a non-qualified option
by paying the exercise price, in whole or in part, by selling back to us shares
of our common stock already held by the participant and to a participant who is
subject to the reporting requirements of Section 16 of the Securities Exchange
Act.
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RELATED PARTY TRANSACTIONS
We expect to enter into banking and other business transactions in the
ordinary course of business with our directors and officers, including members
of their families or corporations, partnerships or other organizations in which
these directors and officers have a controlling interest. If transactions
between SouthernBank Holdings or SouthernBank and any of our directors or
officers occur, the transaction:
- will be on substantially the same terms, including price or interest
rate and collateral, as those prevailing at the time for comparable
transactions with unrelated parties, and any banking transactions will
not involve more than the normal risk of collectibility or present
other unfavorable features to us;
- will be on terms no less favorable than could be obtained from an
unrelated third party; and
- will be approved by a majority of our directors who do not have an
interest in the transaction.
In addition, Land South Properties, LLC, a real estate development company
owned by Jeffrey S. Tucker and James H. Daws, two of our organizers, entered
into an agreement to purchase the property that will serve as the location for
SouthernBank's main office, for a purchase price of approximately $857,000, or
$16.00 per square foot. The purchase price resulted from arms-length
negotiations between Land South and Mall Developers, LLC, the owner of the
property, and was based on comparable transactions in the area surrounding the
Mall of Georgia which ranged from $15.50 to $21.00 per square foot. Land South
plans to assign its rights under the agreement to SouthernBank and is expected
to receive $10.00 as consideration for the assignment. To pay for the property,
SouthernBank plans to establish a line of credit with The Bankers Bank for an
amount up to $860,000. The line of credit is expected to be guaranteed by our
organizers, bear interest at 1.0% less than the prime rate, as published in the
Money Rates section of The Wall Street Journal, and be due on June 30, 2000.
DESCRIPTION OF SOUTHERNBANK HOLDINGS' CAPITAL STOCK
COMMON STOCK
Our articles of incorporation authorize our board of directors, without
shareholder approval, to issue up to 100,000,000 shares of common stock, par
value $1.00 per share, of which 1,250,000 shares will be issued pursuant to this
offering. As of the date of this prospectus, 100,000 shares of our common stock,
or an amount equal to 8.0% of the shares of our common stock to be sold in this
offering, were reserved for issuance upon the exercise of stock options to be
issued under our stock option plan and 227,500 shares of our common stock were
reserved for issuance upon the exercise of warrants to be issued to our
organizers.
All of the shares of our common stock will be entitled to share equally in
dividends from legally available funds, when, as and if declared by our board of
directors. Upon SouthernBank Holdings' voluntary or involuntary liquidation or
dissolution, all shares of our common stock will be entitled to share equally in
any remaining assets that are available for distribution to the shareholders.
SouthernBank Holdings does not anticipate paying any cash dividends on our
common stock in the near future. Each holder of our common stock will be
entitled to one vote for each share held on all matters submitted to
shareholders. Holders of our common stock will not have any right to acquire
authorized but unissued capital stock when, as or if we decide to issue new
shares of capital stock. No cumulative voting right with respect to the election
of directors, redemption rights, sinking fund provisions or conversion rights
apply to our common stock. All shares of our common stock issued in the offering
will be fully paid and non-assessable.
PREFERRED STOCK
Our articles of incorporation also authorize our board of directors,
without shareholder approval, to issue up to 10,000,000 shares of preferred
stock, par value $1.00 per share. Our board of directors may determine the terms
of the preferred stock. Preferred stock may have voting rights, subject to
applicable
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law and determination by our board of directors. Although we have no present
plans to issue any preferred stock, the ownership and control of SouthernBank
Holdings by the holders of our common stock would be diluted if we were to issue
preferred stock that had voting rights.
ORGANIZERS' WARRANTS
Our organizers intend to purchase approximately 227,500 shares of our
common stock in this offering at a price of $10.00 per share. This represents
18.2% of the 1,250,000 shares that will be outstanding after the close of the
offering.
Our organizers have personally guaranteed a line of credit from The
Bankers Bank for an amount up to $750,000. Our organizers also intend to
personally guarantee a second line of credit from The Bankers Bank for an amount
up to $860,000 to be used for the purchase of SouthernBank's main office
property. In recognition of the financial risks undertaken by personally
guaranteeing the existing line of credit with The Bankers Bank, we will issue to
our organizers warrants to purchase additional shares of our common stock. The
warrants are being offered by this prospectus, and are being offered only to our
organizers and not to the public. Specifically, we will issue to each organizer
a warrant to purchase one share of our common stock for each share the organizer
purchases in this offering. Accordingly, based on our organizers' intent to
purchase approximately 227,500 shares of our common stock in this offering, we
expect the organizers to be able to purchase up to 227,500 additional shares
through the exercise of warrants. The one-to-one ratio between the anticipated
number of shares to be purchased by our organizers and the number of warrants to
be issued to them was determined after considering a number of factors. The
principal factors we considered were prevailing market conditions, comparable de
novo bank holding company capitalizations and regulatory restrictions imposed by
the OCC.
The warrants will become exercisable in one-third annual increments
beginning on the one-year anniversary of the date SouthernBank opens for
business. Warrants will remain exercisable for up to ten years following the
date on which SouthernBank opens for business. Each share purchased under a
warrant will be issued at a price of $10.00, subject to adjustment for stock
splits, recapitalizations or other similar events. Additionally, if either
SouthernBank Holdings' or SouthernBank's capital falls below the minimum level
mandated by its primary federal regulator, SouthernBank Holdings may be directed
to require the organizers to exercise or forfeit their warrants. If all of the
warrants were exercised, our organizers would own 30.8% of the shares
outstanding after the close of the offering, on a fully diluted basis. See
"Management's Discussion and Analysis of Financial Condition and Plan of
Operations" on page 15.
TRANSFER AGENT
The transfer agent and registrar for our common stock is SunTrust Bank,
Atlanta.
IMPORTANT PROVISIONS OF SOUTHERNBANK HOLDINGS'
ARTICLES OF INCORPORATION AND BYLAWS
PROTECTIVE PROVISIONS
General. Shareholders' rights and related matters are governed by the
Georgia Business Corporation Code and SouthernBank Holdings' articles of
incorporation and bylaws. SouthernBank Holdings' articles of incorporation and
bylaws contain protective provisions that would have the effect of impeding an
attempt to change or remove SouthernBank Holdings' management or to gain control
of SouthernBank Holdings if a particular transaction was not supported by
SouthernBank Holdings' board of directors. These provisions are discussed in
more detail below. In general, the purpose of these provisions is to protect
SouthernBank Holdings' interests and those of its shareholders as appropriate
under the circumstances, including if the board of directors determines that a
sale of control is in the best interests of SouthernBank Holdings and its
shareholders, by enhancing the board of director's ability to maximize the value
to be received by shareholders upon such a sale.
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Although our management believes the protective provisions are beneficial
to our shareholders, they also may tend to discourage some takeover bids. As a
result, our shareholders may be deprived of opportunities to sell some or all of
their shares at prices that represent a premium over prevailing market prices.
On the other hand, defeating undesirable acquisition offers can be an expensive
and time-consuming process. To the extent that the protective provisions
discourage undesirable proposals, we may be able to avoid those expenditures of
time and money.
The protective provisions also may discourage open market purchases by a
potential acquirer. These purchases could increase the market price of our
common stock, temporarily enabling shareholders to sell their shares at a price
higher than that which would otherwise prevail. In addition, the provisions
could decrease the market price of our common stock by making the stock less
attractive to persons who invest in securities in anticipation of price
increases from potential acquisition attempts. The provisions also could make it
more difficult and time consuming for a potential acquirer to obtain control of
SouthernBank Holdings by replacing its board of directors and management.
Furthermore, the provisions could make it more difficult for our shareholders to
replace our board of directors or management, even if a majority of the
shareholders believes that replacing them would be in SouthernBank Holdings'
best interests.
The protective provisions contained in our articles of incorporation and
bylaws are discussed more fully below.
Preferred Stock. The existence of preferred stock could impede a takeover
of SouthernBank Holdings without the approval of its board of directors. This is
because our board of directors could issue shares of preferred stock to persons
friendly to current management, which could render more difficult or discourage
any attempt to gain control of SouthernBank Holdings through a proxy contest,
tender offer, merger or otherwise. In addition, the issuance of shares of
preferred stock with voting rights may adversely affect the rights of the
holders of our common stock and, in some circumstances, could decrease its
market price.
Staggered Terms for Board of Directors. Our articles of incorporation
provide that our board of directors will be divided into three classes.
Directors serve staggered terms, which means that one-third of the directors
will be elected each year at our annual meeting of shareholders. The initial
term of our Class I directors expired in February 2000, and each Class I
director was elected to serve an additional three-year term that will expire in
2003. The initial term of our Class II directors expires in 2001 and the initial
term of our Class III directors expires in 2002. Thereafter, each Class II and
each Class III director will serve for a term of three years. This means that
unless the existing directors were to resign, it would take at least two annual
meetings of our shareholders to replace a majority of our directors.
Under Georgia law, directors are elected annually for a term of one year
unless the articles of incorporation provide otherwise.
Removal of Directors. Our articles of incorporation provide that one or
more directors may be removed from office at any time, but only for cause, and
only by the affirmative vote of the holders of at least two-thirds of the total
number of votes entitled to be cast by the holders of all of the shares of our
capital stock who are entitled to vote in an election of directors.
Under Georgia law, the shareholders may remove one or more directors with
or without cause unless the articles of incorporation or a bylaw adopted by the
shareholders provides that directors may be removed only for cause. A director
may be removed only by a majority of the votes entitled to be cast. If the
directors have staggered terms, directors may be removed only for cause, unless
the articles of incorporation or a bylaw adopted by shareholders provides
otherwise. A director may be removed by the shareholders only at a meeting
called for the purpose of removing him or her and the meeting notice must state
the purpose, or one of the purposes, of the meeting is the removal of the
director.
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Business Combinations. Our articles of incorporation and bylaws
explicitly "opt in" to Georgia's business combination statute. Under this
statute, mergers or purchases of 10.0% or more of our assets or securities
("business combinations") with a person who beneficially owns 10.0% or more of
our voting stock (an "interested shareholder") that occur within five years of
the acquirer becoming an interested shareholder are generally prohibited unless:
- the board of directors approved the business combination or the
transaction that made the acquirer an interested shareholder;
- the interested shareholder attained 90.0% of the voting stock in the
transaction that made the shareholder an interested shareholder; or
- the interested shareholder attains 90.0% of the voting stock subsequent
to becoming an interested shareholder and a majority of SouthernBank
Holdings' voting shares approves the acquisition.
Fair Price. Similar to the protective provisions relating to business
combinations, our articles of incorporation and bylaws explicitly "opt in" to
Georgia's fair price provisions. Under these provisions, in addition to any
other approvals required by law, a business combination with an interested
shareholder generally must be (1) unanimously approved by the directors who are
not affiliates or associates of the interested shareholder and who were
directors prior to the time the shareholder became an interested shareholder
("continuing directors") or (2) recommended by at least two-thirds of the
continuing directors and approved by the affirmative vote of a majority of the
shares not beneficially owned by the interested shareholder unless:
- the consideration to be received by our shareholders meets specified
minimum levels (typically the highest price paid by the interested
shareholder for any shares it has acquired);
- the consideration to be received by shareholders who are not interested
is paid in cash or in the same form as the interested shareholder
previously paid for other purchased shares; and
- there has been no reduction in the annual dividend rate from that which
was paid prior to the time the interested shareholder became an
interested shareholder.
Considerations in Evaluating an Acquisition Proposal. Our articles of
incorporation provide factors that its board of directors must consider in
evaluating whether an acquisition proposal made by another party is in the best
interest of SouthernBank Holdings and its shareholders. The term "acquisition
proposal" refers to any offer of another party:
- to make a tender offer or exchange offer for our common stock or any
other equity security of SouthernBank Holdings;
- to merge or consolidate SouthernBank Holdings with another corporation;
or
- to purchase or otherwise acquire all or substantially all of the
properties and assets owned by SouthernBank Holdings.
Our articles of incorporation charge our board of directors, in evaluating
an acquisition proposal, to consider all relevant factors, including:
- the payment being offered by the other corporation in relation (1) our
current value at the time of the proposal, as determined in a freely
negotiated transaction, and (2) to our board of directors' estimate of
SouthernBank Holdings' future value as an independent company at the
time of the proposal;
- the expected social and economic effects of the transaction on our
employees, customers and other constituents, such as suppliers of goods
and services; and
- the expected social and economic effects on the communities within
which we operate.
Our board of directors may also consider other relevant factors.
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The provision regarding the evaluation of an acquisition proposal is
included in our articles of incorporation because we are charged with providing
support to, and being involved with, the communities we serve. As a result, our
board of directors believes its obligations in evaluating an acquisition
proposal extend beyond evaluating merely the payment being offered in relation
to the market or book value of our common stock at the time of the proposal.
Georgia law does not specifically list the factors a corporation's board of
directors should consider in the event the corporation is presented with an
acquisition proposal.
While the value of what is being offered to shareholders in exchange for
their stock is the main factor when weighing the benefits of an acquisition
proposal, our board of directors believes it is appropriate also to consider all
other relevant factors. For example, this provision directs our board of
directors to evaluate what is being offered in relation to our current value at
the time of the proposal, as determined in a freely negotiated transaction, and
in relation to our board of directors' estimate of the future value of
SouthernBank Holdings as an independent concern at the time of the proposal. A
takeover bid often places the target corporation virtually in the position of
making a forced sale, sometimes when the market price of its stock may be
depressed. Our board of directors believes that frequently the payment offered
in such a situation, even though it may exceed the value at which shares are
then trading, is less than that which could be obtained in a freely negotiated
transaction. In a freely negotiated transaction, management would have the
opportunity to seek a suitable partner at a time of its choosing and to
negotiate for the most favorable price and terms that would reflect not only
SouthernBank Holdings' current value, but also its future value.
One effect of this provision, as well as the business combination and fair
price provisions discussed above, may be to discourage a tender offer in
advance. Often an offeror consults the board of directors of a target
corporation before or after beginning a tender offer in an attempt to prevent a
contest from developing. In the opinion of our board of directors, these
provisions will strengthen our position in dealing with any potential offeror
that might attempt to acquire SouthernBank Holdings through a hostile tender
offer. Another effect of these provisions may be to dissuade our shareholders
who might be displeased with our board of directors' response to an acquisition
proposal from engaging SouthernBank Holdings in costly litigation. These
provisions permit our board of directors to determine that an acquisition
proposal is not in SouthernBank Holdings' and its shareholders' best interest,
and thus to oppose it. The effect of these provisions, as well as the other
protective provisions discussed above, in some cases, may have the effect of
maintaining incumbent management.
INDEMNIFICATION
Our bylaws contain indemnification provisions that provide that our
directors and officers, and, in some cases, our employees or agents
(collectively, the "insiders"), will be indemnified against expenses that they
actually and reasonably incur if they are successful on the merits of a claim or
proceeding. In addition, our bylaws provide that we must advance to our insiders
reasonable expenses of any claim or proceeding so long as the insider furnishes
us with a written affirmation of his or her good faith belief that the
applicable standard of conduct has been met and a written statement that the
insider will repay any advances if it is ultimately determined by our board of
directors that he or she is not entitled to indemnification.
When a case or dispute is settled or otherwise not ultimately determined
on its merits, the indemnification provisions provide that we will indemnify
insiders when they meet the applicable standard of conduct. The applicable
standard of conduct is met if the insider:
- in his or her official capacity, acted in a manner he or she in good
faith believed to be in our best interests;
- in all cases not involving official capacity or criminal activities, he
or she acted in a manner that was at least not opposed to our best
interests; and
- in the case of a criminal action or proceeding, if he or she had no
reasonable cause to believe his or her conduct was unlawful.
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Our board of directors, our shareholders or independent legal counsel will
determine whether the insider has met the applicable standard of conduct in each
specific case.
Our bylaws also provide that the indemnification rights contained in the
bylaws do not exclude other indemnification rights to which an insider may be
entitled under any bylaw, resolution or agreement, either specifically or in
general terms approved by the affirmative vote of the holders of a majority of
the shares entitled to vote. We can also provide for greater indemnification
than is provided for in our bylaws if we choose to do so, subject to approval by
our shareholders. We may not, however, indemnify an insider for liability
arising out of circumstances that would cause the insider to remain liable for
his or her actions as described under "- Limitation of Liability" below.
The indemnification provisions of our bylaws specifically provide that we
may purchase and maintain insurance on behalf of any director against any
liability asserted against and incurred by him or her in his or her capacity as
a director, whether or not we would have had the power to indemnify against such
liability.
We are not aware of any pending or threatened action, suit or proceeding
involving any of our insiders for which indemnification may be sought.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to insiders under the foregoing provisions, or otherwise,
we have been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
LIMITATION OF LIABILITY
Our articles of incorporation, eliminate, with certain exceptions, the
potential personal liability of a director for monetary damages to us or to our
shareholders for any failure to take any action as a director. However, there is
no elimination of liability for:
- a breach of duty involving the appropriation of a SouthernBank Holdings
business opportunity;
- an act or omission involving intentional misconduct or a knowing
violation of law;
- a transaction from which the director derives an improper material
tangible personal benefit; or
- distributions, such as the payment of a dividend or approval of a stock
repurchase, that are illegal under Georgia law.
Georgia law allows corporations to include in their articles of
incorporation provisions eliminating or limiting the liability of directors,
except in the circumstances described above. As a result, and to encourage
qualified individuals to serve and remain as directors, we have included these
types of provisions in our articles of incorporation. While we have not
experienced any problems in locating directors, we could experience difficulty
in the future as our business activities increase and diversify. We have also
adopted liability limiting provisions to enhance our ability to secure liability
insurance for our directors at a reasonable cost. We intend to obtain liability
insurance covering actions taken by our directors in their capacities as
directors. Our board of directors believes that liability limiting provisions
will enable us to obtain such insurance on terms more favorable than if they
were not included in our articles of incorporation.
AMENDMENTS
Any amendment of the provisions contained in our articles of incorporation
regarding:
- our staggered board of directors;
- the ability of our board of directors to consider various factors when
evaluating an acquisition proposal; or
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- the limitation of a director's personal liability requires the
affirmative vote of the holders of two-thirds of the total number of
votes entitled to be cast by the holders of all of the shares of our
capital stock who are entitled to vote in an election of directors.
Except as may otherwise be required by Georgia law, our board of directors
may amend any provision of our bylaws by the affirmative vote of a majority of
our entire board, unless our shareholders have adopted, amended or repealed a
particular bylaw provision and, in doing so, have expressly reserved to our
shareholders the right of amendment or repeal therefor. Our bylaws require the
affirmative vote of the holders of not less than two-thirds of the total number
of votes entitled to be cast by the holders of all of the shares of our capital
stock then entitled to vote in the election of directors to amend our bylaws.
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SUPERVISION AND REGULATION
The following discussion describes the material elements of the regulatory
framework that applies to banks and bank holding companies and provides certain
specific information related to SouthernBank and SouthernBank Holdings.
GENERAL
SouthernBank Holdings will be a bank holding company registered with the
Federal Reserve under the Bank Holding Company Act. As a result, SouthernBank
Holdings and any future non-bank subsidiaries will be subject to the
supervision, examination, and reporting requirements of the Bank Holding Company
Act and the regulations of the Federal Reserve.
The Bank Holding Company Act requires every bank holding company to obtain
the Federal Reserve's prior approval before:
- it may acquire direct or indirect ownership or control of any voting
shares of any bank if, after the acquisition, the bank holding company
will directly or indirectly own or control more than 5.0% of the bank's
voting shares;
- it or any of its non-bank subsidiaries may acquire all or substantially
all of the assets of any bank; or
- it may merge or consolidate with any other bank holding company.
The Bank Holding Company Act further provides that the Federal Reserve may
not approve any transaction that would result in or tend to create a monopoly
or, substantially lessen competition or otherwise function as restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the community to be served. The Federal Reserve is also required to consider
the financial and managerial resources and future prospects of the bank holding
companies and banks concerned and the convenience and needs of the community to
be served. The Federal Reserve's consideration of financial resources generally
focuses on capital adequacy, which is discussed below.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act, the
restrictions on interstate acquisitions of banks by bank holding companies were
repealed. As a result, SouthernBank Holdings, and any other bank holding company
located in Georgia is able to acquire a bank located in any other state, and a
bank holding company located outside of Georgia can acquire any Georgia-based
bank, in either case subject to specified deposit percentage and other
restrictions. The legislation provides that unless an individual state has
elected to prohibit out-of-state banks from operating interstate branches within
its territory, adequately capitalized and managed bank holding companies will be
able to consolidate their multistate banking operations into a single bank
subsidiary and to branch interstate through acquisitions. De novo branching by
an out-of-state bank is permitted only if it is expressly permitted by the laws
of the host state. Georgia does not permit de novo branching by an out-of-state
bank. Therefore, the only method by which an out-of-state bank or bank holding
company may enter Georgia is through an acquisition. Georgia has adopted an
interstate banking statute that removes the existing restrictions on the ability
of banks to branch interstate through mergers, consolidations and acquisitions.
However, Georgia law prohibits a bank holding company from acquiring control of
a financial institution until the target financial institution has been
incorporated five years. As a result, no bank holding company may acquire
control of SouthernBank Holdings until after the fifth anniversary date of
SouthernBank's incorporation.
The Bank Holding Company Act generally prohibits bank holding companies
from engaging in activities other than banking or managing or controlling banks
or other permissible subsidiaries and from acquiring or keeping direct or
indirect control of any company engaged in any activities other than those
activities that the Federal Reserve determines to be closely related to banking
or managing or controlling banks. The Gramm-Leach-Bliley Act has added
additional financial related activities that may be
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conducted by a bank holding company that qualifies as a financial holding
company. See "- Gramm-Leach-Bliley Act" below.
In determining whether a particular activity is permissible, the Federal
Reserve must consider whether the performance of such an activity reasonably can
be expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. The Bank
Holding Company Act does not place territorial limitations on permissible
non-banking activities of bank holding companies. Despite prior approval, the
Federal Reserve may order a 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.
SouthernBank's deposits will be insured by the FDIC to the maximum extent
provided by law. SouthernBank will also be subject to numerous state and federal
statutes and regulations that will affect its business, activities and
operations, and it will be supervised and examined by one or more state or
federal bank regulatory agencies.
The OCC will regularly examine SouthernBank's operations and has the
authority to approve or disapprove mergers, the establishment of branches and
similar corporate actions. The OCC also has the power to prevent the continuance
or development of unsafe or unsound banking practices or other violations of
law.
GRAMM-LEACH-BLILEY ACT
On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act which implements major changes to the statutory framework
for providing banking and other financial services in the United States. The
Gramm-Leach-Bliley Act, among other things, eliminates many of the restrictions
on affiliations among banks and securities firms, insurance firms, and other
financial service providers. A bank holding company that qualifies as a
financial holding company will be permitted to engage in activities that are
financial in nature or incidental or complimentary to a financial activity. The
activities that the Gramm-Leach-Bliley Act expressly lists as financial in
nature include insurance activities, providing financial and investment advisory
services, underwriting securities and limited merchant banking activities.
To become eligible for these expanded activities, a bank holding company
must qualify as a financial holding company. To qualify as a financial holding
company, each insured depository institution controlled by the bank holding
company must be well-capitalized, well-managed, and have at least a satisfactory
rating under the Community Reinvestment Act. In addition, the bank holding
company must file a declaration with the Federal Reserve of its intention to
become a financial holding company. Presently, we have no plans to become a
financial holding company.
Although considered to be one of the most significant banking laws since
Depression-era statutes were enacted, because of our small size and recent
organization, we do not expect the Gramm-Leach-Bliley Act to materially affect
our initial products, services or other business activities. To the extent the
Gramm-Leach-Bliley Act allows banks, securities firms, and insurance firms to
affiliate, the financial services industry may experience further consolidation.
The Gramm-Leach-Bliley Act may have the result of increasing the amount of
competition we face from larger financial institutions and other companies
offering financial products and services, many of which have substantially more
financial resources.
PAYMENT OF DIVIDENDS
SouthernBank Holdings is a legal entity separate and distinct from
SouthernBank. The principal sources of SouthernBank Holdings' cash flow,
including cash flow to pay dividends to its shareholders, are dividends that
SouthernBank pays to its sole shareholder, SouthernBank Holdings. Statutory and
regulatory
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<PAGE> 49
limitations apply to SouthernBank's payment of dividends to the company as well
as to the company's payment of dividends to its shareholders.
If, in the opinion of the OCC, SouthernBank were engaged in or about to
engage in an unsafe or unsound practice, the OCC could require, after notice and
a hearing, the bank to cease and desist from the practice. The federal banking
agencies have indicated that paying dividends that deplete a depository
institution's capital base to an inadequate level would be an unsafe and unsound
banking practice. Under the Federal Deposit Insurance Corporation Improvement
Act, a depository institution may not pay any dividend if payment would cause it
to become undercapitalized or if it already is undercapitalized. Moreover, the
federal agencies have issued policy statements that provide that bank holding
companies and insured banks should generally only pay dividends out of current
operating earnings. See "- Prompt Corrective Action" on page 47.
The payment of dividends by SouthernBank Holdings and SouthernBank may
also be affected by other factors, such as the requirement to maintain adequate
capital above regulatory guidelines.
CAPITAL ADEQUACY
SouthernBank Holdings and SouthernBank will be required to comply with the
capital adequacy standards established by the Federal Reserve, in the case of
the company, and the OCC, in the case of the bank. The Federal Reserve has
established two basic measures of capital adequacy for bank holding companies: a
risk-based measure and a leverage measure. A bank holding company must satisfy
all applicable capital standards to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance sheet items,
such as letters of credit and unfunded loan commitments, are assigned to broad
risk categories, each with appropriate weights. The resulting capital ratios
represent capital as a percentage of total risk-weighted assets and off-balance
sheet items.
The minimum guideline for the ratio of total capital to risk-weighted
assets is 8.0%. At least half of total capital must comprise common stock,
minority interests in the equity accounts of consolidated subsidiaries,
noncumulative perpetual preferred stock, and a limited amount of cumulative
perpetual preferred stock, less goodwill and certain other intangible assets, or
"Tier 1 Capital." The remainder may consist of subordinated debt, other
preferred stock, and a limited amount of loan loss reserves, or "Tier 2
Capital."
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets, of 3.0% for bank holding companies that meet certain
specified criteria, including having the highest regulatory rating. All other
bank holding companies generally are required to maintain a leverage ratio of at
least 3.0%, plus an additional cushion of 1.0% to 2.0%. The guidelines also
provide that bank holding companies experiencing internal growth, as will be the
case for SouthernBank Holdings, or making acquisitions will be expected to
maintain strong capital positions substantially above the minimum supervisory
levels without significant reliance on intangible assets. Furthermore, the
Federal Reserve has indicated that it will consider a bank holding company's
Tier 1 Capital leverage ratio, after deducting all intangibles, and other
indicators of capital strength in evaluating proposals for expansion or new
activities.
SouthernBank will be subject to risk-based and leverage capital
requirements adopted by the OCC, which are substantially similar to those
adopted by the Federal Reserve for bank holding companies.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the termination
of deposit insurance by the FDIC, a prohibition on the taking of brokered
deposits, and certain other restrictions on its business. As described below,
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<PAGE> 50
substantial additional restrictions can be imposed on FDIC-insured depository
institutions that fail to meet applicable capital requirements. See "- Prompt
Corrective Action" below.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, we are expected to act as a source of
financial strength for, and to commit resources to support, SouthernBank. This
support may be required at times when, without this Federal Reserve policy, we
might not be inclined to provide it. In addition, any capital loans by a bank
holding company to SouthernBank will be repaid only after its deposits and
certain other indebtedness are repaid in full. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
PROMPT CORRECTIVE ACTION
The Federal Deposit Insurance Corporation Improvement Act establishes a
system of prompt corrective action to resolve the problems of undercapitalized
institutions. Under this system, the federal banking regulators have established
five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized), and are required to take certain mandatory supervisory
actions, and are authorized to take other discretionary actions, with respect to
institutions in the three undercapitalized categories. The severity of the
action will depend upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the banking regulator must appoint a
receiver or conservator for an institution that is critically undercapitalized.
The federal banking agencies have specified by regulation the relevant capital
level for each category.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency. A
bank holding company must guarantee that a subsidiary depository institution
meets its capital restoration plan, subject to certain limitations. The
controlling holding company's obligation to fund a capital restoration plan is
limited to the lesser of 5.0% of an undercapitalized subsidiary's assets or the
amount required to meet regulatory capital requirements. An undercapitalized
institution is also generally prohibited from increasing its average total
assets, making acquisitions, establishing any branches or engaging in any new
line of business, except under an accepted capital restoration plan or with FDIC
approval. In addition, the appropriate federal banking agency may test an
undercapitalized institution in the same manner as it treats a significantly
undercapitalized institution if it determines that those actions are necessary.
FDIC INSURANCE ASSESSMENTS
The FDIC has adopted a risk-based assessment system for insured depository
institutions that takes into account the risks attributable to different
categories and concentrations of assets and liabilities. The system assigns an
institution to one of three capital categories: (1) well capitalized; (2)
adequately capitalized; and (3) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. The FDIC also assigns an
institution to one of three supervisory subgroups within each capital group. The
supervisory subgroup to which an institution is assigned is based on a
supervisory evaluation that the institution's primary federal regulator provides
to the FDIC and information that the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
funds. The FDIC then determines an institution's insurance assessment rate based
on the institution's capital category and supervisory category. Under the
risk-based assessment system, there are nine combinations of capital groups and
supervisory subgroups to which different assessment rates are applied.
Assessments range from 0 to 27 cents per $100 of deposits, depending on the
institution's capital group and supervisory subgroup.
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<PAGE> 51
The FDIC may terminate its insurance of deposits if it finds that the
institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC.
COMMUNITY REINVESTMENT ACT
SouthernBank will be subject to the provisions of the Community
Reinvestment Act, which requires the OCC, in connection with its regular
examination of a bank, to assess the bank's record of meeting the credit needs
of the communities it serves, including low- and moderate-income neighborhoods,
consistent with safe and sound banking practices.
Regulations promulgated under the CRA are intended to set distinct
assessment standards for financial institutions. The regulations provide for
streamlined procedures for institution's with assets of less than $250 million.
The regulations contain the following three evaluation tests:
- A lending test, which compares the institution's market share of loans
in low- and moderate-income areas to its market share of loans in its
entire service area;
- A service test, which evaluates the provision of services that promote
the availability of credit to low- and moderate-income areas; and
- An investment test, which evaluate's the institution's record of
investments in organizations designed to foster community development,
small- and minority-owned businesses and affordable housing lending,
including state and local government housing or revenue bonds.
Institutions are required to make public disclosure of their written CRA
evaluations made by regulatory agencies. This promotes enforcement of CRA
requirements by providing the public with the status of a particular
institution's community investment record. In addition to public disclosure of
an institution's CRA assessment, regulatory authorities are required to consider
an institution's CRA assessment when an institution applies for approval to
establish a new branch which will accept deposits, to relocate an existing
branch or to merge with another federally regulated financial institution.
RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES
We are subject to the provisions of Section 23A of the Federal Reserve
Act. Section 23A places limits on the amount of:
- A bank's loans or extensions of credit to affiliates;
- A bank's investment in affiliates;
- Assets a bank may purchase from affiliates, except for real and
personal property exempted by the Federal Reserve;
- The amount of loans or extensions of credit to third parties
collateralized by the securities or obligations of affiliates; and
- A bank's guarantee, acceptance or letter of credit issued on behalf of
an affiliate.
The total amount of the above transactions is limited in amount, as to any
one affiliate, to 10.0% of a bank's capital and surplus and, as to all
affiliates combined, to 20.0% of a bank's capital and surplus. In addition to
the limitation on the amount of these transactions, each of the above
transactions must also meet specified collateral requirements. SouthernBank must
also comply with other provisions designed to avoid the taking of low-quality
assets.
We are also subject to the provisions of Section 23B of the Federal
Reserve Act which, among other things, prohibits an institution from engaging in
the above transactions with affiliates unless the transactions are on terms
substantially the same, or at least as favorable to the institution or its
subsidiaries, as those prevailing at the time for comparable transactions with
nonaffiliated companies.
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<PAGE> 52
SouthernBank is also subject to restrictions on extensions of credit to
its executive officers, directors, principal shareholders and their related
interests. These extensions of credit (1) must be made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with third parties, and (2) must not involve more
than the normal risk of repayment or present other unfavorable features.
MONETARY POLICY
The earnings of SouthernBank, as well SouthernBank Holdings, will be
affected by domestic and foreign conditions, particularly by the monetary and
fiscal policies of the United States government and its agencies. The Federal
Reserve has had, and will continue to have, an important impact on the operating
results of commercial banks through its power to implement national monetary
policy in order, among other things, to mitigate recessionary and inflationary
pressures by regulating the national money supply. The techniques used by the
Federal Reserve include setting the reserve requirements of member banks and
establishing the discount rate on member bank borrowings. The Federal Reserve
also conducts open market transactions in United States government securities.
49
<PAGE> 53
SHARES ELIGIBLE FOR FUTURE SALE
Upon the close of the offering, we will have 1,250,000 shares of our
common stock outstanding, or 1,437,500 shares of our common stock outstanding if
the underwriter exercises its over-allotment option in full. These shares of
common stock will be freely tradable without restriction, except that
"affiliates" of SouthernBank Holdings must comply with the resale limitations of
Rule 144 under the Securities Act. 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. We expect that a total of 227,500 shares owned directly or
indirectly by our affiliates will be eligible for public sale under Rule 144,
subject to the contractual and volume restrictions discussed below, beginning
180 days after the date of this prospectus.
Purchasers of our common stock in this offering or on the open market may
resell those shares immediately, although our affiliates 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 1.0% 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 certain manner of sale provisions, notice requirements and the
availability of current public information about SouthernBank Holdings.
Affiliates will not be subject to the volume restrictions and other limitations
under Rule 144 beginning 90 days after their status as an affiliate terminates.
Even though Rule 144 would otherwise permit the sale of shares held by
affiliates beginning 90 days after the date of this prospectus, we have agreed,
along with our organizers, directors and officers, with the underwriter that we
will not sell, contract to sell, or otherwise dispose of any shares of our
common stock or any securities convertible into or exchangeable for any shares
of our common stock for a period of 180 days from the date of this prospectus
without the underwriter's prior written consent, except in limited
circumstances.
We intend to issue warrants to purchase up to a total of 227,500 shares of
our common stock, representing an amount equal to 18.2% of our common stock sold
in the offering. We have also reserved for issuance under our stock option plan
a total of 100,000 shares of our common stock, representing an amount equal to
8.0% of our common stock sold in the offering. SouthernBank Holdings intends to
register the shares issuable upon exercise of these warrants and options. Upon
registration, these shares will be eligible for resale in the public market
without restriction by persons who are not affiliates of SouthernBank Holdings,
and to the extent they are held by affiliates, under Rule 144 without a holding
period.
Prior to the offering, there has been no public market for our common
stock, and we cannot predict the effect, if any, that the sale of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. Nevertheless, sales of substantial amounts of our common stock in
the public market could adversely affect prevailing market prices and our
ability to raise equity capital in the future.
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<PAGE> 54
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement between
SouthernBank Holdings and the underwriter named below, the underwriter has
agreed to purchase from us, and we have agreed to sell to the underwriter, the
number of shares of our common stock listed opposite the underwriter's name
below.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF OVER-ALLOTMENT
UNDERWRITER FIRM SHARES SHARES
- ----------- ----------- --------------
<S> <C> <C>
Wachovia Securities, Inc............................ 1,250,000 187,500
</TABLE>
The underwriting agreement provides that the underwriter's obligations are
subject to approval of various legal matters by counsel and to other conditions
customary in a firm commitment underwritten public offering. The underwriter is
required to purchase and pay for the shares offered by this prospectus other
than those covered by the over-allotment option described below.
The underwriting discount that will apply to shares not purchased by our
organizers and executive officers in this offering will equal 7.5% of the public
offering price listed on the cover page of this prospectus, or $0.75 per share.
The underwriting discount that will apply to shares purchased in this offering
by our organizers and executive officers, up to 375,000 shares, will equal 3.5%
of the public offering price, or $0.35 per share.
The underwriter proposes to offer our common stock directly to the public
at the public offering price listed on the cover page of this prospectus and to
various securities dealers at that price less a concession not in excess of
$ per share. The underwriter may allow, and the selected dealers may
reallow, a concession not in excess of $ per share to certain other brokers
and dealers. We expect that the shares of our common stock will be ready for
delivery on or about , 2000. After the offering, the offering price
and other selling terms may change.
SouthernBank Holdings and the underwriter arbitrarily determined the
public offering price based on several factors. These factors include prevailing
market conditions and the price of comparable publicly traded companies.
We have granted the underwriter an over-allotment option, exercisable
within 30 days after the date of this prospectus, to purchase up to 187,500
additional shares of our common stock, representing 15.0% of the initial
1,250,000 shares to be outstanding upon the close of the offering. The
over-allotment option will be exercisable at the public offering price listed on
the cover page of this prospectus, less the 7.5% underwriting discount, and may
be exercised only to cover over-allotments made in connection with this
offering. If the underwriter exercises its over-allotment option, in whole or in
part, to cover any short sales made, the underwriter will deliver a copy of the
final prospectus to all purchasers of the over-allotment shares. Accordingly,
these purchasers will be entitled to the same legal remedies provided under the
federal securities laws as any other purchaser of shares covered by the
registration statement. The potential size of the syndicate short position is
not expected to exceed 187,500 shares, or 15.0% of the initial 1,250,000 shares
to be outstanding upon the close of the offering.
In addition, we have granted to the underwriter a right of first refusal
to serve as exclusive or lead advisor on all corporate finance transactions
undertaken or considered by us for a period of three years after the date of
this prospectus. If the underwriter's right of first refusal is subsequently
waived in exchange for cash or non-cash consideration, any waiver may require
the prior approval of the National Association of Securities Dealers, Inc.
The underwriter does not intend to sell shares of our common stock to any
account over which it exercises discretionary authority.
Each of our organizers, directors and officers has agreed with the
underwriter that they will not sell, contract to sell, or otherwise dispose of
any shares of our common stock or any securities that can be converted into or
exchanged for shares of our common stock for a period of 180 days from the date
of this
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<PAGE> 55
prospectus without the underwriter's prior written consent, except in limited
circumstances. The underwriter and its affiliates may on occasion be a customer
of, engage in transactions with, and perform services for SouthernBank Holdings
or SouthernBank in the ordinary course of business.
We have agreed to indemnify the underwriter against specified liabilities,
including liabilities under the Securities Act, or to contribute to payments
that the underwriter may be required to make in connection with these
liabilities.
In connection with this offering, the underwriter may purchase and sell
our common stock in the open market. These transactions may include
over-allotment and stabilizing transactions, and purchases to cover syndicate
short positions created in connection with this offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of our common stock, and syndicate
short positions involve the underwriter's sale of a greater number of shares of
our common stock than it is required to purchase from us in the offering. These
activities may stabilize, maintain or otherwise affect the market price of our
common stock, which may be higher than the price that might otherwise prevail in
the open market. The underwriter may effect these transactions on the Nasdaq OTC
Bulletin Board, or otherwise, and may discontinue them at any time.
LEGAL MATTERS
Troutman Sanders LLP, Atlanta, Georgia, will pass upon the validity of the
shares of common stock offered by this prospectus for SouthernBank Holdings.
Powell, Goldstein, Frazer & Murphy LLP, Atlanta, Georgia, is acting as counsel
for the underwriter in connection with legal matters relating to the shares of
common stock offered by this prospectus.
EXPERTS
SouthernBank Holdings' audited financial statements for the period from
July 13, 1999 through December 31, 1999, included in this prospectus, have been
included in reliance on the report of Mauldin & Jenkins, LLC, independent
certified public accountants, given on the authority of that firm as experts in
accounting and auditing.
REPORTS TO SHAREHOLDERS
Upon the effective date of the Registration Statement on Form SB-2 that
registers the shares of our common stock offered by this prospectus with the
Securities and Exchange Commission, we will be subject to the reporting
requirements of the Securities Exchange Act, which include requirements to file
annual reports on Form 10-KSB and quarterly reports on Form 10-QSB with the
Securities and Exchange Commission. This reporting obligation will exist for at
least one year and will continue for successive fiscal years, except that these
reporting obligations may be suspended for any subsequent fiscal year if at the
beginning of such year our common stock is held of record by less than 300
persons.
At any time that we are not a reporting company, we will furnish our
shareholders with annual reports containing audited financial information for
each fiscal year on or before the date of the annual meeting of shareholders as
required by Rule 80-6-1-.05 of the Georgia Department of Banking and Finance.
Our fiscal year ends on December 31. Additionally, we will also furnish other
reports as we may determine to be appropriate or as otherwise may be required by
law.
ADDITIONAL INFORMATION
SouthernBank Holdings has filed with the Securities and Exchange
Commission a Registration Statement on Form SB-2 under the Securities Act of
1933, as currently in effect, with respect to the shares of our common stock
offered by this prospectus. This prospectus does not contain all of the
information contained in the Registration Statement. For further information
with respect to SouthernBank
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<PAGE> 56
Holdings and its common stock, we refer you to the Registration Statement and
the exhibits to it. The Registration Statement may be examined and copied at the
public reference facilities maintained by the Securities and Exchange Commission
at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
and at the regional offices of the Securities and Exchange Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of the Registration Statement are available at prescribed rates from the
Public Reference Room of the Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain additional information
regarding the operation of the public reference facilities by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission also maintains a Web site (http://www.sec.gov) that contains
registration statements, reports, proxy and information statements and other
information regarding registrants, such as SouthernBank Holdings, that file
electronically with the Securities and Exchange Commission.
SouthernBank Holdings and our organizers have filed or will file various
applications with the FDIC, the Federal Reserve, the OCC and the Georgia
Department of Banking and Finance. These applications and the information they
contain are not incorporated into this prospectus. You should rely only on
information contained in this prospectus and in the related Registration
Statement in making an investment decision. To the extent that other available
information not presented in this prospectus, including information available
from SouthernBank Holdings and information in public files and records
maintained by the FDIC, the Federal Reserve, the OCC and the Georgia Department
of Banking and Finance is inconsistent with information presented in this
prospectus or provides additional information, that information is superseded by
the information presented in this prospectus and should not be relied on.
Projections appearing in the applications are based on assumptions that our
organizers believe are reasonable, but as to which they can make no assurances.
We specifically disaffirm those projections for purposes of this prospectus and
cautions you against relying on them for purposes of making an investment
decision.
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- --------------------------------------------------------------------------------
SOUTHERNBANK HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AUDITED FINANCIAL STATEMENTS
Independent Auditor's Report................................ F-2
Balance Sheet, December 31, 1999............................ F-3
Statement of Loss, Period from July 13, 1999, Date of
Inception, to December 31, 1999........................... F-4
Statement of Cash Flows, Period from July 13, 1999, Date of
Inception, to December 31, 1999........................... F-5
Notes to Financial Statements............................... F-6
UNAUDITED FINANCIAL STATEMENTS
Balance Sheet, March 31, 2000............................... F-9
Statement of Loss, Three Months Ended March 31, 2000 and
Period from July 13, 1999, Date of Inception, to March 31,
2000...................................................... F-10
Statements of Cash Flows, Three Months Ended March 31, 2000
and
Period from July 13, 1999, Date of Inception, to March 31,
2000...................................................... F-11
Notes to Financial Statements............................... F-12
</TABLE>
F-1
<PAGE> 58
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
SouthernBank Holdings, Inc.
Buford, Georgia
We have audited the accompanying balance sheet of SouthernBank Holdings,
Inc., a development stage company, as of December 31, 1999, and the related
statements of loss and cash flows for the period from July 13, 1999, date of
inception, to 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SouthernBank Holdings, Inc.,
a development stage company, as of December 31, 1999, and the results of its
operations and its cash flows for the period from July 13, 1999, date of
inception, to December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ MAULDIN & JENKINS, LLC
Atlanta, Georgia
February 22, 2000
F-2
<PAGE> 59
- --------------------------------------------------------------------------------
SOUTHERNBANK HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Cash $ 19,690
Equipment (net of accumulated depreciation of $114) 3,972
Related party receivable 20,000
Other assets 1,000
----------------
Total assets $ 44,662
================
LIABILITIES AND STOCKHOLDER'S DEFICIT
LIABILITIES
Line of credit $ 120,000
Accrued expenses 7,596
----------------
Total liabilities 127,596
----------------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDER'S (DEFICIT)
Preferred stock, $1 par value; 10,000,000 shares authorized,
no shares issued and outstanding 0
Common stock, $1 par value; 100,000,000 shares authorized, 1
share issued and outstanding 1
Capital surplus 5,509
Deficit accumulated during the development stage (88,444)
----------------
Total stockholder's deficit (82,934)
----------------
Total liabilities and stockholder's deficit $ 44,662
================
</TABLE>
See notes to financial statements.
F-3
<PAGE> 60
- --------------------------------------------------------------------------------
SOUTHERNBANK HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF LOSS
PERIOD FROM JULY 13, 1999, DATE OF INCEPTION, TO DECEMBER 31, 1999
<TABLE>
<S> <C>
Expenses:
Salaries and employee benefits $ 13,000
Equipment and occupancy expenses 2,093
Interest 1,902
Legal and consulting 50,081
Regulatory fees 15,000
Other expenses 6,368
--------
88,444
--------
Net loss and deficit accumulated during the
development stage $(88,444)
========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 61
- --------------------------------------------------------------------------------
SOUTHERNBANK HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD FROM JULY 13, 1999, DATE OF INCEPTION, TO DECEMBER 31, 1999
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss $(88,444)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 114
Contributed services of chief executive officer, a
non-cash item 5,500
Increase in related party receivable (20,000)
Increase in other assets (1,000)
Increase in accrued expenses 7,596
--------
Net cash used in operating activities (96,234)
--------
INVESTING ACTIVITIES
Purchase of equipment (4,086)
--------
Net cash used in investing activities (4,086)
--------
FINANCING ACTIVITIES
Proceeds from line of credit 120,000
Proceeds from issuance of common stock 10
--------
Net cash provided by financing activities 120,010
--------
Net increase in cash 19,690
Cash at beginning of period 0
--------
Cash at end of period $ 19,690
========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 62
- --------------------------------------------------------------------------------
SOUTHERNBANK HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
SouthernBank Holdings, Inc. (the "Company") was incorporated on July 13,
1999 to operate as a bank holding company pursuant to the Federal Bank Holding
Act of 1956, as amended, and the Georgia Bank Holding Company Act. The Company
intends to acquire 100% of the issued and outstanding capital stock of
SouthernBank, N.A. (Proposed) (the "Bank"), a corporation to be organized under
the laws of the State of Georgia to conduct a general banking business in
Buford, Georgia. On November 19, 1999, the organizers filed an application for
approval of the organization of the Bank with the Office of the Comptroller of
the Currency ("OCC") and also with the Federal Deposit Insurance Corporation
("FDIC") for insurance of the Bank's deposits. The Company will apply to the
Federal Reserve Bank of Atlanta ("FRB") and the Georgia Department of Banking
and Finance ("DBF") to become a bank holding company. Upon obtaining regulatory
approval, the Company will be a registered bank holding company subject to
regulation by the FRB and DBF.
Activities since inception have consisted primarily of the Company's and
the Bank's organizers engaging in organizational and preopening activities
necessary to obtain regulatory approvals and to prepare to commence business as
a financial institution.
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements have been prepared on the accrual basis in
accordance with generally accepted accounting principles.
ORGANIZATION AND STOCK OFFERING COSTS
Organization costs have been expensed as incurred in accordance with
generally accepted accounting principles. Stock offering costs will be charged
to capital surplus upon completion of the stock offering. Additional costs are
expected to be incurred for organization costs and stock offering costs.
EQUIPMENT
Equipment is carried at cost less accumulated depreciation. Depreciation
is computed by the straight-line method over an estimated useful life of three
years.
F-6
<PAGE> 63
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
INCOME TAXES
The Company will be subject to Federal and state income taxes when taxable
income is generated. No income taxes have been accrued because of operating
losses incurred during the preopening period.
FISCAL YEAR
The Company will adopt a calendar year for both financial and tax
reporting purposes.
NOTE 2. LINE OF CREDIT
To facilitate the formation of the Company and the Bank, the organizers
have established a $250,000 line of credit with an independent bank for the
purpose of paying organization and preopening expenses for the Company and the
Bank and the expenses of the Company's common stock offering. The line of credit
bears interest at the lender's prime rate less 1% and matures on June 28, 2000.
Interest is payable quarterly. The interest rate at December 31, 1999 was 7.5%.
The organizers have personally guaranteed repayment of the line of credit. All
funds advanced on behalf of the Company and the Bank will be repaid from the
proceeds of the stock offering. The Company's ability to repay these advances
and relieve the organizers from their personal guarantees depends upon the
completion of the offering.
NOTE 3. CONTRIBUTED SERVICES OF CHIEF EXECUTIVE OFFICER
The Company's chief executive officer did not and will not receive cash
compensation for services rendered to the Company for the period from July 13,
1999, date of inception, to December 31, 1999. The Company has estimated the
fair value of the services rendered to be $5,500. This amount has been recorded
as an expense in the statement of loss with a corresponding increase to capital
surplus in the balance sheet.
NOTE 4. COMMITMENTS AND RELATED PARTY TRANSACTIONS
To facilitate the Company's acquisition of a site for its main office, a
real estate business owned by two of the Company's directors has entered into an
agreement to purchase approximately one acre of land at a cost of $857,000. The
rights in the agreement will be assigned to the Company. As of December 31,
1999, the Company has paid the real estate business $20,000 which has been used
as an earnest money deposit on the land. The payment is reflected as a related
party receivable in the balance sheet.
The Company is leasing temporary office facilities under a six month
operating lease agreement for $1,000 per month. Total rental expense included in
the statement of loss under this agreement amounted to $1,000.
F-7
<PAGE> 64
- --------------------------------------------------------------------------------
NOTE 5. COMMON STOCK OFFERING
The Company proposes to file a Registration Statement on Form SB-2 with
the Securities and Exchange Commission offering for sale 1,250,000 shares of the
Company's common stock at a price of $10 per share.
NOTE 6. STOCK WARRANTS AND STOCK OPTIONS
Upon completion of the common stock offering, the Company intends to grant
a maximum of 227,500 stock warrants to its organizers. The warrants will allow
the organizers to purchase one share of common stock for each warrant granted at
a price of $10 per share.
The Company has also established a stock option plan which will allow the
granting of stock options to employees. At December 31, 1999, the Company had
100,000 shares of its common stock reserved for future grants under this plan.
Management anticipates that options will be granted at prices no less than the
fair value of the Company's common stock on the date of grant.
As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", the Company will recognize
compensation cost for stock-based compensation awards in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees". The Company
anticipates recognizing no compensation cost for stock-based compensation awards
upon the granting of stock warrants and options.
F-8
<PAGE> 65
- --------------------------------------------------------------------------------
SOUTHERNBANK HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Cash $ 20,855
Equipment (net of accumulated depreciation of $585) 8,300
Related party receivable 25,000
Deferred stock offering costs 10,983
Other assets 1,000
---------
Total assets $ 66,138
=========
LIABILITIES AND STOCKHOLDER'S DEFICIT
LIABILITIES
Line of credit $ 235,000
Accrued expenses 4,122
---------
Total liabilities $ 239,122
=========
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDER'S DEFICIT
Preferred stock, $1 par value; 10,000,000 shares
authorized; no shares issued or
outstanding 0
Common stock, $1 par value; 100,000,000 shares authorized;
1 share issued and
outstanding 1
Capital surplus 8,509
Accumulated deficit (181,494)
---------
Total stockholder's deficit (172,984)
---------
Total liabilities and stockholder's deficit $ 66,138
=========
</TABLE>
See notes to financial statements.
F-9
<PAGE> 66
- --------------------------------------------------------------------------------
SOUTHERNBANK HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF LOSS
THREE MONTHS ENDED MARCH 31, 2000 AND PERIOD FROM JULY 13, 1999,
DATE OF INCEPTION, TO MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JULY 13, 1999,
THREE MONTHS DATE OF
ENDED INCEPTION, TO
MARCH 31, MARCH 31,
2000 2000
------------ --------------
<S> <C> <C>
Expenses:
Salaries and employee benefits $50,288 $ 63,288
Equipment and occupancy expenses 5,271 7,364
Interest 2,878 4,780
Legal and consulting 22,594 72,675
Regulatory fees 3,500 18,500
Other expenses 8,519 14,887
------- --------
Net loss $93,050 $181,494
======= ========
</TABLE>
See notes to financial statements.
F-10
<PAGE> 67
- --------------------------------------------------------------------------------
SOUTHERNBANK HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND PERIOD FROM JULY 13, 1999,
DATE OF INCEPTION, TO MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
JULY 13, 1999,
THREE MONTHS DATE OF
ENDED INCEPTION, TO
MARCH 31, MARCH 31,
2000 2000
------------ --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(93,050) $(181,494)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 471 585
Contributed services of chief executive officer, a
non-cash item 3,000 8,500
Increase in related party receivable (5,000) (25,000)
Increase in other assets 0 (1,000)
Increase (decrease) in accrued expenses (3,474) 4,122
-------- ---------
Net cash used in operating activities (98,053) (194,287)
-------- ---------
INVESTING ACTIVITIES
Purchase of equipment (4,799) (8,885)
-------- ---------
Net cash used in investing activities (4,799) (8,885)
-------- ---------
FINANCING ACTIVITIES
Proceeds from line of credit 115,000 235,000
Proceeds from issuance of common stock 0 10
Increase in deferred stock offering costs (10,983) (10,983)
-------- ---------
Net cash provided by financing activities 104,017 224,027
-------- ---------
Net increase in cash 1,165 20,855
Cash at beginning of period 19,690 0
-------- ---------
Cash at end of period $ 20,855 $ 20,855
======== =========
</TABLE>
See notes to financial statements.
F-11
<PAGE> 68
- --------------------------------------------------------------------------------
SOUTHERNBANK HOLDINGS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
SouthernBank Holdings, Inc. (the "Company") was incorporated on July 13,
1999 to operate as a bank holding company pursuant to the Federal Bank Holding
Act of 1956, as amended, and the Georgia Bank Holding Company Act. The Company
intends to acquire 100% of the issued and outstanding capital stock of
SouthernBank, N.A. (In Organization) (the "Bank"), a corporation organized under
the laws of the State of Georgia to conduct a general banking business in
Buford, Georgia. Preliminary approvals for the organization of the Bank and the
insurance of the Bank's deposits have been received from the Office of the
Comptroller of the Currency ("OCC") and the Federal Deposit Insurance
Corporation ("FDIC"), respectively. The Company has applied to the Federal
Reserve Bank of Atlanta ("FRB") and the Georgia Department of Banking and
Finance ("DBF") to become a bank holding company. Upon obtaining regulatory
approval, the Company will be a registered bank holding company subject to
regulation by the FRB and DBF.
Activities since inception have consisted primarily of the Company's and
the Bank's organizers engaging in organizational and preopening activities
necessary to obtain regulatory approvals and to prepare to commence business as
a financial institution.
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements have been prepared on the accrual basis in
accordance with generally accepted accounting principles. The financial
information included herein is unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair statement of results for the
interim periods.
ORGANIZATION AND STOCK OFFERING COSTS
Organization costs have been expensed as incurred in accordance with
generally accepted accounting principles. Stock offering costs will be charged
to capital surplus upon completion of the stock offering. Additional costs are
expected to be incurred for organization costs and stock offering costs.
EQUIPMENT
Equipment is carried at cost less accumulated depreciation. Depreciation
is computed by the straight-line method over an estimated useful life of three
years.
INCOME TAXES
The Company will be subject to Federal and state income taxes when taxable
income is generated. No income taxes have been accrued because of operating
losses incurred during the preopening period.
FISCAL YEAR
The Company will adopt a calendar year for both financial and tax
reporting purposes.
F-12
<PAGE> 69
- --------------------------------------------------------------------------------
NOTE 2. LINE OF CREDIT
To facilitate the formation of the Company and the Bank, the organizers
have established a $750,000 line of credit with an independent bank for the
purpose of paying organization and preopening expenses for the Company and the
Bank and the expenses of the Company's common stock offering. The line of credit
bears interest at the lender's prime rate less 1% and matures on June 28, 2000.
Interest is payable quarterly. The interest rate at March 31, 2000 was 8.00%.
The organizers have personally guaranteed repayment of the line of credit. All
funds advanced on behalf of the Company and the Bank will be repaid from the
proceeds of the stock offering. The Company's ability to repay these advances
and relieve the organizers from their personal guarantees depends upon the
completion of the offering.
NOTE 3. CONTRIBUTED SERVICES OF CHIEF EXECUTIVE OFFICER
The Company's chief executive officer did not and will not receive cash
compensation for services rendered to the Company for the period from July 13,
1999, date of inception, to March 31, 2000. The Company has estimated the fair
value of the services rendered to be $3,000 for the three months ended March 31,
2000 and $8,500 for the period from July 13, 1999, date of inception, to March
31, 2000. These amounts have been recorded as expenses in the statements of loss
with corresponding increases to capital surplus in the balance sheet.
NOTE 4. COMMITMENTS AND RELATED PARTY TRANSACTIONS
To facilitate the Company's acquisition of a site for its main office, a
real estate business owned by two of the Company's directors has entered into an
agreement to purchase approximately one acre of land at a cost of $857,000. The
rights in the agreement will be assigned to the Company which will pay $10 as
consideration for the assignment. As of March 31, 2000, the Company has paid the
real estate business $25,000 which has been used as an earnest money deposit on
the land. The payment is reflected as a related party receivable in the balance
sheet.
The Company is leasing temporary office facilities under a six month
operating lease agreement for $1,000 per month. Total rental expense included in
the statements of loss under this agreement amounted to $3,000 for the three
months ended March 31, 2000 and $4,000 for the period from July 13, 1999, date
of inception, to March 31, 2000.
NOTE 5. COMMON STOCK OFFERING
The Company has filed a Registration Statement on Form SB-2 with the
Securities and Exchange Commission offering for sale 1,250,000 shares of the
Company's common stock at a price of $10 per share.
NOTE 6. STOCK WARRANTS AND STOCK OPTIONS
Upon completion of the common stock offering, the Company intends to grant
a maximum of 227,500 stock warrants to its organizers. The warrants will allow
the organizers to purchase one share of common stock for each warrant granted at
a price of $10 per share.
The Company has also established a stock option plan which will allow the
granting of stock options to employees. At December 31, 1999, the Company had
100,000 shares of its common stock reserved for future grants under this plan.
Management anticipates that options will be granted at prices no less than the
fair value of the Company's common stock on the date of grant.
As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", the Company will recognize
compensation cost for stock-based compensation awards in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees". The Company
anticipates recognizing no compensation cost for stock-based compensation awards
upon the granting of stock warrants and options.
F-13
<PAGE> 70
- ------------------------------------------------------
- ------------------------------------------------------
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NO ONE HAS AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS
NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS
OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 1
Risk Factors.......................... 5
A Warning About Forward-Looking
Statements.......................... 10
Use of Proceeds....................... 11
Capitalization........................ 13
Dividends............................. 13
Management's Discussion and Analysis
of Financial Condition and Plan of
Operations.......................... 15
Our Proposed Business................. 18
Management............................ 28
Executive Compensation................ 33
Related Party Transactions............ 37
Description of SouthernBank Holdings'
Capital Stock....................... 37
Important Provisions of SouthernBank
Holdings' Articles of Incorporation
and Bylaws.......................... 38
Supervision and Regulation............ 44
Shares Eligible for Future Sale....... 50
Underwriting.......................... 51
Legal Matters......................... 52
Experts............................... 52
Reports to Shareholders............... 52
Additional Information................ 52
Index to Financial Report............. F-1
</TABLE>
UNTIL , 2000 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT EFFECT TRANSFERS IN THESE SECURITIES OR TRADE THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,250,000 SHARES
SOUTHERNBANK
HOLDINGS, INC.
A PROPOSED BANK HOLDING COMPANY FOR
(SOUTHERN BANK LOGO)
(IN ORGANIZATION)
COMMON STOCK
------------------
PROSPECTUS
------------------
WACHOVIA SECURITIES, INC.
, 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 71
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Consistent with the applicable provisions of the laws of Georgia, the
Registrant's bylaws provide that the Registrant shall have the power to
indemnify its directors, officers, employees and agents against expenses
(including attorneys' fees) and liabilities arising from actual or threatened
actions, suits or proceedings, whether or not settled, to which they become
subject by reason of having served in such role if such director, officer,
employee or agent acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Registrant and,
with respect to a criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. Advances against expenses shall be made
so long as the person seeking indemnification agrees to refund the advances if
it is ultimately determined that he or she is not entitled to indemnification. A
determination of whether indemnification of a director, officer, employee or
agent is proper because he or she met the applicable standard of conduct shall
be made (1) by the board of directors of the Registrant, (2) in certain
circumstances, by independent legal counsel in a written opinion or (3) by the
affirmative vote of a majority of the shares entitled to vote.
In addition, Article 11 of the Registrant's articles of incorporation,
subject to certain exceptions, eliminates the potential personal liability of a
director for monetary damages to the Registrant and to the shareholders of the
Registrant for breach of a duty as a director. There is no elimination of
liability for (1) a breach of duty involving appropriation of a business
opportunity of the Registrant, (2) an act or omission involving intentional
misconduct or a knowing violation of law, (3) a transaction from which the
director derives an improper material tangible personal benefit or (4) as to any
payment of a dividend or approval of a stock repurchase that is illegal under
the Georgia Business Corporation Code. The articles of incorporation do not
eliminate or limit the right of the Registrant or its shareholders to seek
injunctive or other equitable relief not involving monetary damages.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses, other than underwriting discounts and commissions, of
the sale of the Registrant's Common Stock, $1.00 par value per share, are as
follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 3,795
National Association of Securities Dealers, Inc. Filing
Fee....................................................... 1,938
Blue Sky Fees and Expenses.................................. 10,000
Legal Fees and Expenses..................................... 65,000
Accounting Fees and Expenses................................ 10,000
Printing and Engraving Expenses............................. 40,000
Miscellaneous............................................... 4,267
--------
Total............................................. $135,000
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
On July 13, 1999, the Registrant issued to D. Arnold Tillman, Jr. in a
private placement, one share of the Registrant's Common Stock, $1.00 par value
per share, for an aggregate price of $10.00 in connection with the organization
of the Company. The sale to Mr. Tillman was exempt from registration under the
Securities Act of 1933, as amended (the "Act") pursuant to Section 4(2) of the
Act because it was a transaction by an issuer that did not involve a public
offering.
II-1
<PAGE> 72
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S> <C>
1.1 -- Form of Underwriting Agreement
3.1 -- Articles of Incorporation*
3.2 -- Bylaws*
4.1 -- Specimen Common Stock Certificate*
4.2 -- See Exhibits 3.1 and 3.2 for provisions of the Articles of
Incorporation and Bylaws defining rights of holders of the
Common Stock
4.3 -- Form of Organizer Warrant Agreement*
5.1 -- Legal Opinion of Troutman Sanders LLP**
10.1 -- Agreement for purchase of main office property*
10.2 -- Assignment Agreement, dated as of , 2000, by and
between Land South Properties, LLC, and SouthernBank, N.A.
(In Organization)**
10.3 -- Form of Lease Agreement for temporary facility, by and
between SouthernBank, N.A. (In Organization) and Blazer
Ridge, Inc.*
10.4 -- Form of Loan Agreement, by and between SouthernBank
Holdings, Inc., as Borrower and The Bankers Bank, as Lender,
and the Organizers as Guarantors*
10.5 -- Form of Loan Agreement, by and between SouthernBank, N.A.
(In Organization), as Borrower and The Bankers Bank, as
Lender, and the Organizers as Guarantors*
10.6 -- Employment Agreement, dated and effective as of December 1,
1999, by and among SouthernBank Holdings, Inc.,
SouthernBank, N.A. (In Organization) and M. Lauch McKinnon*
10.7 -- Letter Agreement, dated February 9, 2000, by and between
SouthernBank Holdings, Inc. and Rita B. Gray*
10.8 -- SouthernBank Holdings, Inc. Stock Option Plan*
10.9 -- Form of SouthernBank Holdings, Inc. Incentive Stock Option*
10.10 -- Form of SouthernBank Holdings, Inc. Non-Qualified Stock
Option*
23.1 -- Consent of Mauldin & Jenkins, LLC
23.2 -- Consent of Troutman Sanders LLP (contained in Exhibit 5.1)
24.1 -- Power of Attorney*
27.1 -- Financial Data Schedule as of December 31, 1999 (for SEC use
only)
27.2 -- Financial Data Schedule as of March 31, 2000 (for SEC use
only)
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the 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
II-2
<PAGE> 73
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes as follows:
(a)(1) To 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
20.0% 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 being registered that remain unsold at the end of the
offering.
The Registrant hereby undertakes as follows:
(b)(1) For determining any liability under the Securities Act, to
treat the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this Registration Statement as
of the time the Commission declared it effective.
(2) For determining any liability under the Securities Act, to treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the Registration
Statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-3
<PAGE> 74
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Buford, State of Georgia, on April 26, 2000.
SOUTHERNBANK HOLDINGS, INC.
By: /s/ D. ARNOLD TILLMAN, JR.
------------------------------------
D. Arnold Tillman, Jr.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement, has been signed below by the following persons in
the capacities and on the dates indicated.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director
- -----------------------------------------------------
James O. Andrews
/s/ RITA B. GRAY Chief Financial Officer May 9, 2000
- ----------------------------------------------------- (Principal Financial and
Rita B. Gray Accounting Officer)
* Director May 9, 2000
- -----------------------------------------------------
James. E. Hinshaw, Sr.
* Director May 9, 2000
- -----------------------------------------------------
Donald F. Jackson
* Director May 9, 2000
- -----------------------------------------------------
Lewis A. Massey
* Director May 9, 2000
- -----------------------------------------------------
Tyler C. McCain
/s/ M. LAUCH MCKINNON Director and President May 9, 2000
- -----------------------------------------------------
M. Lauch McKinnon
Director
- -----------------------------------------------------
D. Alan Najjar
/s/ D. ARNOLD TILLMAN Director and Chief Executive May 9, 2000
- ----------------------------------------------------- Officer (Principal Executive
D. Arnold Tillman Officer)
</TABLE>
II-4
<PAGE> 75
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director
- -----------------------------------------------------
Jeffrey S. Tucker
* /s/ M. LAUCH MCKINNON
- -----------------------------------------------------
M. Lauch McKinnon
Attorney-in-fact
</TABLE>
II-5
<PAGE> 76
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement
23.1 -- Consent of Mauldin & Jenkins, LLC
27.1 -- Financial Data Schedule as of December 31, 1999 (for SEC use
only)
27.2 -- Financial Data Schedule as of March 31, 2000 (for SEC use
only)
</TABLE>
<PAGE> 1
EXHIBIT 1.1
SOUTHERNBANK HOLDINGS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
_______________, 2000
WACHOVIA SECURITIES, INC.
As representative of the several
Underwriters named in Schedule I hereto,
c/o Wachovia Securities, Inc.
IJL Financial Center
201 North Tryon Street
Charlotte, North Carolina 28202
Ladies and Gentlemen:
Subject to the terms and conditions stated herein, SouthernBank
Holdings, Inc., a Georgia corporation (the "Company") and proposed holding
company for SouthernBank, N.A., a national banking association in organization
(the "Bank"), proposes to issue and sell to the underwriters named in Schedule I
hereto (collectively, the "Underwriters") an aggregate of 1,250,000 shares of
common stock, $1.00 par value per share (the "Common Stock"), of the Company
(the "Firm Shares"), and, at the election of the Underwriters, to sell to the
Underwriters up to 187,500 additional shares of Common Stock (the "Optional
Shares") solely to cover over-allotments, if any (the Firm Shares and the
Optional Shares that the Underwriters elect to purchase pursuant to Section 2
hereof are collectively called the "Shares").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with each of the Underwriters that:
(a) A registration statement on Form SB-2 (File No. 333-32786)
with respect to the Shares, has been filed by the Company with the
Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"). The
registration statement and any amendments thereto, including any
post-effective amendments, have been declared effective by the
Commission in such form and copies of each of those items have been
delivered by the Company to you. No other document with respect to the
registration statement or any post effective amendment thereto has been
filed with the Commission. No stop order suspending the effectiveness
of the registration statement has been issued and no proceeding for
that purpose has been instituted or threatened by the Commission. Any
preliminary prospectus included in the
<PAGE> 2
registration statement or filed with the Commission pursuant to Rule
424 of the Rules and Regulations of the Commission under the Securities
Act (the "Rules and Regulations"), is herein called a "Preliminary
Prospectus." The various parts of such registration statement,
including the prospectus, Part II, all financial schedules and exhibits
thereto, and including the information contained in the form of any
final prospectus filed with the Commission pursuant to Rule 424(b)
under the Securities Act, and deemed by virtue of Rule 430A under the
Securities Act to be part of the registration statement at the time it
was declared effective, as amended at the time such part became
effective, are herein called collectively the "Registration Statement."
The final prospectus, in the form first filed pursuant to Rule 424(b)
or as included in the Registration Statement at the time it is declared
effective if no Rule 424(b) filing is required, is herein called the
"Prospectus."
(b) No order preventing or suspending the use of any
Prospectus, including any Preliminary Prospectus, has been issued and
no proceeding for that purpose has been instituted or threatened by the
Commission or the securities authority of any state or other
jurisdiction. No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued and no
proceeding for that purpose has been instituted or threatened or, to
the best knowledge of the Company, contemplated by the Commission or
the securities authority of any state or other jurisdiction.
(c) Each Preliminary Prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto complied when so filed in all material respects with the
requirements applicable to it under the Securities Act and the Rules
and Regulations, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading. Any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission,
as the case may be, will conform in all material respects to the
requirements of the Securities Act, and the Rules and Regulations and
will not contain an untrue statement of material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Wachovia
Securities, Inc. (the "Representative") expressly for use therein. When
the Registration Statement or any amendment thereto was declared
effective, and at each Time of Delivery (as hereinafter defined), it
(i) contained all statements required to be stated therein in
accordance with, and complied or will comply in all material respects
with the requirements of, the Securities Act and the Rules and
Regulations and (ii) did not include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. When the Prospectus or any amendment or
supplement thereto is filed with the Commission pursuant to Rule 424(b)
(or, if the Prospectus or such amendment or supplement is not required
to be so filed, when the Registration Statement or the amendment
thereto containing such amendment or supplement to the
2
<PAGE> 3
Prospectus was or is declared effective) and at each Time of Delivery,
the Prospectus, as amended or supplemented at any such time (i)
contained or will contain all statements required to be stated therein
in accordance with, and complied or will comply in all material
respects with the requirements of, the Securities Act and the Rules and
Regulations and (ii) did not or will not include any untrue statement
of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(d) The descriptions in the Registration Statement and the
Prospectus of statutes, rules, regulations, legal and governmental
proceedings or contracts and other documents that are required to be so
described are accurate and fairly present the information required to
be shown. In addition, there are no statutes, rules, regulations or
legal or governmental proceedings required to be described in the
Registration Statement or the Prospectus that are not described as
required and no contracts or documents of a character that are required
to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement that are not
described and filed as required.
(e) The Company has been duly incorporated, is validly
existing as a corporation under the laws of the State of Georgia and
has full power and authority to own or lease its properties and conduct
its business as described in the Prospectus. The Bank is a national
banking association in organization under the laws of the United States
of America and, upon the issuance of a charter by the Office of the
Comptroller of the Currency (the "OCC"), will have full power and
authority to own or lease its properties and conduct its business as
described in the Prospectus. The Company has full power and authority
to enter into this Agreement and to perform its obligations hereunder.
Neither the Company nor the Bank is required to be qualified to
transact business as a foreign corporation under the laws of any other
jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, except where the failure
to so qualify would not have a material adverse effect on the financial
position, general affairs, management, business or prospects of the
Company and the Bank.
(f) The capitalization of the Company is as disclosed under
the caption "Capitalization" in the Prospectus. All of the issued
shares of capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and conform to the
description of the capital stock under the caption "Description of Our
Capital Stock" contained in the Prospectus. None of the issued shares
of capital stock of the Company has been issued or is owned or held in
violation of any preemptive or similar rights, and no person or entity
(including any holder of outstanding shares of capital stock of the
Company or its subsidiary) has any preemptive or other rights to
subscribe for any of the Shares. None of the shares of capital stock of
the Bank has been issued.
3
<PAGE> 4
(g) Upon the issuance of a charter by the OCC and the payment
for the capital stock of the Bank, all of the issued shares of the Bank
will be duly authorized and validly issued, fully paid, and, except as
may be applicable under the National Bank Act, nonassessable and will
be owned beneficially by the Company free and clear of all liens,
security interests, pledges, charges, encumbrances, defects,
shareholders' agreements, voting trusts, equities or claims of any
nature whatsoever. The Company has made application:
(i) to the Board of Governors of the Federal Reserve
System and the Georgia Department of Banking and Finance for
approval to become a bank holding company and to acquire all
of the shares of the Bank;
(ii) to the OCC, to charter a national bank; and
(iii) to the Federal Deposit Insurance Corporation
for Federal Deposit Insurance for deposits of the Bank
(collectively, the "Regulatory Approvals").
The Company and the Bank have obtained or have filed for all
other material licenses, consents and approvals, and have satisfied or
have taken all action required at this time to satisfy all material
eligibility and other similar requirements imposed by federal and state
regulatory bodies, administrative agencies or other governmental
bodies, agencies or officials, in each case applicable to the conduct
of the business in which they are engaged or are contemplated to be
engaged as described in the Registration Statement. With respect to the
Regulatory Approvals, as well as all other material licenses, consents
and approvals, and any other similar requirements that the Company or
the Bank does not have at this time:
(i) all applications therefor are complete and
accurate;
(ii) each has been filed with the appropriate
regulatory authorities; and
(iii) the Company knows of no reason why the
Regulatory Approvals will not be received or satisfied prior
to the time the same are required.
Other than the Bank, the Company does not own, directly or indirectly,
any capital stock or other equity securities of any corporation or any
ownership interest in any partnership, joint venture or other
association.
(h) Except as disclosed in the Prospectus, there are no
outstanding:
(i) securities or obligations of the Company or the
Bank convertible into or exchangeable for any capital stock of
the Company or the Bank;
4
<PAGE> 5
(ii) warrants, rights or options to subscribe for or
purchase from the Company or the Bank any such capital stock
or any such convertible or exchangeable securities or
obligations; or
(iii) obligations of the Company or the Bank to issue
any shares of capital stock, any such convertible or
exchangeable securities or obligations, or any such warrants,
rights or options.
(i) Since the date as of which information is given in the
Prospectus, neither the Company nor the Bank has sustained any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as disclosed in or contemplated by the Prospectus.
(j) Since the date as of which information is given in the
Prospectus:
(i) neither the Company nor the Bank has incurred any
liabilities or obligations, direct or contingent, or entered
into any transactions, not in the ordinary course of business,
that are material to the Company and the Bank;
(ii) the Company has not purchased any of its
outstanding capital stock or declared, paid or otherwise made
any dividend or distribution of any kind on its capital stock;
(iii) there has not been any change in the capital
stock, long-term debt or short-term debt of the Company or the
Bank (except with respect to such changes in the balance due
under any lines of credit described in the Prospectus); and
(iv) there has not been any material adverse change,
or any development involving a prospective material adverse
change, in or affecting the financial position, general
affairs, management, business or prospects of the Company and
the Bank, in each case other than as disclosed in or
contemplated by the Prospectus.
(k) The consolidated financial statements of the Company,
together with related notes and schedules as set forth in the
Registration Statement, conform to the requirements of the Securities
Act and the Rules and Regulations. Such financial statements fairly
present the consolidated financial position of the Company at the
respective dates indicated in accordance with generally accepted
accounting principles applied on a consistent basis for the periods
indicated. The Company and the Bank have no material contingent
obligations that are not disclosed in the Company's financial
statements, which are included in the Registration Statement. Mauldin &
Jenkins, LLC,
5
<PAGE> 6
whose report is included in the Registration Statement, are independent
certified public accountants as required by the Securities Act and the
Rules and Regulations.
(l) The Shares to be sold by the Company hereunder have been
duly authorized and, when issued and delivered against payment therefor
as provided herein, will be validly issued and fully paid and
nonassessable and will conform to the description of the Common Stock
contained in the Prospectus. All corporate action required to be taken
for the authorization, issuance and sale of the Shares has been validly
taken. The Underwriters will receive good and marketable title to the
Shares to be issued and delivered hereunder, free and clear of all
liens, encumbrances, claims, security interests, restrictions,
shareholders' agreements and voting trusts whatsoever. The certificates
evidencing the Shares will be in due and proper form and will comply
with all applicable legal requirements.
(m) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or
to be owned by such person or to require the Company to include such
securities in the securities registered pursuant to the Registration
Statement or any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act.
(n) Neither the Company nor the Bank is, or (with or without
the giving of notice or passage of time or both) would be:
(i) in violation of its Articles of Incorporation or
Articles of Association (as the case may be), Bylaws or other
governing instruments; or
(ii) in default under any indenture, mortgage, deed
of trust, loan agreement, lease or other agreement or
instrument to which the Company or the Bank is a party or to
which any of their respective properties or assets are
subject, except where such default would not have a material
adverse effect on either the Company or the Bank.
(o) The issue and sale of the Shares and the performance of
this Agreement and the consummation of the transactions herein
contemplated will not conflict with, or (with or without the giving of
notice or the passage of time or both) result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which the Company or the Bank is a party or
to which any of their respective properties or assets is subject, nor
will such action conflict with or violate any provision of the Articles
of Incorporation or Articles of Association (as the case may be),
Bylaws or other governing instruments of the Company or the Bank, or
any statute, rule or regulation or
6
<PAGE> 7
any order, judgment or decree of any court or governmental agency or
body having jurisdiction over the Company or the Bank or any of their
respective properties or assets.
(p) The Company and the Bank have good and marketable title in
fee simple to all real property, if any, and good title to all personal
property owned by them, in each case free and clear of all liens,
security interests, pledges, charges, encumbrances, mortgages and
defects, except such as are disclosed in the Prospectus or such as do
not materially and adversely interfere with the operations of the
Company and the Bank. Any real property and buildings held under lease
by the Company or the Bank are held under valid, subsisting and
enforceable leases, with such exceptions as are disclosed in the
Prospectus or are not material and do not interfere with the operations
of the Company or the Bank.
(q) No consent, approval, authorization, order or declaration
of or from, or registration, qualification or filing with, any court or
governmental agency or body or third party is required for the issue
and sale of the Shares or the consummation of the transactions
contemplated by this Agreement, except:
(i) the registration of the Shares under the
Securities Act and such as may be required by the National
Association of Securities Dealers, Inc. (the "NASD") and under
state securities or blue sky laws in connection with the
offer, sale and distribution of the Shares by the
Underwriters; and
(ii) as required in connection with the Regulatory
Approvals.
(r) Other than as disclosed in the Prospectus, there is no
litigation, arbitration, claim, proceeding (formal or informal) or
investigation pending or, to the knowledge of any director or executive
officer of the Company, threatened (or any reasonable basis therefor)
in which the Company or the Bank is a party or of which any of their
respective properties or assets are the subject which, if determined
adversely to the Company or the Bank, would individually or in the
aggregate have a material adverse effect on the financial position,
general affairs, management, business or prospects of the Company and
the Bank.
(s) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms subject, as to enforcement, to applicable bankruptcy,
insolvency, reorganization and moratorium laws and other laws relating
to or affecting the enforcement of creditors' rights generally and to
general equitable principles, and except as the enforceability of
rights to indemnity and contribution under this Agreement may be
limited under applicable securities laws or the public policy
underlying such laws.
7
<PAGE> 8
(t) Neither the Company nor any of its organizers, officers,
directors or affiliates has:
(i) taken, directly or indirectly, any action
designed to cause or result in, or that has constituted or
might reasonably be expected to constitute, the stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares; or
(ii) since the filing of the Registration Statement
(A) sold, bid for, purchased or paid anyone any compensation
for soliciting purchases of, the Shares or (B) paid or agreed
to pay to any person any compensation for soliciting another
to purchase any other securities of the Company.
(u) None of the Company, the Bank, nor, to the knowledge of
the Company, any organizer, director or executive officer, agent,
employee or other person acting on behalf of the Company or the Bank
has:
(i) used or authorized the use of, any corporate or
other funds for unlawful payments, or contributions;
(ii) made unlawful expenditures relating to political
activity to government officials; or
(iii) established or maintained any unlawful or
unrecorded funds in violation of any federal, state, or local
law or regulation, including Section 30A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
None of the Company, the Bank, nor, to the knowledge of the Company,
any organizer, director or executive officer of the Company or the Bank
has accepted or received any unlawful contributions or payments.
(v) The Company has obtained for the benefit of the Company
and the Underwriters from each of its organizers, directors and
executive officers a written agreement (the "Lockup Agreements") that
for a period of 180 days from the date of the Prospectus such
organizer, director or officer will not, without your prior written
consent, offer, pledge, sell, contract to sell, grant any option for
the sale of, or otherwise dispose of (or announce any offer, pledge,
sale, grant of an option to purchase or other disposition), directly or
indirectly, any shares of the Common Stock or securities convertible
into, or exercisable or exchangeable for, shares of the Common Stock.
(w) The Bank, upon the issuance of a charter by the OCC, will
not be prohibited, directly or indirectly, from paying any dividends to
the Company, from making any other distributions on the Bank's capital
stock, from repaying to the Company any loans or advances to the Bank
or from transferring the Bank's property or
8
<PAGE> 9
assets to the Company, except as prohibited by federal or state
regulations as disclosed in the Prospectus.
(x) The Company and the Bank have filed all material foreign,
federal, state and local tax returns that are required to be filed by
them and have paid all taxes shown as due on such returns as well as
all other taxes, assessments and government charges that are due and
payable. No deficiency with respect to any such return has been
assessed or proposed in any material respects. All tax liabilities have
been adequately provided for in the financial statements of the
Company.
(y) The Company is not, nor will it become as a result of
transactions contemplated hereby, and does not intend to conduct its
business in a manner that would cause it to become an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940.
2. PURCHASE AND SALE OF SHARES.
(a) Subject to the terms and conditions herein set forth:
(i) the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agree, severally and not
jointly, to purchase from the Company the number of Firm Shares set
opposite the name of such Underwriter in Schedule 1 hereto, at the
following purchase prices:
(A) with respect to the Firm Shares not purchased by
the Company's organizers and executive officers, as described
in (B) below, at a purchase price of $9.25 per share; and
(B) with respect to the Firm Shares purchased by the
Company's organizers and executive officers, but only up to a
maximum of 375,000 Firm Shares, at a purchase price of $9.65
per share;
(ii) in the event and to the extent that the Underwriters
shall exercise the election to purchase Optional Shares as provided
below, the Company agrees to issue and to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at a purchase price of
$9.25 per share, that portion of the number of Optional Shares as
to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction, the numerator of
which is the maximum number of Optional Shares that such
Underwriter is entitled to purchase as set forth opposite the name
of such Underwriter in Schedule I hereto and the denominator of
which is the maximum
9
<PAGE> 10
number of Optional Shares that all of the Underwriters are entitled to
purchase hereunder.
(b) The Company hereby grants to the Underwriters the right to
purchase at their election in whole or in part from time to time up to
187,500 Optional Shares, at the purchase price of $9.25 per share for
the sole purpose of covering over-allotments in the sale of Firm
Shares. Any such election to purchase Optional Shares may be exercised
by written notice from you to the Company, given from time to time
within a period of 30 calendar days after the date of this Agreement
and setting forth the aggregate number of Optional Shares to be
purchased and the date on which the Optional Shares are to be
delivered, as determined by you but in no event earlier than the First
Time of Delivery (as hereinafter defined) or, unless you and the
Company otherwise agree in writing earlier than two or later than ten
business days after the date of such notice. In the event you elect to
purchase all or a portion of the Optional Shares, the Company agrees to
furnish or cause to be furnished to you the certificates, letters and
opinions, and to satisfy all conditions set forth in Section 7 hereof
at each Subsequent Time of Delivery (as hereinafter defined).
3. OFFERING BY THE UNDERWRITERS. Upon the authorization by you of the
release of the Shares, the several Underwriters propose to offer the Shares for
sale upon the terms and conditions disclosed in the Prospectus.
4. DELIVERY OF SHARES; CLOSING. Certificates in definitive form for the
Shares to be purchased by each Underwriter hereunder, and in such denominations
and registered in such names as the Representative may request upon at least 48
hours prior notice to the Company, shall be delivered by or on behalf of the
Company to you for your account against payment by you of the purchase price
therefor by wire transfer of immediately available funds to an account
designated by the Company. The closing of the sale and purchase of the Shares
shall be held at the offices of Powell, Goldstein, Frazer & Murphy LLP, Atlanta,
Georgia. The time and date of such delivery and payment shall be, with respect
to the Firm Shares, at 10:00 a.m., Atlanta, Georgia time, on the 3rd (or if the
Firm Shares are priced, as contemplated by Rule 15c6-1(c) under the Exchange
Act, after 4:30 p.m., Washington, D.C. time, on the 4th) full business day after
the execution of this Agreement or at such other legally permissible time and
date as you and the Company may agree upon in writing, and, with respect to the
Optional Shares, at 10:00 a.m., Atlanta, Georgia time, on the date specified by
you in the written notice given by you of the Underwriters' election to purchase
all or part of the Optional Shares, or at such other time and date as you and
the Company may agree upon in writing as provided in Section 2 herein. Such time
and date for delivery of the Firm Shares is herein called the "First Time of
Delivery," such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called a "Subsequent Time of Delivery," and
each such time and date for delivery is herein called a "Time of Delivery." The
Company will make such certificates available for checking and packaging at
least 24 hours prior to each Time of Delivery at your office at the address set
forth above or such other location designated by you to the Company. If the
Representative so elects, delivery of the Firm Shares and the Optional Shares,
if any, may be
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<PAGE> 11
made by credit through full fast transfer to the accounts at the Depositary
Trust Company designated by the Representative.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Underwriters:
(a) The Company shall comply with the provisions of and make
all requisite filings with the Commission pursuant to and in accordance
with Rule 430A and subparagraph (1) (or, if applicable and if consented
to by you, subparagraph (4)) of Rule 424(b) not later than the earlier
of (i) the second business day following the execution and delivery of
this Agreement or (ii) the date on which the Prospectus is first used
after the Registration Statement is declared effective. The Company
will advise you promptly of any such filing pursuant to Rules 430A or
424(b).
(b) The Company will not file with the Commission the
Prospectus or any amendment or supplement to the Prospectus or any
amendment to the Registration Statement unless you have received a
reasonable period of time to review any such proposed amendment or
supplement and consented to the filing thereof and will use its best
efforts to cause any such amendment to the Registration Statement to be
declared effective as promptly as possible. Upon the request of the
Representative or counsel for the Representative, the Company will
promptly prepare and file with the Commission, in accordance with the
Rules and Regulations, any amendments to the Registration Statement or
amendments or supplements to the Prospectus that may be necessary or
advisable in connection with the distribution of the Shares by the
Underwriters and will use its best efforts to cause any such amendment
to the Registration Statement to be declared effective as promptly as
possible. If required, the Company will file any amendment or
supplement to the Prospectus with the Commission in the manner and
within the time period required by Rule 424(b) under the Securities
Act. The Company will advise the Representative, promptly after
receiving notice thereof, of the time when the Registration Statement
or any amendment thereto has been filed or declared effective or the
Prospectus or any amendment or supplement thereto has been filed and
will provide evidence to the Representative of each such filing or
effectiveness.
(c) The Company will advise you promptly after receiving
notice or obtaining knowledge of:
(i) the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or
any part thereof or any order preventing or suspending the use
of any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto;
(ii) the suspension of the qualification of the
Shares for offer or sale in any jurisdiction or of the
initiation or threatening of any proceeding for any such
purpose; or
11
<PAGE> 12
(iii) any request made by the Commission or any
securities authority of any other jurisdiction for amending
the Registration Statement, for amending or supplementing the
Prospectus or for additional information.
The Company will use its best efforts to prevent the issuance of any
such stop order and, if any such stop order is issued, to obtain the
withdrawal thereof as promptly as possible.
(d) If during the period in which a prospectus is required by
law to be delivered by the Underwriters or dealers, any events shall
have occurred as a result of which, in the judgment of the Company or
the opinion of the Underwriters, the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, or if for any reason it is necessary during such
same period to amend or supplement the Prospectus to comply with the
Securities Act or the Rules and Regulations or any law, the Company
will promptly notify you and upon your request (but at the Company's
expense) prepare and file with the Commission and any state or other
governmental securities commissions in jurisdictions where the Shares
have been sold by the Underwriters, an amendment or supplement to the
Prospectus that corrects such statement or omission or effects such
compliance and will furnish without charge to each of the Underwriters
and to any dealer in securities, as many copies of such amended or
supplemented Prospectus as you may from time to time reasonably
request. Neither your consent to, nor the Underwriters' delivery of,
any such amendment or supplement shall constitute a waiver of any of
the conditions set forth in Section 7.
(e) The Company promptly from time to time will take such
action as you may reasonably request to qualify the Shares for offering
and sale under the securities or blue sky laws of such jurisdictions as
you may request and will continue such qualifications in effect for as
long as may be necessary to complete the distribution of the Shares,
provided that in connection therewith the Company shall not be required
to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction. In the event that the
qualification of the Shares in any jurisdiction is suspended, the
Company shall so advise the Representative promptly in writing.
(f) The Company will deliver to, or upon the order of, the
Representative, from time to time, as many copies of the Preliminary
Prospectus as the Representative may reasonably request. The Company
will deliver to, or upon the order of, the Representative, during the
period when delivery of a Prospectus is required under the Securities
Act, as many copies of the Prospectus in final form, or as thereafter
amended or supplemented, as the Representative may reasonably request.
The Company will deliver to the Representative at or before the Time of
Delivery, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will
deliver to the Representative such number of copies of the Registration
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<PAGE> 13
Statement (including such number of copies of the exhibits filed
therewith that may be reasonably requested), and of all amendments
thereto, as the Representative may reasonably request.
(g) The Company will, from time to time, after the effective
date of the Registration Statement file with the Commission such
reports as are required by the Securities Act, the Exchange Act and the
Rules and Regulations, and the Company agrees to keep the Common Stock
registered pursuant to the Exchange Act for at least five years after
the date hereof. The Company shall also file with foreign, state and
other governmental securities commissions in jurisdictions where the
Shares have been sold by the Underwriters such reports as are required
to be filed by the securities acts and the regulations of those
jurisdictions.
(h) As soon as practicable, but in any event not later than
the last day of the 13th month after the effective date of the
Registration Statement, the Company will make generally available to
its security holders an earnings statement (which need not be audited)
in reasonable detail covering a period of at least 12 consecutive
months beginning after the effective date of the Registration
Statement, complying with Section 11(a) of the Securities Act and the
Rules and Regulations and will advise you in writing when such
statement has been so made available.
(i) The Company will, for a period of five years from the Time
of Delivery, deliver to the Representative copies of annual reports and
copies of all other documents, reports and information furnished by the
Company to its shareholders or filed with the NASD or any securities
exchange pursuant to the requirements of such exchange or with the
Commission pursuant to the Securities Act or the Exchange Act. The
Company will deliver to the Representative similar reports with respect
to significant subsidiaries, as that term is defined in the Rules and
Regulations, which are not consolidated in the Company's financial
statements.
(j) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, the Company will not, without your prior written consent,
offer, pledge, issue, sell, contract to sell, grant any option for the
sale of, or otherwise dispose of (or announce any offer, pledge, sale,
grant of an option to purchase or other disposition), directly or
indirectly, any shares of the Common Stock or securities convertible
into, exercisable or exchangeable for, shares of the Common Stock,
except as provided in Section 2 and except as described in the
Prospectus.
(k) Neither the Company nor any of its organizers, officers,
directors or affiliates will:
(i) take, directly or indirectly, prior to the
closing of the purchase and sale of the Shares, any action
designed to cause or to result in, or that might
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<PAGE> 14
reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Shares;
(ii) sell, bid for, purchase or pay anyone any
compensation for soliciting purchases of, the Shares; or
(iii) pay or agree to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
(l) The Company will apply the net proceeds from the offering
in the manner set forth under the heading "Use of Proceeds" in the
Prospectus, including the payment of the full amount required for the
capitalization of the Bank, and will timely report such use of proceeds
pursuant to Item 701 of Regulation S-B or S-K in its periodic reports
filed pursuant to Section 13(a) and 15(d) of the Exchange Act in
accordance with Rule 463 of the Securities Act or any successor
provision.
(m) If at any time during the 60-day period after the
Registration Statement becomes effective, any rumor, publication or
event relating to or affecting the Company shall occur as a result of
which in your reasonable opinion the market price of the Common Stock
has been or is likely to be materially affected (regardless of whether
such rumor, publication or event necessitates a supplement to or
amendment of the Prospectus) and after written notice from you advising
the Company to the effect set forth above, the Company agrees to
forthwith prepare, consult with you concerning the substance of, and
disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor,
publication or event.
(n) The Company will cause the Shares to be quoted on the
Nasdaq OTC Bulletin Board (or a stock exchange acceptable to the
Representative) at each Time of Delivery and for at least three years
from the date hereof.
6. EXPENSES. The Company will pay all costs and expenses incident to
the performance of its obligations under this Agreement, whether or not the
transactions contemplated hereby are consummated or this Agreement is terminated
pursuant to Section 10 hereof, including without limitation all costs and
expenses incident to:
(a) The fees, disbursements and expenses of the Company's
counsel and accountants in connection with the registration of the
Shares under the Securities Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement
(including all amendments thereto), any Preliminary Prospectus, the
Prospectus and any amendments and supplements thereto, this Agreement
and any blue sky memoranda;
(b) The delivery of copies of the foregoing documents to the
Underwriters;
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<PAGE> 15
(c) The filing fees of the Commission and the NASD relating to
the Shares;
(d) The preparation, issuance and delivery to the Underwriters
of any certificates evidencing the Shares, including transfer agent's
and registrar's fees;
(e) The qualification of the Shares for offering and sale
under state securities and blue sky laws, including filing fees and
fees and disbursements of counsel for the Underwriters relating
thereto;
(f) Any expenses of listing the Shares on the Nasdaq OTC
Bulletin Board (or such stock exchange as the Shares may be listed);
(g) Any expenses for travel, lodging and meals incurred by the
Company and any of its organizers, officers, directors and employees in
connection with any meetings with prospective investors in the Shares.
It is understood, however, that, except as provided in this Section 6,
Section 8 and Section 10 hereof, the Underwriters will pay all of their
own costs and expenses, including the fees of their counsel (other than
those related to qualification of the Shares for offering and sale
under state securities or blue sky laws), stock transfer taxes on
resale of any Shares by them, and their advertising expenses related to
the offer and sale of the Shares.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder to purchase and pay for the Shares to be delivered at
each Time of Delivery shall be subject, in their discretion, to the accuracy of
the representations and warranties of the Company contained herein as of the
date hereof and as of such Time of Delivery, to the accuracy of the statements
of Company officers made pursuant to the provisions hereof, to the performance
by the Company of its covenants and agreements hereunder and to the following
additional conditions precedent:
(a) The Registration Statement as amended to date shall have
become effective prior to the execution of this Agreement or at such
later date and/or time as shall have been consented to by you in
writing. If required, the Prospectus and any amendment or supplement
thereto shall have been filed with the Commission pursuant to Rule
424(b) within the applicable time period prescribed for such filing and
in accordance with Section 5(a) of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceedings for that purpose
shall have been instituted, threatened or, to the knowledge of the
Company and the Representative, contemplated by the Commission. All
requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction.
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<PAGE> 16
(b) Powell, Goldstein, Frazer & Murphy LLP, counsel for the
Underwriters, shall have furnished to you such opinion or opinions,
dated such Time of Delivery, with respect to such matters as you may
reasonably require and which are customary, and the Company shall have
furnished to such counsel such documents as they reasonably request for
the purpose of enabling them to pass upon such matters.
(c) You shall have received an opinion, dated such Time of
Delivery, of Troutman Sanders LLP, counsel for the Company in form and
substance satisfactory to you and your counsel, to the effect that:
(i) The Company has been duly incorporated, is
validly existing as a corporation under the laws of the State
of Georgia and has the corporate power and authority to own or
lease its properties and conduct its business as described in
the Registration Statement and the Prospectus and to enter
into this Agreement and perform its obligations hereunder. The
Company is duly qualified to transact business as a foreign
corporation where required and where failure to so qualify
would have a material adverse effect on the Company.
(ii) The Company has received evidence of the receipt
of each of the Regulatory Approvals.
(iii) The Bank is a national banking association in
organization under the laws of the United States of America
and, upon the issuance of a charter by the OCC, will have the
corporate power and authority to own or lease its properties
and conduct its business as described in the Registration
Statement and the Prospectus.
(iv) The Company's authorized, issued and outstanding
capital stock is as disclosed under the caption
"Capitalization" in the Prospectus. None of the issued shares
has been issued in violation of or subject to any preemptive
rights provided for by law, agreement or the Company's
Articles of Incorporation or Bylaws.
(v) Upon the issuance of a charter by the OCC, the
shares of capital stock of the Bank will be issued only to the
Company free and clear of any liens, claims or encumbrances of
any kind, and the Bank will become a wholly owned subsidiary
of the Company.
(vi) The Shares to be sold by the Company have been
duly authorized and, when issued and delivered against payment
therefor as provided herein, will be validly issued and fully
paid and nonassessable and will conform to the description of
the Common Stock contained in the Prospectus. The Underwriters
will receive valid title to the Shares to be issued and
delivered by the Company pursuant to this Agreement, free and
clear of all liens, encumbrances, claims,
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<PAGE> 17
security interests, restrictions, shareholders' agreements and
voting trusts whatsoever.
(vii) To the knowledge of such counsel, the Company
does not have outstanding any options to purchase, or any
rights or warrants to subscribe for, or any securities or
obligations convertible into, or any contracts or commitments
to issue or sell any capital stock, and there are no
preemptive rights or other rights to subscribe for or purchase
any capital stock of the Company, or any restriction upon the
transfer of, the Shares pursuant to the Company's Articles of
Incorporation or Bylaws or any agreement or other instrument
to which the Company is a party or by which it may be bound,
except as described in the Prospectus. To the knowledge of
such counsel, neither the filing of the Registration Statement
nor the offer or sale of the Shares as contemplated by this
Agreement gives rise to any rights for or relating to the
registration of any of the Common Stock or any other
securities of the Company.
(viii) The issue and sale of the Shares being issued
at such Time of Delivery and the performance of this Agreement
and the consummation of the transactions herein contemplated
will not conflict with, or (with or without the giving of
notice or the passage of time or both) result in a breach or
violation of any of the terms or provisions of, or constitute
a default under any document or agreement which is an Exhibit
to the Registration Statement, or violate any provision of the
Articles of Incorporation, Articles of Association, Bylaws or
other governing instruments of the Company or the Bank as the
case may be, or any statute, rule or regulation or, to such
counsel's knowledge after diligent inquiry, any order,
judgment or decree of any court or governmental agency or body
having jurisdiction over the Company or the Bank or any of
their respective properties or assets.
(ix) No consent, approval, authorization or order
from, or registration, qualification or filing with, any
governmental agency or body or third party is required for the
issue and sale of the Shares or the consummation of the
transactions contemplated by this Agreement, except (A) the
registration of the Shares under the Securities Act and such
as may be required by the NASD and under state securities or
blue sky laws in connection with the offer, sale and
distribution of the Shares by the Underwriters, and (B) as
required in connection with the Regulatory Approvals.
(x) This Agreement has been duly authorized, executed
and delivered by the Company and constitutes the valid and
binding agreement of the Company enforceable against the
Company in accordance with its terms subject, as to
enforcement, to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws relating to
or affecting the enforcement of creditors' rights generally
and to general equitable principles, and except as the
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<PAGE> 18
enforceability of rights to indemnity and contribution under
this Agreement may be limited under applicable securities laws
and further subject to 12 U.S.C.ss.1818(b)(6)(D) and similar
bank regulatory powers and to the application of the public
policy underlying such laws.
(xi) The Company and the Bank have obtained or have
filed for all licenses, consents and approvals, and have
satisfied or have taken all action required at this time to
satisfy all eligibility and other similar requirements imposed
by federal and state regulatory bodies, administrative
agencies or other governmental bodies, agencies or officials,
in each case necessary for the conduct of the business in
which they are engaged or are contemplated to be engaged as
described in the Prospectus (except where the failure to have
any such licenses, consents, and approvals, or to have
satisfied or taken such action to satisfy the requirements,
individually or in the aggregate, would not have a material
adverse effect on the business, properties, operations, or
financial condition of the Company or its subsidiaries, taken
as a whole). With respect to any necessary licenses, consents
and approvals, and any necessary eligibility and other similar
requirements that the Company or the Bank does not have at
this time, (A) all applications therefor are, to such
counsel's knowledge, complete and accurate, and have been
filed with the appropriate regulatory authorities, and (B)
counsel knows of no reason why the same will not be received
or satisfied prior to the time the same are required to
conduct business as described in the Prospectus.
(xii) To such counsel's knowledge after diligent
inquiry, there is not pending or threatened any action, suit,
proceeding, inquiry or investigation, to which the Company or
the Bank is a party, or to which property of the Company or
the Bank is subject, before or brought by any court or
governmental agency or body.
(xiii) To the knowledge of such counsel, neither the
Company nor the Bank is in violation of any law, ordinance,
administrative or governmental rule or regulation applicable
to the Company or the Bank, or any decree of any court or
governmental agency or body having jurisdiction over the
Company or the Bank, except where such violation does not and
will not have a material adverse effect on the Company and the
Bank as a whole.
(xiv) The Registration Statement and the Prospectus
and each amendment or supplement thereto (other than the
financial statements and schedules and other financial
information included therein, as to which such counsel need
express no opinion), as of their respective effective or issue
dates, complied as to form in all material respects with the
requirements of the Securities Act and the Rules and
Regulations. The descriptions in the Registration Statement
and the Prospectus of statutes, rules and regulations are
accurate and fairly present the information required to be
shown. Such counsel does not know
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<PAGE> 19
of any statutes, rules, regulations or legal or governmental
proceedings required to be described in the Registration
Statement or Prospectus that are not described as required or
of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or to be
filed as exhibits to the Registration Statement which are not
described and filed as required.
(xv) The Registration Statement and all
post-effective amendments thereto have become effective under
the Securities Act; any required filing of the Prospectus
pursuant to Rule 430A and Rule 424(b) has been made in the
manner and within the time period required by such rules. To
such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or any part
thereof has been issued and, to such counsel's knowledge, no
proceedings for that purpose have been instituted or
threatened or are contemplated by the Commission.
(xvi) The Company is not, and will not be as a result
of the consummation of the transactions contemplated by this
Agreement, an "investment company," or a company "controlled"
by an "investment company," within the meaning of the
Investment Company Act of 1940.
Such counsel shall also state that no facts have come
to their attention which lead them to believe that, as of its
effective date, the Registration Statement or any further
amendment thereto made by the Company prior to the date hereof
(other than the financial statements and related schedules
therein or other financial data derived from accounting
records, as to which they need express no opinion) contained
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading or that, as of its
date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to the date hereof (other
than the financial statements and related schedules therein or
other financial data derived from accounting records, as to
which they need express no opinion) contained an untrue
statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading
or that, as of the date hereof, either the Registration
Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to the date
hereof (other than the financial statements and related
schedules therein or other financial data derived from
accounting records, as to which they need express no opinion)
contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading.
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<PAGE> 20
In rendering any such opinion, such counsel may rely,
as to matters of fact, to the extent such counsel deem proper,
on certificates of responsible officers of the Company and
public officials.
(d) You shall have received from Mauldin & Jenkins, LLC,
letters dated, respectively, the date of this Agreement and the
effective date of the most recently filed post-effective amendment to
the Registration Statement and also at each Time of Delivery, in form
and substance satisfactory to you, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement
and the Prospectus.
(e) You shall have received at each Time of Delivery a
certificate or certificates of the President and Chief Executive
Officer and the Chief Financial Officer of the Company to the effect
that:
(i) the representations and warranties of the Company
in Section 1 of this Agreement are true and correct, as if
made at and as of the First Time of Delivery or the Subsequent
Time of Delivery, as the case may be, and the Company has
complied with all the agreements and covenants and satisfied
all the conditions on its part to be performed or satisfied at
or prior to the Time of Delivery and as to such other matters
as you may reasonably request;
(ii) no stop order suspending the effectiveness of
the Registration Statement has been issued, and no proceedings
for that purpose have been initiated or are pending, or to
their knowledge, contemplated under the Securities Act;
(iii) all filings required by Rule 424 and Rule 430A
of the Rules and Regulations have been made;
(iv) they have carefully examined the Registration
Statement and the Prospectus, and any amendments or
supplements thereto, and in his or her opinion, such documents
do not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances under which they were made; and
(v) since the effective date of the Registration
Statement, there has occurred no event required to be set
forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not been so set forth.
(f) Since the date of the latest audited financial statements
included in the Prospectus, neither the Company nor the Bank shall have
sustained (i) any loss or
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<PAGE> 21
interference with their respective businesses from fire, explosion,
flood, hurricane or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as disclosed in or contemplated by the
Prospectus, or (ii) any change, or any development involving a
prospective change (including without limitation a change in management
or control of the Company), in or affecting the position (financial or
otherwise), results of operations, net worth or business prospects of
the Company and the Bank, otherwise than as disclosed in or
contemplated by the Prospectus (including any amendment), the effect of
which, in either such case, is in your judgment so material and adverse
as to make it impracticable or inadvisable to proceed with the
purchase, sale and delivery of the Shares being delivered at such Time
of Delivery as contemplated by the Registration Statement, as amended
as of the date hereof.
(g) Subsequent to the date hereof, there shall not have
occurred any of the following:
(i) any suspension or limitation in trading in
securities generally on the New York Stock Exchange or the
over-the-counter market (other than normal market breaks or
cooling periods), or any setting of minimum prices for trading
on such exchange, or if trading in any securities of the
Company has been suspended by the Commission, or limitations
on prices for trading (other than limitations on hours or
numbers of days of trading) have been fixed, or maximum ranges
for prices for securities have been required, by the Nasdaq
OTC Bulletin Board or the NASD or by order of the Commission
or any other governmental authority;
(ii) a moratorium on commercial banking activities in
New York declared by either federal or state authorities;
(iii) any major outbreak or major escalation of
hostilities involving the United States, declaration by the
United States of a national emergency (other than with respect
to natural disasters) or war or any other national or
international calamity or emergency or any material adverse
change in general economic, political or financial conditions
if the effect of any such event specified in this clause (iii)
in your judgment makes it impracticable or inadvisable to
proceed with the purchase, sale and delivery of the Shares
being delivered at such Time of Delivery as contemplated by
the Registration Statement.
(h) The Shares shall be approved for quotation on the Nasdaq
OTC Bulletin Board (or a stock exchange acceptable to the
Representative) when issued.
(i) The Company shall have furnished the Representative with
evidence of its receipt of each of the Regulatory Approvals.
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(j) The Representative shall have received the Lockup
Agreements as described in Section 1(v).
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under
the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon:
(i) any untrue statement or alleged untrue statement
made by the Company in Section 1 of this Agreement;
(ii) any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration
Statement or any amendment thereto, any Preliminary Prospectus
or the Prospectus or any amendment or supplement thereto, or
(B) any application or other document, or any amendment or
supplement thereto, executed by the Company or based upon
written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify the Shares under
the securities or blue sky laws thereof or filed with the
Commission or any securities association or securities
exchange (each an "Application"); or
(iii) the omission or alleged omission to state in
the Registration Statement or any amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or any Application, a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each of
the Underwriters for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating,
defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or
action; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or
omission or alleged omission made in the Registration
Statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement
thereto or any Application in reliance upon and in conformity
with written information furnished to the Company by any of
the Underwriters expressly for inclusion in the Prospectus
beneath the headings "Underwriting" and "Shares Eligible For
Future Sale." The Company will not, without the prior written
consent of each of the Underwriters, settle or compromise or
consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding (or related cause
of action or portion thereof) in respect of which
indemnification may be sought hereunder
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(whether or not such Underwriter is a party to such claim,
action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of
such Underwriter from all liability arising out of such claim,
action, suit or proceeding or related cause of action or
portion thereof.
(b) Each of the Underwriters agrees to indemnify and hold
harmless the Company and its officers, directors, agents,
representatives and affiliates against any losses, claims, damages or
liabilities to which the Company or its officers, directors, agents,
representatives and affiliates may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment thereto,
any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto or any Application, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by any of
the Underwriters through the Representative expressly for inclusion in
the Prospectus beneath the headings "Underwriting" and "Shares Eligible
For Future Sale." In addition, the Underwriters will reimburse the
Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such loss,
claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under
subsection (a) and (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify
the indemnifying party in writing of the commencement thereof; but the
omission to so notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to
the indemnifying party); provided, however, that if the defendants in
any such action included the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that
there may be one or more legal defenses available to it or other
indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnifying party shall not
have the right to assume the defense of such action on behalf of such
indemnified party and such indemnified party shall have the right to
select separate counsel to defend such action on behalf of such
indemnified party. After such notice from the indemnifying party to
such indemnified party of its election to so assume the defense of an
action and
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approval by such indemnified party of counsel appointed to defend such
action, the indemnifying party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses, other than
reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense of the action, unless:
(i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next
preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not
be liable for the expenses of more than one separate counsel
(in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction
arising out of the same general allegations or circumstances,
which separate counsel shall be designated by the
Representative in the case of indemnity arising under
paragraph (a) of this Section 8) or
(ii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense
of the indemnifying party.
Nothing in this Section 8(c) shall preclude an indemnified party from
participating at its own expense in the defense of any such action so
assumed by the indemnifying party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities
(or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Underwriters.
The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. The Company and the
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Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were determined by pro
rata allocation (even if the Underwriters were treated as one for such
purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
subsection (d), the Underwriters shall not be required to contribute
any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company under this Section 8 shall
be in addition to any liability which the Company may otherwise have
and shall extend, upon the same terms and conditions, to each person,
if any, who controls any of the Underwriters within the meaning of the
Securities Act. The obligations of the Underwriters under this Section
8 shall be in addition to any liability which the Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to
each officer and director of the Company and to each person, if any,
who controls the Company within the meaning of the Securities Act.
9. DEFAULT OF UNDERWRITERS.
(a) If any of the Underwriters defaults in its obligation to
purchase Shares at a Time of Delivery, you may in your discretion
arrange for you or another party, or other parties to purchase such
shares on the terms contained herein. If within 36 hours after such
default by any of the Underwriters you do not arrange for the purchase
of such Shares, the Company shall be entitled to a further period of 36
hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company
that you have so arranged for the purchase of such Shares, or the
Company notifies you that it has so arranged for the purchase of such
Shares, you or the Company shall have the right to postpone a Time of
Delivery for a period of not more than seven days in order to effect
whatever change is made necessary thereby in the Registration Statement
or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration
Statement or the Prospectus that in your opinion may thereby be made
necessary. The cost of preparing, printing and filing any such
amendments shall be paid for by the Underwriters. The term
"Underwriter" as used
25
<PAGE> 26
in this Agreement shall include any person substituted under this
Section as if such person had originally been a party to this Agreement
with respect to such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by
you and the Company as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed
one-eleventh of the aggregate number of Shares to be purchased at such
Time of Delivery, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and,
in addition, to require each non-defaulting Underwriter to purchase its
pro rata share (based on the number of Shares which such Underwriter
agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been
made, but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. TERMINATION.
(a) This Agreement may be terminated with respect to the Firm
Shares or any Optional Shares in the sole discretion of the
Representative by notice to the Company given prior to the First Time
of Delivery or any Subsequent Time of Delivery, respectively, in the
event that:
(i) any condition to the obligations of the
Underwriters set forth in Section 7 hereof has not been
satisfied; or
(ii) the Company shall have failed, refused or been
unable to deliver the Shares or to perform all obligations and
satisfy all conditions on its part to be performed or
satisfied hereunder at or prior to such Time of Delivery, in
either case other than by reason of a default by any of the
Underwriters.
If this Agreement is terminated pursuant to this Section 10(a), the
Company will reimburse the Underwriters upon demand for all
out-of-pocket expenses (including counsel fees and disbursements) that
shall have been incurred by it in connection with the proposed purchase
and sale of the Shares. The Company shall not in any event be liable to
any of the Underwriters for the loss of anticipated profits from the
transactions covered by this Agreement.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by
you and the Company as provided in Section 9(a), the aggregate number
of such Shares which remain unpurchased exceeds one-eleventh of the
aggregate number of Shares to be purchased at such Time of Delivery, or
if the Company shall not exercise the right described in Section 9(b)
to require non-defaulting Underwriters to purchase Shares of a
defaulting Underwriter or Underwriters, then this Agreement (or, with
respect to a Subsequent Time of Delivery, the obligations
26
<PAGE> 27
of the Underwriters to purchase and of the Company to sell the Optional
Shares) thereupon will terminate, without liability on the part of any
nondefaulting Underwriter or the Company, except for the expenses to be
borne by the Company and the Underwriters as provided in Section 6
hereof and the indemnity and contribution agreements in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
11. SURVIVAL. The respective indemnities, agreements, representations,
warranties and other statements of the Company, its officers and the
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of the Underwriters or any controlling person referred to
in Section 8(e) or made by or on behalf of the Company, or any officer or
director or controlling person of the Company referred to in Section 8(e), and
shall survive delivery of and payment for the Shares. The respective agreements,
covenants, indemnities and other statements set forth in Sections 6, 8 and 13
hereof shall remain in full force and effect, regardless of any termination or
cancellation of this Agreement.
12. NOTICES. All communications hereunder shall be in writing and, if
sent to the Underwriters, shall be mailed, delivered or faxed and confirmed in
writing to:
Wachovia Securities, Inc.
IJL Financial Center
201 North Tryon Street
Charlotte, North Carolina 28202
Attention: Investment Banking Department
Fax: (704) 379-9025
with a copy to:
Ronald W. Goff
Wachovia Securities, Inc.
Resurgens Plaza
945 E. Paces Ferry Road
Atlanta, Georgia 30326
Fax: (404) 240-5121
and
Kathryn L. Knudson, Esq.
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street, N.E.
Sixteenth Floor
Atlanta, Georgia 30303
Fax: (404) 572-6999
27
<PAGE> 28
and if sent to the Company, shall be mailed, delivered or faxed and confirmed in
writing to:
SouthernBank Holdings, Inc.
2090 Buford Highway
Suite 2A
Buford, Georgia 30518
Attention: President and Chief Executive Officer
Fax: (678) 482-4425
with a copy to:
Thomas O. Powell, Esq.
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
Fax: (404) 962-6658
13. RIGHT OF FIRST REFUSAL. The Company grants to the Representative an
unconditional right of first refusal to serve as exclusive or lead advisor to
the Company on all corporate finance transactions undertaken or considered by
the Company on a normal and customary fee basis for three years from the
effective date of the Prospectus. The Representative shall not be entitled to
more than one payment or fee in exchange for the waiver or termination of this
right of first refusal, and any payment or fee to waive or terminate the right
of first refusal shall be paid in cash and will not exceed the greater of (a)
one percent (1%) of the aggregate purchase price of the Shares purchased
pursuant to this Agreement, and (b) five percent (5%) of the underwriting
discount or commission paid in connection with the future financing (including
any over-allotment option that may be exercised).
14. REPRESENTATIVE. You will act for the several Underwriters in
connection with the transactions contemplated by this Agreement, and any action
under this Agreement taken by you will be binding upon all the Underwriters.
15. BINDING EFFECT. This Agreement shall be binding upon, and inure
solely to the benefit of, each of the Underwriters and the Company and to the
extent provided in Sections 8 and 10 hereof, the organizers, officers, directors
and controlling persons, as applicable, referred to therein and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Shares from the Underwriters shall be deemed a successor
or assign merely by reason of such purchase.
28
<PAGE> 29
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia without giving effect to any
provisions regarding conflicts of laws.
17. COUNTERPARTS. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
(Signatures Appear on Next Page)
29
<PAGE> 30
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one of the counterparts hereof, and upon
the acceptance hereof by Wachovia Securities, Inc., this letter will constitute
a binding agreement among the Underwriters and the Company.
Very truly yours,
SOUTHERNBANK HOLDINGS, INC.
By:
--------------------------
Name: D. Arnold Tillman, Jr.
Title: Chief Executive Officer
WACHOVIA SECURITIES, INC.
By:
----------------------
Name:
-------------------
Title:
------------------
30
<PAGE> 31
SCHEDULE I
SOUTHERNBANK HOLDINGS, INC.
1,250,000 SHARES
COMMON STOCK
<TABLE>
<CAPTION>
NUMBER OF
OPTIONAL SHARES
TOTAL NUMBER OF TO BE PURCHASED
FIRM SHARES TO IF MAXIMUM
UNDERWRITER BE PURCHASED OPTION EXERCISED
- ----------- ------------ ----------------
<S> <C> <C>
Wachovia Securities, Inc.
Total
</TABLE>
31
<PAGE> 1
EXHIBIT 23.1
CONSENT OF MAULDIN & JENKINS, LLC
CONSENT OF INDEPENDENT AUDITOR
We have issued our report, dated February 22, 2000, accompanying the financial
statements as of and for the period ended December 31, 1999 contained in the
Registration Statement on Form SB-2 of SouthernBank Holdings, Inc. (the
"Registration Statement") and the Prospectus constituting a part thereof (the
"Prospectus"). We consent to the use of the aforementioned report in the
Registration Statement and Prospectus, and to the use of our name as it appears
under the caption "Experts."
/s/ Mauldin & Jenkins, LLC
May 11, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-13-1999
<PERIOD-END> DEC-31-1999
<CASH> 19,690
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 44,662
<DEPOSITS> 0
<SHORT-TERM> 120,000
<LIABILITIES-OTHER> 7,596
<LONG-TERM> 0
0
0
<COMMON> 1
<OTHER-SE> (82,935)
<TOTAL-LIABILITIES-AND-EQUITY> 44,662
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 1,902
<INTEREST-INCOME-NET> (1,902)
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 81,042
<INCOME-PRETAX> (82,944)
<INCOME-PRE-EXTRAORDINARY> (82,944)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,944)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 20,855
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 66,138
<DEPOSITS> 0
<SHORT-TERM> 235,000
<LIABILITIES-OTHER> 4,122
<LONG-TERM> 0
0
0
<COMMON> 1
<OTHER-SE> (172,985)
<TOTAL-LIABILITIES-AND-EQUITY> 66,138
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 2,878
<INTEREST-INCOME-NET> (2,878)
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 90,172
<INCOME-PRETAX> (93,050)
<INCOME-PRE-EXTRAORDINARY> (93,050)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93,050)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
