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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.1
TO
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number . . . . 33-14610
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TARA BANKSHARES CORPORATION
(Name of Small Business Issuer)
Georgia 58-1736696
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(State of incorporation) (I.R.S. Employer
identification No.)
6375 Highway 85, P.O. Box 775
Riverdale, Georgia 30274
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(Address of Principal Executive Offices)
Issuer telephone number, including area code: (770) 996-8272
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Securities registered pursuant to Section 12(b) of the Exchange Act:
NONE
----
Securities registered pursuant to Section 12(g) of the Exchange Act:
NONE
----
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No _____
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
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This issuer's revenues for its most recent fiscal year were $5,053,409.
The aggregate market value of voting stock of the registrant, held by persons
other than directors or executive officers, was $3,560,810 as of February 1,
1996, based on a per share price of $10.00 as of February 28, 1996, the date of
the last sale of stock of which management is aware. The basis of this
calculation does not constitute a determination by the registrant that all its
directors and executive officers are affiliates as defined in Rule 405.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of common
equity as of the last practicable date:
At March 15, 1996, there were 448,003 shares of the registrant's Common Stock,
$10.00 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1995 Annual Report to Shareholders are incorporated
by reference into Parts I, II, and III of this report and portions of the
registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders are
incorporated by reference into Part III of this report.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART I
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ITEM 1. DESCRIPTION OF BUSINESS.
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BUSINESS OF THE COMPANY AND THE BANK
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TARA BANKSHARES CORPORATION (the "Company") is a Georgia bank holding
company which provides through a single commercial bank subsidiary, TARA STATE
BANK (the "Bank"), banking services to individuals and businesses in the
southern half of metropolitan Atlanta, Georgia. The Company's executive office
is located at 6375 Highway 85, Riverdale, Georgia 30274, and its telephone
number is (770) 996-8272.
The Company was incorporated as a Georgia business corporation in 1987.
Through a reorganization on September 30, 1987, the Company acquired all of the
issued and outstanding common stock of the Bank in exchange for 280,000 shares
of the Company's common stock. In order to finance future expansion, the
Company commenced a stock offering on December 18, 1989. The offering was
completed on June 18, 1990, and the Company received net proceeds totalling
$3,943,628 from the sale of 168,003 shares. From the net proceeds of the stock
offering, the Company repaid a $2,000,000 note payable, in 1990.
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Because of its ownership of all of the issued and outstanding shares of the
common stock of the Bank, the Company is a "bank holding company" as that term
is defined under federal law in the Bank Holding Company Act of 1956, as amended
(the "Federal Bank Holding Company Act"), and under the bank holding company
laws of the State of Georgia (the "Georgia Bank Holding Company Act"). As a
bank holding company, the Company is subject to the applicable provisions of the
Federal Bank Holding Company Act and the Georgia Bank Holding Company Act as
well as to supervision by the Board of Governors of the Federal Reserve System
(the "Federal Reserve") and the State of Georgia Department of Banking and
Finance (the "Georgia Department").
The Company's primary business as a bank holding company is to manage the
business and affairs of its banking subsidiary. The Bank provides substantially
a full range of banking services to its customers. The Bank is organized under
the banking laws of the State of Georgia. It was formed in 1983 and opened for
business in March 1984. The Bank is not a member of the Federal Reserve System
and uses The Bankers Bank as its primary correspondent bank.
MARKET AREA
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The Bank's main office is located at 6375 Highway 85, Riverdale, Clayton
County, Georgia 30274, approximately four miles south of that road's
intersection with Interstate 75, a primary north-south arterial expressway of
Atlanta, and the same distance from Hartsfield Atlanta International Airport.
In June 1986, the Bank opened its first full-service branch office at 223 North
Main Street, Jonesboro, Clayton County, Georgia 30236, approximately five miles
southeast of the Riverdale headquarters. The Bank considers its primary market
area to be Clayton County in the southern half of metropolitan Atlanta, Georgia,
although the Bank maintains significant banking and lending relations with
customers in adjoining counties and the City of Atlanta. There is substantial
residential and commercial development in Clayton County and south suburban
Atlanta.
COMPETITION
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Recent legislation, together with other regulatory changes by the primary
regulators of the various financial institutions and competition from
unregulated entities, eliminated many traditional distinctions between
commercial banks, thrift institutions, and other providers of financial
services. Consequently, competition among financial institutions of all types is
virtually unlimited with respect to legal ability and authority to provide most
financial services.
Multistate and Atlanta-based commercial banks have many branches within the
Bank's primary market area. Moreover, the Bank encounters significant
competition in the immediate vicinity of its offices. Within three miles of the
Bank's Riverdale headquarters are branches of five of Georgia's seven largest
banks. Within three miles of the Bank's Jonesboro, Georgia branch are branches
of five of Georgia's seven largest banks. Each of these institutions has
significantly greater resources, higher lending limits (by virtue of their
greater capitalization), and a greater variety of banking services to offer than
does the Bank.
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In the Bank's primary market area, there are other independent suburban
institutions such as Southern Crescent Bank and Clayton County Federal Savings
and Loan. These institutions are being marketed as locally owned and
headquartered institutions providing personalized service not generally
available from larger banks. Delta Airlines, servicing nearby Hartsfield
Atlanta International Airport, sponsors a sizable credit union for its employees
and other persons and offers interest rates on deposits higher than the Bank
typically can offer. The Bank also competes with savings and loan associations,
credit unions, money market funds, and other financial institutions which
provide services similar to those provided by the Bank and which may have
competitive advantages as a result of being subject to different, and possibly
less stringent, regulatory requirements.
To compete with other financial institutions in its primary market area,
the Bank relies principally on personal contacts by its officers and directors
and on local advertising and promotional activities. The Bank offers many of the
financial services offered by its larger competitors but has not sought
authority from the Georgia Department to perform personal or corporate trust
services.
LENDING ACTIVITIES
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The Bank makes secured and unsecured commercial loans, principally to
smaller business enterprises, and extends consumer and commercial installment
loans to existing customers. The Bank also lends to a limited number of south
suburban Atlanta residential real estate contractors and developers. The Bank
makes loans outside Georgia only occasionally.
The Bank's commercial lending includes loans to smaller business ventures,
credit lines for working capital and short-term seasonal or inventory financing,
as well as occasional letters of credit. Commercial borrowers typically secure
their loans with assets of the business as well as personal guaranties of their
principals, often secured by second mortgages on their residences. The Bank's
commercial loans are generally in principal amounts between $10,000 and $100,000
and have variable rates of interest; a fixed interest rate is available for
loans of less than 12 months maturity. The Bank has made a significant amount of
commercial loans which are classified as real estate loans because their
security is improved commercial property, the purchase or improvement of which
is often financed therefrom. Such loans are for a term of years, although
rarely more than 10 years, over which period the principal thereof is amortized.
Risks associated with these loans can be significant. Risks include, but are
not limited to, fraud, bankruptcy, economic downturn, deteriorated or non-
existing collateral, and changes in interest rates.
The Bank provides commercial and consumer installment loans to its
customers. Such loans are typically of multiple-year duration, are secured by
the property financed thereby, and, if not variable rate, bear interest at a
rate tied to the Bank's cost of funds of equivalent maturity. Commercial
installment loans typically finance commercial equipment, while consumer
installment loans are typically for automobiles or home improvements. Consumer
installment loans have decreased in frequency as the Bank's customers establish
and then use lines of credit secured by their residences, and presently
constitute only one-third of the Bank's installment loans. Risks associated
with these loans include, but are not limited to, fraud, deteriorated or non-
existing collateral, general economic downturn, and customer financial problems.
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The Bank has a number of lines of credit secured by second mortgages on
residences. Changes in Federal income tax laws concerning the deductibility of
interest have encouraged home owners to borrow through secured credit lines
rather than by installment loans. Such lines are typically used by customers to
finance automobiles, home improvements and other significant capital
expenditures such as the financing of commercial endeavors. The Bank
occasionally makes residential mortgage loans to its customers and others who
are referred to the Bank by real estate agents. The Bank does not act as an
originating agent for residential mortgages for other institutions but
occasionally refers persons to another institution. The Bank does not make
mortgage loans for resale in secondary markets or to other institutions. Risks
involved with residential mortgage lending include, but are not limited to,
title defects, fraud, general real estate market deterioration, inaccurate
appraisals, violation of banking protection laws, interest rate fluctuations,
and financial deterioration of the borrower.
The Bank lends to several developers and general contractors in the south
suburban Atlanta residential real estate market, as well as occasionally to
individuals needing construction or permanent financing. Construction loans
generally have maturities of six months but are usually renewable for a second
six months and have a variable rate of interest. Construction loans are secured
by a security deed on the building lot and the house under construction, with
repayment due upon the completion of the house and, if built by a contractor,
its sale. The Bank also occasionally makes land development loans to certain
developers for the infrastructure of new residential subdivisions before those
developers or other contractors begin construction of individual residences.
Loans for construction can present a high degree of risk to the lender,
depending on, among other things, whether the developer can find builders to buy
the lots, whether the builder can obtain financing, whether the builder can sell
the home to a buyer, whether the buyer can obtain permanent financing, whether
the transaction produces income in the interim, and the nature of changing
economic conditions.
The Bank's Board of Directors establishes and periodically reviews the
Bank's lending policies and procedures. State banking regulations provide that
no secured loan relationship may exceed 25% of the Bank's total capital and no
unsecured loan relationship may exceed 15% of the Bank's total capital. The
Bank sells participation interests in loans to other lenders when a loan exceeds
the Bank's legal lending limits or in other cases, typically the secured portion
of a Small Business Administration ("SBA") guaranteed loan, when the Bank deems
sale appropriate. Risks associated with SBA loans include, but are not limited
to, credit risk, e.g., fraud, bankruptcy, economic downturn, deteriorated or
non-existing collateral and changes in interest rates, and operational risks,
e.g., failure of the Bank to adhere to SBA funding and servicing requirements in
order to secure and maintain the SBA guarantees and servicing rights.
As noted above, the Bank does a relatively modest amount of development and
construction lending and originates few mortgages for its or others' portfolios.
Consequently, the Bank earns its primary fee income from commercial lending
activities. The Bank also receives fees upon the sale of participation
interests in loans.
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DEPOSITS
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Checking, savings and money market accounts and other time accounts are the
primary sources of the Bank's funds for loans and investments. The Bank obtains
most of its deposits from individuals and from businesses in its market area.
On December 31, 1995, the Bank had a total of approximately 5,887 deposit
accounts consisting of 1,768 demand deposit accounts, 1,802 interest-bearing NOW
and savings accounts, 313 money market accounts, and 2,004 time accounts. At
that date, certificates of deposit of at least $100,000 represented
approximately 11.02% of total deposits, virtually none of which were held by
customers outside the Atlanta Area.
The Bank has not had to attract new or retain old deposits by paying
depositors rates of interest on certificates of deposit and money market
accounts significantly above rates paid by large Atlanta banks. In the future,
increasing competition among suburban Atlanta independent banks may cause the
Bank's interest margins to shrink. The Bank has never accepted deposits for
which a broker's commission was paid.
INVESTMENT ACTIVITIES
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After establishing necessary cash reserves and funding loans, the Bank
invests its remaining liquid assets in investments allowed under banking laws
and regulations. The Bank invests primarily in obligations of the United States
or obligations guaranteed as to principal and interest by the United States, and
other taxable securities and in certain obligations of states and
municipalities. The Bank also engages in Federal Funds transactions with its
principal correspondent banks and primarily acts as a net seller of such funds.
The sale of Federal Funds amounts to a short term loan from the Bank to another
bank. Risks associated with these investments include, but are not limited to,
mismanagement in terms of interest rate, maturity and concentration.
Traditionally, losses associated with the investment portfolio have been
minimal.
ASSET/LIABILITY MANAGEMENT
--------------------------
It is the objective of the Bank to manage its assets and liabilities to
provide a satisfactory, consistent level of profitability within the framework
of established cash, loan, investment, borrowing and capital policies. Certain
officers of the Bank are charged with the responsibility for developing and
monitoring policies and procedures that are designed to insure acceptable
composition of the asset/liability mix. It is the overall philosophy of
management to support asset growth primarily through growth of core deposits,
which include deposits of all categories made by individuals, partnerships and
corporations. Management of the Bank seeks to invest the largest portion of the
Bank's assets in commercial loans. The Bank's asset/liability mix is monitored
on a timely basis with a report reflecting interest-sensitive assets and
interest-sensitive liabilities being prepared and presented to the Bank's Board
of Directors on a bi-monthly basis. The objective of this policy is to manage
interest-sensitive assets and liabilities so as to minimize the impact of
substantial movements in interest rates on the Bank's earnings. See "Item 6 --
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Interest Rate Sensitivity."
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EMPLOYEES
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As of December 31, 1995, the Bank employed 30 full-time employees,
including 5 employees at its Jonesboro branch and 8 employees in its operation
department. The Company has no employees separate from the Bank. The Bank
considers its relationship with its employees to be good.
SUPERVISION AND REGULATION
--------------------------
Bank holding companies and banks are extensively regulated under both
Federal and state law. The following is a brief summary of certain statutes and
rules and regulations affecting the Company and the Bank. This summary is
qualified in its entirety by reference to the particular statute and regulatory
provision referred to below and is not intended to be an exhaustive description
of the statutes or regulations applicable to the business of the Company and the
Bank. Supervision, regulation and examination of the Company and the Bank by
the bank regulatory agencies are intended primarily for the protection of
depositors rather than shareholders of the Company.
Bank Holding Company Regulation
-------------------------------
The Company is a registered holding company under the Federal Bank Holding
Company Act and the Georgia Bank Holding Company Act and is regulated under such
acts by the Federal Reserve and by the Georgia Department, respectively.
As a bank holding company, the Company is required to file annual reports
with the Federal Reserve and the Georgia Department and such additional
information as the applicable regulator may require pursuant to the Federal and
Georgia Bank Holding Company Acts. The Federal Reserve and the Georgia
Department may also conduct examinations of the Company to determine whether the
institution is in compliance with both Bank Holding Company Acts and the
regulations promulgated thereunder.
The Federal Bank Holding Company Act also requires every bank holding
company to obtain prior approval from the Federal Reserve before acquiring
direct or indirect ownership or control of more than 5% of the voting shares of
any bank which is not already majority owned or controlled by that bank holding
company. Acquisitions of any additional banks would also require prior approval
from the Georgia Department.
On September 29, 1994, the President of the United States signed the
"Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994" (the
"Interstate Branching Act"). The Interstate Branching Act amends Federal law to
permit bank holding companies to acquire existing banks in any state effective
September 29, 1995, subject to certain deposit - percentage, aging requirements
and other restrictions. In addition, the Interstate Branching Act provides that
any interstate bank holding company is permitted to merge its various bank
subsidiaries into a single bank with interstate branches effective June 1, 1997.
By adopting legislation prior to that date, a state has the authority either to
"opt in" and evaluate the date after which interstate branching is permissible
or to "opt out" and prohibit interstate branching altogether.
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In response to the Interstate Branching Act, the Georgia legislature
adopted the "Georgia Interstate Banking Act," effective July 1, 1995, which
provides that (1) interstate acquisitions by institutions located in Georgia
will be permitted in states which also allow national interstate acquisitions,
and (2) interstate acquisitions of institutions located in Georgia will be
permitted by institutions located in states which also allow national interstate
acquisitions; provided, however, that if the board of directors of a Georgia
bank or bank holding company adopts a resolution to except such bank or bank
holding company from being acquired pursuant to the provisions of the Georgia
Interstate Banking Act and properly files a certified copy of such resolution
with the Georgia Department, such bank or bank holding company may not be
acquired by an institution located outside of the State of Georgia.
Additionally, in February 1996, the Georgia legislature adopted the
"Georgia Interstate Branching Act," which when signed by the Governor, will
permit Georgia-based banks and bank holding companies owning or acquiring banks
outside of Georgia and all non-Georgia banks and bank holding companies owning
or acquiring banks in Georgia the right to merge any lawfully acquired bank into
an interstate branch network. The Georgia Interstate Branching Act also allows
banks to establish de novo branch banks on a limited basis beginning July 1,
1996. Beginning July 1, 1998, the number of de novo bank branches which may be
established will no longer be limited.
In addition to having the right to acquire ownership or control of other
banks, the Company is authorized to acquire ownership or control of nonbanking
companies, provided the activities of such companies are so closely related to
banking or managing or controlling banks that the Federal Reserve considers such
activities to be proper to the operation and control of banks. Regulation Y,
promulgated by the Federal Reserve, sets forth those activities which are
regarded as closely related to banking or managing or controlling banks and,
thus, are permissible activities for bank holding companies, subject to approval
by the Federal Reserve in individual cases.
Federal Reserve policy requires a bank holding company to act as a source
of financial strength and to take measures to preserve and protect bank
subsidiaries in situations where additional investments in a troubled bank may
not be warranted. Under these provisions, a bank holding company may be required
to loan money to its subsidiaries in the form of capital notes or other
instruments which qualify for capital under regulatory rules. Any loans by the
holding company to such subsidiary banks are likely to be unsecured and
subordinated to such bank's depositors and perhaps to its other creditors.
The Company is also subject to various federal securities laws, including
the Securities Act of 1933 (the "1933 Act") and the Securities Exchange Act of
1934 (the "1934 Act"). The 1933 Act regulates the distribution or public
offering of securities, while the 1934 Act regulates trading in securities that
are already issued and outstanding. Both Acts provide civil and criminal
penalties for misrepresentations and omissions in the connection with the sale
of securities, and the 1934 Act also prohibits market manipulation and insider
trading. Pursuant to the 1934 Act, the Company files annual, quarterly and
current reports with the Securities and Exchange Commission.
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Bank Regulation
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The Bank operates as a bank organized under the laws of the State of
Georgia subject to examination by the Georgia Department. The Georgia Department
regulates all areas of the Bank's commercial banking operations including
reserves, loans, mergers, payment of dividends, interest rates, establishment of
branches, and other aspects of operations.
The Bank is also insured and regulated by the Federal Deposit Insurance
Corporation (the "FDIC"). The major functions of the FDIC with respect to
insured banks include paying depositors to the extent provided by law in the
event an insured bank is closed without adequately providing for payment of the
claims of depositors, acting as a receiver of state banks placed in receivership
when so appointed by state authorities, and preventing the continuance or
development of unsound and unsafe banking practices. In addition, the FDIC is
authorized to examine insured banks which are not members of the Federal Reserve
to determine the condition of such banks for insurance purposes. The FDIC also
approves conversions, mergers, consolidations and assumption of deposit
liability transactions between insured banks and noninsured banks or
institutions to prevent capital or surplus diminution in such transactions where
the resulting, continued or assumed bank is an insured nonmember state bank.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Bank Holding Company Act on any extension of
credit to the bank holding company or any of its subsidiaries, on investment in
the stock or other securities of the bank holding company or its subsidiaries,
and on the taking of such stock or securities as collateral for loans to any
borrower. In addition, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in connection with any
extension of credit or provision of any property or services.
Under Georgia law, a bank must obtain the approval of the Georgia
Department before cash dividends may be paid if (1) the total classified assets
at the most recent examination of such bank exceeded 80% of the equity capital,
(2) the aggregate amount of dividends declared or anticipated to be declared in
the calendar year exceeds 50% of the net profits, after taxes but before
dividends, for the previous calendar year or (3) the ratio of equity capital to
adjusted assets is less than 6%.
The Bank is also subject to the provisions of the Community Reinvestment
Act of 1977, which requires the appropriate federal bank regulatory agency, in
connection with its regular examination of a bank, to assess the Bank's record
in meeting the credit needs of the communities served by the Bank, including
low-and moderate-income neighborhoods.
Capital Requirements
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General
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Regulatory agencies measure capital adequacy within a framework that makes
capital requirements sensitive to the risk profile of the individual banking
institutions. The guidelines define capital as either Tier 1 capital (primarily
shareholders equity) or Tier 2 capital (certain debt
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instruments and a portion of the reserve for loan losses). There are two
measures of capital adequacy for bank holding companies and their subsidiary
banks: the Tier 1 leverage ratio and the risk-based capital requirements. Bank
holding companies and their subsidiary banks must maintain a minimum Tier 1
leverage ratio of 4%. In addition, Tier 1 capital must equal 4% of risk-
weighted assets, and total capital (Tier 1 plus Tier 2) must equal 8% of risk-
weighted assets. These are minimum requirements, however, and institutions
experiencing internal growth or making acquisitions, as well as institutions
with supervisory or operational weaknesses, will be expected to maintain capital
positions well above these minimum levels.
At December 31, 1995, the Bank had a Tier 1 leverage ratio of 8.55%, a Tier
1 risk-based ratio of 14.21%, and a Total risk-based ratio of 15.48%.
Prompt Corrective Action
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The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"FDIC Act") imposes a regulatory matrix which requires the federal banking
agencies to take prompt corrective action to deal with depository institutions
that fail to meet their minimum capital requirements or are otherwise in a
troubled condition. The prompt corrective action provisions require
undercapitalized institutions to become subject to an increasingly stringent
array of restrictions, requirements and prohibitions, as their capital levels
deteriorate and supervisory problems mount. Should these corrective measures
prove unsuccessful in recapitalizing the institution and correcting its
problems, the FDIC Act mandates that the institution be placed in receivership.
Pursuant to regulations promulgated under the FDIC Act, the corrective
actions that the banking agencies either must or may take are tied primarily to
an institution's capital levels. In accordance with the framework adopted by
the FDIC Act, the banking agencies have developed a classification system,
pursuant to which all banks and thrifts will be placed into one of five
categories: well-capitalized institutions, adequately capitalized institutions,
undercapitalized institutions, significantly undercapitalized institutions and
critically undercapitalized institutions. The capital thresholds established
for each of the categories are as follows:
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<TABLE>
<CAPTION>
=====================================================================================================
RISK-BASED TIER 1 RISK-
CAPITAL CATEGORY TIER 1 CAPITAL CAPITAL BASED CAPITAL OTHER
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Well Capitalized 5% or more 10% or more 6% or more Not subject to
a capital
directive
- -----------------------------------------------------------------------------------------------------
Adequately Capitalized 4% or more 8% or more 4% or more ---
- -----------------------------------------------------------------------------------------------------
Undercapitalized less than 4% less than 8% less than 4% ---
- -----------------------------------------------------------------------------------------------------
Significantly less than 3% less than 6% less than 3% ---
Undercapitalized
- -----------------------------------------------------------------------------------------------------
Critically 2% or less --- --- ---
Undercapitalized tangible equity
=====================================================================================================
</TABLE>
The undercapitalized, significantly undercapitalized and critically
undercapitalized categories overlap; therefore, a critically undercapitalized
institution would also be an undercapitalized institution and a significantly
undercapitalized institution. This overlap ensures that the remedies and
restrictions prescribed for undercapitalized institutions will also apply to
institutions in the lowest two categories.
The down-grading of an institution's category is automatic in two
situations: (1) whenever an otherwise well-capitalized institution is subject
to any written capital order or directive, and (2) where an undercapitalized
institution fails to submit or implement a capital restoration plan or has its
plan disapproved. The Federal banking agencies may treat institutions in the
well-capitalized, adequately capitalized and undercapitalized categories as if
they were in the next lower capital level based on safety and soundness
considerations relating to factors other than capital levels.
All insured institutions regardless of their level of capitalization are
prohibited by the FDIC Act from paying any dividend or making any other kind of
capital distribution or paying any management fee to any controlling person if
following the payment or distribution the institution would be undercapitalized.
While the prompt corrective action provisions of the FDIC Act contain no
requirements or restrictions aimed specifically at adequately capitalized
institutions, other provisions of the FDIC Act and the agencies' regulations
relating to deposit insurance assessments, brokered deposits and interbank
liabilities treat adequately capitalized institutions less favorably than those
that are well-capitalized.
At December 31, 1995, the Company and the Bank had the requisite capital
levels to qualify as well-capitalized.
The FDIC has adopted or currently proposes to adopt other rules pursuant to
the FDIC Act that include: (1) real estate lending standards for banks, which
would provide guidelines concerning loan-to-value ratios for various types of
real estate loans; (2) revision to the risk-based capital rules to account for
interest rate risk, concentration of credit risk and the risks proposed by
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"non-traditional activities"; (3) rules requiring depository institutions to
develop and implement internal procedures to evaluate and control credit and
settlement exposure to their correspondent banks; (4) a rule restricting the
ability of depository institutions that are not well capitalized from accepting
brokered deposits; (5) rules addressing various "safety and soundness" issues,
including operations and managerial standards for asset quality, earnings and
stock valuations, and compensation standards for the officers, directors,
employees and principal shareholders of the depository institutions; (6) rules
mandating enhanced financial reporting and audit requirements; and (7) rules
restricting the ability of a state bank, or a subsidiary thereof, to engage as
principal in activities not permissible for a national bank or make any
investment not permissible for a national bank.
FDIC Insurance Assessments
--------------------------
In July 1993, the FDIC adopted a new 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 new
system, which went into effect on January 1, 1994, and replaced a transitional
system that the FDIC had used for the 1993 calendar year, 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. An institution is also assigned by the FDIC 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 provided to the FDIC by the institution's primary federal regulator
and information which the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds (which may
include, if applicable, information provided by the institution's state
supervisor). An institution's insurance assessment rate is then determined
based on the capital category and supervisory category to which it is assigned.
Under the final risk-based assessment system, as well as the prior transitional
system, there are nine assessment risk classifications (i.e., combinations of
capital groups and supervisory subgroups) to which different assessment rates
are applied. Assessment rates for members of both the Bank Insurance Fund
("BIF") and the Savings Association Insurance Fund ("SAIF") for the first half
of 1995, as they had during 1994, ranged from 23 basis points (0.23% of
deposits) for an institution in the highest category (i.e., "well capitalized"
and "healthy") to 31 basis points (0.31% of deposits) for an institution in the
lowest category (i.e., "undercapitalized" and "substantial supervisory
concern"). These rates were established for both funds to achieve a designated
ratio of reserves to insured deposits (i.e., 1.25%) within a specified period of
time.
Once the designated ratio for the BIF was reached, which appears to have
occurred some time during May 1995, the FDIC was authorized to reduce the
minimum assessment rate below 23 basis points and to set future assessment rates
at such levels that would maintain a fund's reserve ratio at the designated
level. In August 1995, the FDIC adopted final regulations reducing the
assessment rates for BIF-member banks. Under the revised schedule, BIF-member
banks, starting with the second half of 1995, will now pay assessments ranging
from 4 basis points to 31 basis points, with an average assessment rate of 4.5
basis points. Refunds, with interest, were paid for assessments
12
<PAGE>
for the month(s) after the month in which the designated reserve ratio for the
BIF was reached, as well as for the quarterly payment made on September 30,
1995, assuming that the designated reserve ratio was achieved prior to June 30,
1995. At the same time, the FDIC elected to retain the existing assessment rate
of 23 to 31 basis points for SAIF members for the foreseeable future given the
undercapitalized nature of that insurance fund. More recently, on November 14,
1995, the FDIC announced that, beginning in 1996, it would further reduce the
deposit insurance premiums for 92% of all BIF members that are in the highest
capital and supervisory categories to $2,000 per year, regardless of deposit
size.
On July 28, 1995, the FDIC, the Treasury Department, and the OTS released
statements outlining a proposed plan to recapitalize the SAIF, certain features
of which were subsequently agreed upon by members of the Banking Committees of
the U.S. House of Representatives and the Senate on November 7, 1995 in
negotiations to reconcile differences in bills on the issue that had been
introduced or partially adopted by each body. Under the agreement, all SAIF-
member institutions would pay a special assessment to the SAIF of approximately
80 basis points, the amount that would enable the SAIF to attain its designated
reserve of 1.25%. The special assessment would be payable on January 1, 1996,
based on the amount of deposits held as of March 31, 1995. BIF-insured
institutions holding SAIF-assessed deposits would receive a 20% reduction in the
assessment rate and would pay a one-time assessment of 64 basis points. The
agreement also provides that the assessment base for the bonds issued in the
late 1980s by the Financing Corporation to recapitalize the now defunct Federal
Savings and Loan Insurance Corporation would be expanded to include deposits of
both BIF- and SAIF-insured institutions, with BIF members paying approximately
75% of the interest on such obligations. The committee members further agreed
that the BIF and SAIF should be merged on January 1, 1998, with such merger
being conditioned upon the prior elimination of the thrift charter. At this
time, the Company is not able to predict if the recapitalization will take
place, the timing or exact amount of any SAIF special assessment that might be
required. As of December 31, 1995, the Bank held no SAIF-assessed deposits.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding 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.
CRA
---
On April 19, 1995, the Federal bank regulatory agencies adopted revisions
to the regulations promulgated pursuant to the Community Reinvestment Act (the
"CRA"), which are intended to set distinct assessment standards for financial
institutions. The revised regulation contains three evaluation tests: (a) a
lending test which will compare the institutions's market share of loans in low-
and moderate-income areas to its market share of loans in its entire service
area and the percentage of a bank's outstanding loans to low- and moderate-
income areas or individuals, (b) a services test which will evaluate the
provision of services that promote the availability of credit to low- and
moderate-income areas, and (c) an investment test, which will evaluate an
institution's record of investments in organizations designed to foster
community development, small- and minority-owned businesses and affordable
housing lending, including state and local government housing or revenue
13
<PAGE>
bonds. The regulation is designed to reduce the paperwork requirements of the
current regulations and provide regulators, institutions and community grounds
with a more objective and predictable manner with which to evaluate the CRA
performance of financial institutions. The rule became effective on January 1,
1996, at which time evaluation under streamlined procedures began for
institutions with assets of less than $250 million that are owned by a holding
company with total assets of less than $1 billion.
Fair Lending
------------
Congress and various Federal agencies (including, in addition to the bank
regulator agencies, the Department of Housing and Urban Development, the Federal
Trade Commission and the Department of Justice) (collectively the "Federal
Agencies") responsible for implementing the nation's fair lending laws have been
increasingly concerned that prospective home buyers and other borrowers are
experiencing discrimination in their efforts to obtain loans. In recent years,
the Department of Justice has filed suit against financial institutions which it
determined had discriminated, seeking fines and restitution for borrowers who
allegedly suffered from discriminatory practices. Most, if not all, of these
suits have been settled (some for substantial sums) without a full adjudication
on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and to specify the factors the agencies will
consider in determining if lending discrimination exits, announced a joint
policy statement detailing specific discriminatory practices prohibited under
the Equal Credit Opportunity Act and the Fair Housing Act. In the policy
statement, three methods of proving lending discrimination were identified: (1)
overt evidence of discrimination, when a lender blatantly discriminates on a
prohibited basis, (2) evidence of disparate treatment, when a lender treats
applicants differently based on a prohibited factor even where there is no
showing that the treatment was motivated by prejudice or a conscious intention
to discriminate against a person, and (3) evidence of disparate impact, when a
lender applies a practice uniformly to all applicants, but the practice has a
discriminatory effect, even where such practices are neutral on their face and
are applied equally, unless the practice can be justified on the basis of
business necessity.
Future Requirements
-------------------
Statutes and regulations are regularly introduced which contain wide-
ranging proposals for altering the structures, regulations and competitive
relationships of the nations's financial institutions. It cannot be predicted
whether or what form any proposed statute or regulation will be adopted or the
extent to which the business of the Company and the Bank may be affected by such
statute or regulation.
Monetary Policy
---------------
The earnings of the Company are affected by domestic and foreign economic
conditions, particularly by the monetary and fiscal policies of the United
States government and its agencies.
14
<PAGE>
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.
ITEM 2. PROPERTIES.
- ------- -----------
The Company's corporate office and the Bank's main office are located at
6375 Highway 85, Riverdale, Georgia 30274. The Bank's branch office is located
at 223 North Main Street, Jonesboro, Georgia.
The Bank's main office is a three-story building constructed in 1983-84
containing approximately 13,500 square feet and located on approximately 1.576
acres owned by the Bank. In August 1988, finish-out construction of the third
floor interior was completed to provide additional office space. The Bank uses
all three floors of the building. The first floor contains the loan
administration and bookkeeping departments. On the second floor, there are
seven inside teller and three drive-up teller windows along with the new account
and customer service representatives and five loan offices. The third floor is
devoted to Administration, Auditing and Commercial Lending.
In June 1989, the Bank purchased a .459 acre tract immediately behind its
headquarters office, on which a 4,100 square foot, one-story office building had
been constructed in 1986. During March 1990, the Bank's bookkeeping and
operation departments were transferred to the facility. As of April 1995, the
Bank's bookkeeping and operation departments were transferred back to the Bank's
main office, and this building is currently being marketed for sale.
The Bank's Jonesboro, Georgia branch office is a modern one-story building
constructed in 1985-86 containing approximately 4,400 square feet located on
approximately .886 acres owned by the Bank.
The Bank's headquarters has enough space to handle expansion without
material capital commitments in the next several years.
Other than normal real estate and commercial lending activities of the
Bank, the Company generally does not invest in real estate, interests in real
estate, real estate mortgages, or securities of or interest in persons primarily
engaged in real estate activities.
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
There are no material pending proceedings to which the Company is a party
or of which any of its properties are subject; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority; nor are there material proceedings known to the Company, pending or
contemplated, in which any director, officer or affiliate or any principal
15
<PAGE>
security holder of the Company, or any associate of any of the foregoing, is a
party or has an interest adverse to the Company.
The Bank, as a lending institution, is from time to time a party plaintiff
in routine collection cases. The Bank acts as a depository of funds, some of
which are titled in more than one name, and therefore the Bank may be named as a
defendant from time to time in lawsuits involving disputes as to ownership of
funds in particular accounts. All such litigation is incidental to the Bank's
business and, based on consultation with external legal counsel, management
believes that the ultimate resolution of these matters will not have a material
adverse effect on the financial position of the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
None.
PART II
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- ------- ---------------------------------------------------------
The Company's common stock, $10 par value, is not traded on an established
trading market, and there is only very limited trading. The following table
sets forth high and low bid information for the common stock for each of the
quarters in which trading has occurred since January 1, 1994. The prices set
forth below have been volunteered by shareholders and reflect only information
that has come to management's attention.
<TABLE>
<CAPTION>
Sales Price
------------------------------------
Calendar Period High Low
--------------- ---- ---
<S> <C> <C>
1995
----
First quarter $15.15 $ 9.37
Second quarter $10.50 $10.00
Third Quarter $10.00 $10.00
Fourth Quarter $10.00 $10.00
1994
----
First quarter $10.77 $10.77
Second quarter $12.00 $10.00
Third Quarter $ 9.00 $ 9.00
Fourth Quarter $15.15 $ 9.00
</TABLE>
Management of the Company believes that all of the above sales, involving
41 sellers, were between individuals or entities who had differing reasons and
degrees of motivation for their
16
<PAGE>
purchases and sales. Further, there may have been sales between individuals who
have not presented the shares for transfer on the Company's transfer books. As
of February 1, 1996, there were approximately 402 holders of record of the
Company's common stock.
Because the Company's sole source of funds is dividends from the Bank,
regulatory limitations governing the amount of dividends payable by the Bank to
the Company directly limit the dividends which the Company can pay to its
shareholders. Bank regulatory agencies limit the amount of dividends that a
subsidiary bank may pay to the parent company without prior regulatory approval.
At December 31, 1995, total stockholder's equity of the Bank aggregated
$4,878,155, and the total net income was $923,000, one-half of which
(approximately $461,000) was not restricted from transfer to the Company as
dividends under the foregoing regulatory limitations, the Memorandum of
Understanding, which was terminated as of August 9, 1995, and the Resolution,
which was terminated as of August 9, 1995, as discussed in "Item 6 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Capital Resources." Having obtained the necessary approval of its
regulators, the Bank paid, on October 30, 1995 to shareholders of record as of
September 15, 1995, a cash dividend of $0.485 per share for a total of $135,800.
On December 15, 1995, the Bank's board of directors adopted a resolution
approving a dividend of $0.485 per share for a total of $135,800 which was paid
on December 20, 1995 to shareholders of record as of December 14, 1995. This
dividend did not require the approval of the Bank's regulators.
ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS.
- ------- ------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operation is incorporated herein by reference to pages 30-48 of the Company's
Annual Report to Shareholders for the year ended December 31, 1995.
ITEM 7. FINANCIAL STATEMENTS.
- ------- ---------------------
The Company's consolidated financial statements are included in pages 1-29
of the Company's Annual Report to Shareholders for the year ended December 31,
1995, and are incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
None.
17
<PAGE>
PART III
--------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
- ------- -------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
--------------------------------------------------
Directors
---------
The following information regarding each director of the Company, sets
forth (l) the person's name, (2) his or her age at December 31, 1995, (3) the
year he or she was first elected as a director of the Company, and (4) his or
her positions with the Company and the Bank (other than as a director) and his
or her other business experience for the past five years.
Charles M. Barnes, age 49, has served as President and as a director of the
Bank since March 1, 1993. Before joining the Bank, Mr. Barnes served in various
executive positions, with First Georgia Bank in East Point from 1990 to March
1993, and with First National Bank of Cobb County/Barnett from 1982 to 1990.
Mr. James W. Babb, Jr., age 50, has been the owner of Babb & Associates, an
accounting firm in Riverdale, Georgia, since 1976. He has served as a director
of the Company and the Bank since their inception.
Mr. Don A. Barnette, age 40, has been the owner of Market Grocery Company,
a Clayton County-based secondary supplier of wholesale grocery items to
restaurants and convenience stores, since 1987. Prior to 1987, he owned and
operated several convenience stores in Conyers and Covington. Mr. Barnette is
also the President of the Georgia Food Industry Association. He has served as a
director of the Bank since 1995.
Mr. Jimmy W. Benefield, age 54, had been regional property tax manager for
Amoco Oil Company and had been with that company since 1968. He retired from
Amoco Oil Company in 1994. Since that time, Mr. Benefield has operated his own
consulting business, and one of his clients is Amoco Oil Company. He has also
represented Clayton County and a portion of Fayette County in the Georgia House
of Representatives since 1977. He has served as a director of the Company and
the Bank since their inception.
Mr. C. Wallace Carrouth, age 67, a retired contractor, was President of C.
W. Carrouth Construction Company, Inc., a Clayton County-based general
contracting firm, or its predecessor, from 1948 to 1992. He has served as a
director of the Company and the Bank since their inception.
Mr. George E. Glaze, age 66, has been a partner in the law firm of Glaze,
Glaze & Fincher of Jonesboro, Georgia since 1964 and has practiced law in
Clayton County for the past 31 years. He has served as a director of the
Company and the Bank since their inception.
18
<PAGE>
Dr. Sanford E. Gruskin, age 53, an oral surgeon and President of Drs.
Gruskin and Lucas, P.C., has practiced in Clayton County since 1971. He has
served as a director of the Company and the Bank since their inception.
Mr. A. Gene Lee, age 60, has been a co-owner of Lee Tire Company of
Riverdale, Georgia since 1959. He has served as a director of the Company and
the Bank since their inception.
Officers
--------
The following table shows for each officer of the Company (1) the person's
name, (2) his or her age at December 31, 1995, (3) the year he or she was first
elected as an officer of the Company, and (4) his or her present positions with
the Company and the Bank and his or her other business experience for the past
five years.
<TABLE>
<CAPTION>
Name Age First Position with Company;
---- ---
Year Business Experience
-------------------
Elected
-------
<S> <C> <C> <C>
Charles M. Barnes 49 1993 President and Chief Executive
Officer of the Company;
President and Chief Executive
Officer of the Bank; various
executive positions with First
Georgia Bank in East Point
from 1990 to March 1993, and
with First National Bank of
Cobb County/Barnett from 1982
to 1990
Allette B. Cheaves 53 1987 Secretary and Treasurer of the
Company; Senior Vice President
and Secretary of the Bank;
served as Chief Executive
Officer of the Bank from June
18, 1992 through February 28,
1993
Steve T. Warren 50 1992 Senior Vice President and
Chief Financial Officer of the
Company; Senior Vice President
and Chief Financial Officer of
the Bank; Secretary of the
Bank from June 18, 1992
through February 28, 1993
</TABLE>
ITEM 10. EXECUTIVE COMPENSATION.
- -------- -----------------------
Executive Compensation is incorporated herein by reference to pages 3-5 of
the Company's Proxy Statement for the 1996 Annual Meeting of Shareholders to be
held May 15, 1996.
19
<PAGE>
ITEM 11. SECURITY - OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- -----------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
----------------------
As of February 1, 1996, the Company had 402 shareholders. The following
table sets forth certain information regarding the shares owned, as of February
1, 1996, (1) by each person who beneficially owns more than 5% of the shares,
(2) by each of the Company's directors, and (3) by all of the Company's
directors and executive officers as a group. The Company has authorized and has
outstanding only one class of common stock. None of the Company's preferred
stock has been issued.
<TABLE>
<CAPTION>
Number of Adjusted
Number Percent Shares Subject Percent
Name of of of to Conversion of
Beneficial Owner (1) Shares (2) Class Rights (3) Class (4)
- -------------------- ---------- ----- ---------- ---------
<S> <C> <C> <C> <C>
Mr. B. Alton Barnette (5) 69,403 15.49 199,167 39.04
Charles M. Barnes 0 0 1,483 (6) 0.33
James L. Askew (7) 35,223 7.86 16,667 11.17
James W. Babb, Jr. (8) 280 0.06 0 .06
Jimmy W. Benefield (9) 3,500 0.78 0 .78
C. W. Carrouth (10) 9,074 2.03 0 2.03
George E. Glaze (11) 12,080 2.70 8,333 4.47
Sanford E. Gruskin (12) 13,654 3.05 9,167 (13) 5.18
A. Gene Lee (14) 7,000 1.56 1,666 (15) 1.56
All directors and executive
officers as a group
(10 persons) (16) 91,922 (17) 20.52 41,166 (18) 30.38
</TABLE>
_____________________
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them. The information shown above is based upon
information furnished to the Company by the named persons. Information
relating to beneficial ownership of the shares is based upon "beneficial
ownership" concepts set forth in rules promulgated under the Securities Act
of 1934, as amended. Under such rules a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power," which includes the power to dispose or to direct the disposition of
such security. A person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire beneficial ownership
within sixty (60) days. Under the rules, more than one person may be deemed
to be a beneficial owner of the same securities.
(2) Excludes shares deemed to be beneficially owned through the right to
exercise conversion rights, warrants or options within 60 days of the
record date.
20
<PAGE>
(3) In order to raise capital for the Bank, the Company issued its Series A
Floating Rate Convertible Subordinated Debentures (the "Debentures").
Holders of the Debentures may convert all or any principal portion of the
Debentures into shares of the Company's common stock, at a conversion price
equal to $6.00 per share, at any time before the close of business on July
1, 2000 (i.e., the maturity date of the Debentures).
(4) Adjusted to reflect shares beneficially owned and shares deemed to be
beneficially owned through the right to exercise conversion rights under
the Debentures, warrants or stock options within 60 days of the record
date.
(5) Consists of (a) 68,895 shares owned directly by Mr. Barnette; and (b) 508
shares held jointly with spouse and grandson. Mr Barnette's address is:
3003 S. Atlantic Avenue, Unit 14 C6, Daytona Beach Shores, Florida 32218.
(6) Consists of Debentures convertible into 1,433 shares of the Company's
common stock at $6.00 per share. These shares represent Mr. Barnes'
investment participation in the Debentures convertible into 8,333 shares
owned by Wheel Enterprises, referred to in footnote (18) below. Mr. Barnes'
address is: 308 Hillpine Drive, Woodstock, Georgia 30189.
(7) Consists of (a) 34,523 shares owned directly by Dr. Askew; and (b) 700
shares held by Dr. Askew as custodian for his daughter, as to which shares
Dr. Askew disclaims beneficial ownership. Dr. Askew's address is: 8312
Carlton Road, Riverdale, Georgia 30274.
(8) Consists of 280 shares owned directly by Mr. Babb. Mr. Babb's address is:
135 Merlin Court, Fayetteville, Georgia 30214.
(9) Consists of 3,500 shares owned directly by Mr. Benefield. Mr. Benefield's
address is: 6656 Morning Dove Place, Jonesboro, Georgia 30236.
(10) Consists of 9,074 shares owned directly by Mr. Carrouth. Mr. Carrouth's
address is: 5749 Ash Street, Forest Park, Georgia 30223.
(11) Consists of (a) 6,934 shares owned directly by Mr. Glaze; and (b) 5,146
shares held in his self-directed IRA. Mr. Glaze's address is: 120 North
McDonough Street, Jonesboro. Georgia 30236.
(12) Consists of (a) 7,966 shares owned directly by Dr. Gruskin; and (b) 5,688
shares held by a profit sharing plan and a pension plan of which Dr.
Gruskin is trustee. Dr. Gruskin's address is: 3050 Margaret Mitchell
Drive, N.W. #36, Atlanta, Georgia 30327.
(13) Debentures convertible into 9,167 shares of the Company's Common Stock at
$6.00 per share held by a profit sharing plan for Drs. Gruskin and Lucas,
P.C., of which Dr. Gruskin is the president.
(14) Consists of (a) 5,536 shares owned directly by Mr. Lee; (b) 964 shares held
in his self-directed IRA; and (c) 500 shares held by Mr. Lee's spouse
either directly or in her
21
<PAGE>
self-directed IRA, as to which Mr. Lee disclaims beneficial ownership. Mr.
Lee's address is: 5337 Hillside Drive, Forest Park, Georgia 30050.
(15) Debentures convertible into 1,666 shares of the Company's common stock at
$6.00 per share, held in Mr. Lee's self-directed IRA.
(16) B. Alton Barnette is neither a director nor an executive officer of the
Company. Accordingly, his shares and his shares subject to conversion
rights are not included in these totals.
(17) Includes (a) 2,674 shares owned directly by two of the executive officers
of the Bank; (b) 2,978 shares held for such officers in the Bank's 401(k)
Profit Sharing Plan; (c) 1,450 held by such officers in their self-directed
IRA's; (d) 336 shares held by such officers jointly with their spouses; (e)
2,773 shares held by their spouses, as to which shares such officers
disclaim beneficial ownership; and (f) 900 shares held by such officers as
custodian for their respective children, as to which shares such officers
disclaim beneficial ownership.
(18) Consists of (a) Debentures convertible into 16,667 shares of the Company's
common stock at $6.00 per share owned directly by Dr. Askew; (b) Debentures
convertible into 8,333 shares of the Company's common stock at $6.00 per
share held in Mr. Glaze's self-directed IRA; (c) Debentures convertible
into 9,167 shares of the Company's common stock at $6.00 per share held by
a profit sharing plan for Drs. Gruskin and Lucas, P.C., of which Dr.
Gruskin is the president; (d) Debentures convertible into 1,666 shares of
the Company's common stock at $6.00 per share held in Mr. Lee's self-
directed IRA; and (e) Debentures convertible into 8,333 shares of the
Company's common stock at $6.00 per share owned by Wheel Enterprises, which
is managed by Steve T. Warren, the Company's Senior Vice President and
Chief Financial Officer. Mr. Warren's address is: 9983 Walden Drive,
Jonesboro, Georgia 30236-6402.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------- -----------------------------------------------
Certain of the executive officers and directors of the Bank, principal
shareholders of the Company, and affiliates of such persons have, from time to
time, engaged in banking transactions with the Bank and are expected to continue
such relationships in the future. All loans or other extensions of credit made
by the Bank to such individuals were made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unaffiliated third
parties and did not involve more than the normal risk of collectibility or
present other unfavorable features.
22
<PAGE>
ITEM 13. EXHIBITS, LIST, AND REPORTS ON FORM 8-K.
- -------- ----------------------------------------
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<C> <S>
3.1 Articles of Incorporation. (2)
3.2 By-Laws. (2)
4 Instruments Defining the Rights of Security Holders: Form of Company's
Series A Floating Rate Convertible Subordinated Debentures. (2)
10.1 Memorandum of Understanding dated March 27, 1992. (1)
10.2 Revised Memorandum of Understanding dated December 1, 1993. (2)
10.3 Memorandum of Agreement and Indexed Executive Salary Continuation
Plan, both dated August 7, 1995, between the Company and Charles M.
Barnes. (3)
10.4 Resolution dated May 19, 1993. (4)
10.5 Letter from the FDIC dated August 2, 1995, terminating its
participation in the Memorandum of Understanding.
10.6 Letter from the Georgia Department dated August 9, 1995, officially
terminating the Memorandum of Understanding.
10.7 Letter from the Federal Reserve dated August 9, 1995, officially
lifting the Resolution.
13 Registrant's 1995 Annual Report to Shareholders. Only those portions
of the Annual Report to Shareholders that are specifically
incorporated by reference into this report on Form 10-KSB shall be
deemed filed with the Commission.
13.1 Independent Auditor's Report.
21 Subsidiaries of the Registrant.
24 Power of Attorney.
27 Financial Data Schedule.
</TABLE>
23
<PAGE>
<TABLE>
<C> <S>
99 Registrant's Proxy Statement for the 1996 Annual Meeting of
Shareholders to be held May 15, 1996. Only those portions of the Proxy
Statement that are specifically incorporated by reference into this
report on Form 10-KSB shall be deemed filed with the Commission.
</TABLE>
_________________________
(1) Incorporated by reference to same exhibit in the Registrant s Form 10-
KSB for the year ended December 31, 1992, as filed with the
Commission.
(2) Incorporated by reference to same exhibit in the Registrant s Form 10-
KSB for the year ended December 31, 1993, as filed with the
Commission.
(3) The indicated exhibits are management contracts or compensatory plans
or arrangements required to be filed or incorporated by reference
herein.
(4) Incorporated by reference to same exhibit in the Registrant's Form 10-
QSB for the period ended June 30, 1993.
(b) Reports on Form 8-K filed in the fourth quarter of 1995: None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TARA BANKSHARES CORPORATION
(Registrant)
Date: 3/21/96 /s/ George E. Glaze
------- -------------------
George E. Glaze, Chairman
Date: 3/21/96 /s/ Charles M. Barnes
------- ---------------------
Charles M. Barnes, President
Date: 3/21/96 /s/ Allette B. Cheaves
------- ----------------------
Allette B. Cheaves, Secretary and Treasurer
Date: 3/21/96 /s/ Steve T. Warren
------- -------------------
Steve T. Warren, Senior Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on
the signature page to this Report constitutes and appoints Charles M. Barnes,
Allette B. Cheaves and Steve T. Warren, and each of them, his true and lawful
attorneys-in-fact and agents, with full power
24
<PAGE>
of substitution and resubstitution, for him and in his name, place, and stead,
in any and all capacities, to sign any and all amendments to this Report, and to
file same, with all exhibits hereto, and other documents in connection herewith
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
<TABLE>
<S> <C> <C> <C>
By: /s/ Charles M. Barnes Date: 3/21/96
-------------------------------------------------- -------
Charles M. Barnes, President and Director
(Principal Executive Officer)
By: /s/ Allette B. Cheaves Date: 3/21/96
-------------------------------------------------- -------
Allette B. Cheaves, Secretary/Treasurer
By: /s/ Steve T. Warren Date: 3/21/96
-------------------------------------------------- -------
Steve T. Warren, Senior Vice President
(Principal Accounting and Financial Officer)
By: /s/ James L. Askew Date: 3/21/96
-------------------------------------------------- -------
James L. Askew, Director
By: /s/ James W. Babb, Jr. Date: 3/21/96
-------------------------------------------------- -------
James W. Babb, Jr., Director
By: /s/ Jimmy W. Benefield Date: 3/21/96
-------------------------------------------------- -------
Jimmy W. Benefield, Director
By: /s/ C. W. Carrouth Date: 3/21/96
-------------------------------------------------- -------
C. W. Carrouth, Director
By: /s/ George E. Glaze Date: 3/21/96
-------------------------------------------------- -------
George E. Glaze, Director
By: /s/ Sanford E. Gruskin Date: 3/21/96
-------------------------------------------------- -------
Sanford E. Gruskin, Director
By: /s/ A. Gene Lee Date: 3/21/96
-------------------------------------------------- -------
A. Gene Lee, Director
</TABLE>
25
<PAGE>
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants which have not Registered Securities
Pursuant to Section 12 of the Act.
(a)(1) The Annual Report of the Registrant for the year ended December 31,
1995 is incorporated herein by reference.
(a)(2) Portions of the Registrant's Proxy Statement for its Annual Meeting
of Shareholders to be held on May 15, 1996 are incorporated by reference herein.
There were no other proxy statements or proxy-soliciting material circulated by
the Registrant since the filing of its Form 10-KSB for the year ended December
31, 1995.
26
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Page Number in
Exhibit Sequentially
Number Exhibit Numbered Copy
- --------------------------------------------------------------------------------------------------
<C> <S> <C>
3.1 Articles of Incorporation. N/A
3.2 By-laws. N/A
4 Instruments Defining Rights of Security Holders. N/A
10.1 Memorandum of Understanding Dated March 27, 1992. N/A
10.2 Revised Memorandum of Understanding dated December 1, 1993. N/A
10.3 Memorandum of Agreement and Indexed Executive Salary [28]
Continuation Plan, both dated August 7, 1995, between the
Company and Charles M. Barnes.
10.4 Resolution dated May 19, 1993. N/A
10.5 Letter from the FDIC dated August 2, 1995, regarding the [47]
termination of the Memorandum of Understanding.
10.6 Letter from the Georgia Department dated August 2, 1995, [49]
regarding the termination of the Memorandum of Understanding.
10.7 Letter from the Federal Reserve dated August 9, 1995, officially [51]
lifting the Resolution.
13 Registrant's 1995 Annual Report to Shareholders. Only those [53]
portions of the Annual Report to Shareholders that are specifically
incorporated by reference into this report on Form 10-KSB shall
be deemed filed with the Commission.
21 Subsidiaries of the Registrant. [107]
24 Power of Attorney. [24]
27 Financial Data Schedule. [108]
99 Registrant's Proxy Statement for the 1996 Annual Meeting of
Shareholders to be held May 15, 1996. Only those portions of the
Proxy Statement that are specifically incorporated by reference
into this report on Form 10-KSB shall be deemed filed with the
Commission. [112]
==================================================================================================
</TABLE>
27
