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As filed with the Securities and Exchange Commission on January 24, 1997
Registration No. 333-18457
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Community Capital Corporation
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
South Carolina 57-0866395
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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109 Montague Street
Greenwood, South Carolina 29646
(864) 941-8200
(Address, including Zip Code, and telephone number,
including area code, of registrant's principal executive offices)
WILLIAM G. STEVENS
Chief Executive Officer
109 Montague Street
Greenwood, South Carolina 29646
(864) 941-8200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
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GLENN W. STURM, ESQ.
JULIAN HENNIG III, ESQ. NEIL E. GRAYSON, ESQ.
Nexsen Pruet Jacobs & Pollard, LLP Nelson Mullins Riley & Scarborough, L.L.P.
1441 Main Street, Suite 1500 1201 Peachtree St., N.E., 400 Colony Square, Suite 2200
Columbia, South Carolina 29201 Atlanta, Georgia 30361
(803) 253-8202 (404) 817-6000
</TABLE>
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after the effective date of this Registration Statement.
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 of
1933, check the following box: ( )
If the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, 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 statement number of 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 number of the earlier effective registration statement for the same
offering. ( )
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: ( )
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
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A Redherring appears on left-side of page rotated and reads as follows:
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any state.
PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 24, 1997
1,465,000 Shares
(Logo of Community Capital Corporation appears here)
Common Stock
All of the shares of common stock, par value $1.00 per share (the "Common
Stock"), offered hereby (the "Offering") are being sold by Community Capital
Corporation, a South Carolina corporation (the "Company"). Prior to the
Offering, there has been only limited trading in the Common Stock, and no
reliable market for the Common Stock has existed. It is currently anticipated
that the public offering price will be between $10.50 and $11.50 per share. See
"Underwriting" for the factors to be considered in determining the public
offering price. The Common Stock is currently quoted on the OTC Bulletin Board,
and the Company has filed an application for its Common Stock to be approved for
listing on the American Stock Exchange under the symbol "CYL," subject to notice
of issuance.
See "Risk Factors" beginning on page 6 for a discussion of certain factors
that should be considered by prospective purchasers of the Common Stock offered
hereby.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
SAVINGS ASSOCIATION INSURANCE FUND OR THE BANK INSURANCE FUND OF THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
[CAPTION]
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Price to Underwriting Proceeds to
Public Discount (1)(2) Company (3)
<S> <C> <C> <C>
Per Share........................................... $ $ $
Total (4)........................................... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) The Underwriting Discount has been calculated on the basis of an
underwriting discount of 7.0% with respect to an aggregate of 1,100,000
shares of Common Stock (or $12.1 million based on the midpoint of the filing
range) to be sold by the Company to the public, and no underwriting discount
with respect to an aggregate of 365,000 shares of Common Stock (or
approximately $4.0 million based on the midpoint of the filing range) to be
sold by the Company to certain purchasers disclosed to the Underwriters. The
Underwriters shall also be paid a financial advisory fee of $112,000. See
"Underwriting."
(3) Before deducting expenses of the Offering payable by the Company, estimated
to be approximately $288,000.
(4) The Company has granted the Underwriters an over-allotment option to
purchase up to 219,750 additional shares of Common Stock on the same terms
and conditions as set forth above. If all such shares are purchased by the
Underwriters, the total Price to Public will be $ , the total
Underwriting Discount will be $ , and the total Proceeds to the
Company will be $ . See "Underwriting."
The shares of Common Stock are offered subject to receipt and acceptance by
the several Underwriters, to prior sale, and to the Underwriters' right to
reject orders in whole or in part and to withdraw, cancel, or modify the offer
without notice. It is expected that certificates for the shares will be
available for delivery on or about , 1997.
J.C. Bradford &Co. Edgar M. Norris & Co., Inc.
, 1997
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COMMUNITY CAPITAL CORPORATION
(Map of South Carolina appears here)
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Company's consolidated financial statements and notes
thereto appearing elsewhere in this Prospectus. Unless the context indicates
otherwise, the information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option. Prospective investors should consider
carefully the information set forth under the heading "Risk Factors."
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
The Company
Community Capital Corporation is a bank holding company headquartered in
Greenwood, South Carolina which currently operates through two community banks
and is in the process of acquiring three de novo community banks (collectively,
the "Banks") in non-metropolitan markets in the State of South Carolina. The
Company pursues a community banking business which is characterized by
personalized service and local decision-making and emphasizes the banking needs
of individuals and small to medium-sized businesses.
The Company was formed in 1988 to serve as a holding company for Greenwood
National Bank, now Greenwood Bank & Trust (the "Greenwood Bank"), principally in
response to perceived opportunities resulting from the takeovers of several
South Carolina-based banks by large southeastern regional bank holding
companies. In many cases, when these consolidations occur, local boards of
directors are dissolved and local management is relocated or terminated. The
Company believes this situation creates favorable opportunities for new
community banks with local management and local directors. Management believes
that such banks can be successful in attracting individuals and small to
medium-sized businesses as customers who wish to conduct business with a locally
owned and managed institution that demonstrates an active interest in their
business and personal financial affairs.
In 1994, the Company made the strategic decision to expand beyond the
Greenwood County area by creating an organization of independently managed
community banks that serve their respective local markets but which share a
common vision and benefit from the strength, resources, and economies of a
larger institution. In June 1995, the Company opened Clemson Bank & Trust (the
"Clemson Bank" and, together with the Greenwood Bank, the "Existing Banks") in
Clemson, South Carolina. The Company is in the process of acquiring three
additional de novo banks which are being formed in Belton, Newberry, and
Barnwell, South Carolina (the "New Banks"). The Company intends to open The Bank
of Belton (In Organization) (the "Belton Bank") and The Bank of Newberry County
(In Organization) (the "Newberry Bank") in traditional de novo fashion by
capitalizing the banks and seeking local deposits to fund loan growth. In
contrast, immediately after opening, The Bank of Barnwell County (In
Organization) (the "Barnwell Bank") will acquire certain deposits and assets
associated with five branches located in Aiken, Barnwell, and Orangeburg
Counties, South Carolina from Carolina First Bank (the "Carolina First
Branches"). As of December 31, 1996, the Carolina First Branches had
approximately $53.7 million in deposits and $15.2 million in loans. See
"Acquisition of the Carolina First Branches." The Company anticipates that the
Barnwell Bank and the Belton Bank will open during the first quarter of 1997 and
that the Newberry Bank will open during the second quarter of 1997.
As a one-bank holding company for the Greenwood Bank, the Company grew from
approximately $21.5 million in assets, $11.7 million in loans, $16.6 million in
deposits, and $4.6 million in shareholders' equity at December 31, 1989, to
approximately $65.1 million in assets, $50.6 million in loans, $49.1 million in
deposits, and $6.1 million in shareholders' equity at December 31, 1994. The
opening of the Clemson Bank in June 1995 resulted in a year-over-year decrease
of the Company's earnings per share for the year ended December 31, 1995, due to
substantial start-up expenditures, as well as the time and expense required to
attract customers, deposits, and earning assets. The Clemson Bank achieved
profitability in September 1996, and at December 31, 1996, the Company had
approximately $116.0 million in assets, $80.5 million in loans, $89.9 million in
deposits, and $13.6 million in shareholders' equity. Based upon levels at
December 31, 1996, and giving effect to this Offering and the acquisition of
certain deposits and assets associated with the Carolina First Branches, the
Company would have approximately $185.1 million in assets, $95.7 million in
loans, $143.6 million in deposits, and $28.4 million in shareholders' equity.
See "Acquisition of Carolina First Branches -- Unaudited Pro Forma Financial
Information."
The Company's strategy is to operate the Banks on a decentralized basis,
emphasizing each Bank's local board of directors and local management's
knowledge and authority to make credit decisions. The Company believes this
operating
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strategy has enabled the Existing Banks, and will enable the New Banks, to
generate high yielding loans and attract and retain core deposits which will
provide substantially all of the Banks' funding requirements. The Company
supplements its decentralized operating strategy with centralized policy
oversight, credit review, back-office support, and strategic planning. Following
the Offering, the Company intends to focus on the development of the New Banks
and the continued growth of the Existing Banks. While the Company does not
intend actively to search for opportunities to expand into additional markets,
the Company may consider opportunities that arise from time to time, most likely
through acquisitions of existing institutions or branches rather than through
the formation of additional de novo banks. The Company has no specific
acquisition plans at the current time other than the New Banks and the Carolina
First Branches.
The Offering
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Common Stock offered........................................ 1,465,000 shares (1)
Common Stock outstanding prior to the Offering.............. 1,225,784 shares (2)
Common Stock to be outstanding after the Offering........... 2,690,784 shares (2)
Use of proceeds............................................. To capitalize and fund certain costs incurred in the
organization of the New Banks, to finance the acquisition of
the Carolina First Branches, and for other general corporate
purposes. See "Use of Proceeds."
American Stock Exchange symbol.............................. CYL
</TABLE>
(1) Excludes up to 219,750 shares of Common Stock which may be sold by the
Company upon exercise of the over-allotment option granted to the
Underwriters. See "Underwriting."
(2) Excludes 447,851 shares of Common Stock issuable upon exercise of stock
options outstanding as of the date of the Prospectus, at exercise prices
ranging from $7.92 to $12.38 per share.
Risk Factors
An investment in the securities offered hereby involves substantial risks
including, among others, the risks associated with the lack of any operating
history of each New Bank, the risks associated with the acquisition of the
Carolina First Branches, the credit risk associated with the Company's loan
portfolio, and the adequacy of the allowance for loan losses.
4
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SUMMARY CONSOLIDATED FINANCIAL DATA
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Year Ended December 31,
1992 1993 1994 1995
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(Dollars in thousands, except per share data)
Income Statement Data:
Net interest income.................................................. $ 1,673 $ 2,194 $ 2,647 $ 3,199
Provision for loan losses............................................ 227 80 14 112
Noninterest income................................................... 631 776 514 777
Noninterest expense.................................................. 1,787 2,121 2,261 3,069
Net income........................................................... 289 560 585 534
Balance Sheet Data:
Assets............................................................... $ 49,281 $ 58,970 $ 65,071 $ 96,100
Earning assets....................................................... 44,636 53,891 58,182 87,980
Securities (1)....................................................... 7,466 7,949 7,617 22,446
Loans (2)............................................................ 34,493 44,634 50,565 63,204
Allowance for loan losses............................................ 500 567 581 671
Deposits............................................................. 40,970 45,992 49,146 73,138
Federal Home Loan Bank advances...................................... 2,627 6,756 5,925 6,244
Shareholders' equity................................................. 4,844 5,420 6,079 12,932
Weighted Average Shares Outstanding: (3)............................... 745,272 745,645 804,822 1,070,135
Per Share Data: (3)
Net income (3)....................................................... $ 0.39 $ 0.75 $ 0.80 $ 0.55
Book value (period end) (4).......................................... 7.89 8.80 9.62 10.68
Tangible book value (period end) (4)................................. 7.73 8.71 9.58 10.64
Performance Ratios:
Return on average assets............................................. 0.66% 1.03% 0.97% 0.68%
Return on average equity............................................. 6.15 10.94 10.17 5.69
Net interest margin (5).............................................. 4.17 4.39 4.78 4.49
Efficiency (6)....................................................... 78.31 71.95 69.81 76.78
Asset Quality Ratios:
Allowance for loan losses to period end loans (2).................... 1.45% 1.27% 1.15% 1.06%
Net charge-offs to average loans..................................... 0.18 0.03 -- 0.03
Nonperforming assets to period end loans and foreclosed property
(2)(7)............................................................. 0.52 0.40 0.04 0.02
Capital and Liquidity Ratios:
Average equity to average assets..................................... 10.69% 9.39% 9.46% 11.99%
Leverage............................................................. 9.62 9.10 9.42 13.21
Risk-based capital
Tier 1............................................................. 12.17 10.89 11.04 18.46
Total.............................................................. 13.46 12.04 12.09 19.41
Average loans to average deposits.................................... 88.21 90.52 98.21 93.03
<CAPTION>
1996
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Income Statement Data:
Net interest income.................................................. $ 4,108
Provision for loan losses............................................ 187
Noninterest income................................................... 1,226
Noninterest expense.................................................. 4,141
Net income........................................................... 706
Balance Sheet Data:
Assets............................................................... $ 115,959
Earning assets....................................................... 104,526
Securities (1)....................................................... 23,280
Loans (2)............................................................ 80,546
Allowance for loan losses............................................ 837
Deposits............................................................. 89,862
Federal Home Loan Bank advances...................................... 4,889
Shareholders' equity................................................. 13,556
Weighted Average Shares Outstanding: (3)............................... 1,356,626
Per Share Data: (3)
Net income (3)....................................................... $ 0.54
Book value (period end) (4).......................................... 11.12
Tangible book value (period end) (4)................................. 11.08
Performance Ratios:
Return on average assets............................................. 0.67%
Return on average equity............................................. 5.41
Net interest margin (5).............................................. 4.28
Efficiency (6)....................................................... 77.28
Asset Quality Ratios:
Allowance for loan losses to period end loans (2).................... 1.04%
Net charge-offs to average loans..................................... 0.03
Nonperforming assets to period end loans and foreclosed property
(2)(7)............................................................. 0.23
Capital and Liquidity Ratios:
Average equity to average assets..................................... 12.37%
Leverage............................................................. 11.62
Risk-based capital
Tier 1............................................................. 15.58
Total.............................................................. 16.54
Average loans to average deposits.................................... 88.06
</TABLE>
(1) Securities held to maturity are stated at amortized cost, and securities
available for sale are stated at fair value.
(2) Loans are stated net of unearned income, before allowance for loan losses.
(3) All share and per share data have been adjusted to reflect the 5% Common
Stock dividends in September 1993, April 1994, August 1995, and May 1996.
Net income per share is computed using the weighted average number of
outstanding shares of common stock and dilutive common stock equivalents
from stock options (using the treasury stock method).
(4) Excludes the effect of any outstanding stock options.
(5) Net interest income divided by average earning assets.
(6) Noninterest expense divided by the sum of net interest income and
noninterest income, net of gains and losses on sales of assets.
(7) Nonperforming loans and nonperforming assets do not include loans past due
90 days or more that are still accruing interest.
5
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RISK FACTORS
The securities offered hereby involve a high degree of risk. In addition to
the other information contained in the Prospectus, the following factors should
be considered carefully in evaluating an investment in the shares of Common
Stock offered hereby.
No Operating History for the New Banks. Each of the New Banks is currently
in the organizational stage and has no operating history. Although the Greenwood
Bank has been operating since 1989 and the Clemson Bank has been operating since
1995, because of the impact of the formation of the New Banks and the
acquisition of the Carolina First Branches, the Company's historical results of
operations are not necessarily indicative of the Company's future operations. As
a bank holding company, the Company's continued profitability will depend
entirely upon the operations of the Banks. The operations of the New Banks will
be subject to the risks inherent in the establishment of a new business and,
specifically, of a new bank. The likelihood of the success of each of the New
Banks must be considered in light of the problems, expenses, complications, and
delays frequently encountered in connection with the development of a new bank
and the competitive environment in which each New Bank will operate. Typically,
new banks incur substantial initial expenses and are not profitable for several
years after commencing business. The start-up expenditures and initial losses of
the Clemson Bank caused a year-over-year decrease in the Company's earnings per
share for the year ended December 31, 1995, and the Company anticipates that the
start-up expenditures and initial losses associated with the development of the
New Banks and the acquisition of the Carolina First Branches will have a similar
negative effect on earnings per share for the year ending December 31, 1997. To
commence business, each of the New Banks must also attract and retain additional
officers and employees. There can be no assurance that any of the New Banks will
ever operate profitably or that the impact of their respective operations will
not have a material adverse impact on the results of operations and financial
condition of the Company. The Company believes that the successful development
and initial operation of each New Bank will also be largely dependent upon the
efforts of its organizers. None of the organizers is obligated to serve as a
director of, or to otherwise remain associated with, his or her Bank. The
failure of organizers to continue to participate in the management of his or her
respective New Bank could have a material adverse effect on the operations of
such New Bank and the Company.
General Risks of the Acquisition of the Carolina First Branches. The
Company has not historically made acquisitions on the same scale as the
acquisition of the Carolina First Branches, and the performance of the Company
will depend on the success of this acquisition. The success of this acquisition
will, in turn, depend on a number of factors, including, without limitation: the
Barnwell Bank's ability to manage the commencement of operations with a
substantial amount of deposits and accountholders; its ability to limit the
outflow of deposits held by its new customers in the Carolina First Branches
beyond the amount anticipated by the Company; its success in deploying the cash
received in the acquisition into assets bearing sufficiently high yields without
incurring unacceptable credit or interest rate risk; its ability to control the
incremental noninterest expense from the Carolina First Branches; its ability to
retain and attract the appropriate personnel to staff the Carolina First
Branches; and its ability to earn acceptable levels of noninterest income from
the Carolina First Branches. No assurance can be given that the Barnwell Bank
will be able to integrate the Carolina First Branches successfully, that the
operation of the Carolina First Branches will not adversely affect the Company's
existing profitability, or that the Company or the Barnwell Bank will be able to
manage the growth resulting from the acquisition effectively. See "Acquisition
of Carolina First Branches" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Investment of Acquired Funds and Impact on Net Interest Margin. The
Barnwell Bank has agreed to assume certain deposit liabilities of the Carolina
First Branches (the "Carolina First Deposits") and purchase certain loans (the
"Carolina First Loans") and other certain assets associated with the Carolina
First Branches. The Barnwell Bank will acquire substantially more
interest-bearing liabilities than interest-earning assets and will receive
approximately $34.5 million in cash assuming the acquisition of approximately
$53.7 million in deposits. Through the Barnwell Bank, the Company intends to
deploy this cash in investment securities, loans in the market areas of the
Carolina First Branches, and loan participations purchased from other financial
institutions, principally from the Company's other Banks. See "Acquisition of
the Carolina First Branches." Prior to investing in loans, the Barnwell Bank
will invest these funds in United States government and United States agency
securities. The Company expects that these investment securities will earn
interest at rates lower than the interest rates that would be earned on loans,
and the Company's net interest margin will therefore decrease in the short- to
medium-term. There can be no assurance that the Barnwell Bank will be able to
invest the funds in loans at market rates or to earn a favorable net interest
margin through investing the funds in investment securities until loans can be
made or loan participations can be purchased. Management currently intends to
designate all of these securities as available-for-sale investments. As with any
fixed-rate investment, market value appreciation or depreciation of investment
securities will occur depending upon the movement of interest rates. Given
fluctuations in market conditions, there can be no assurance that
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management's current strategy for allocating the funds to loans and investment
securities will be the investment allocation ultimately pursued by the Company.
See "Acquisition of the Carolina First Branches."
Credit Risk; Adequacy of Allowance for Loan Losses. There are certain risks
inherent in making all loans, including risks with respect to the period of time
over which loans may be repaid, risks resulting from changes in economic and
industry conditions, risks inherent in dealing with individual borrowers, and,
in the case of a collateralized loan, risks resulting from uncertainties about
the future value of the collateral. Each Bank maintains an allowance for loan
losses based on, among other things, historical experience, an evaluation of
economic conditions, and regular reviews of delinquencies and loan portfolio
quality. Management's judgment as to the adequacy of the allowance is based upon
a number of assumptions about future events which it believes to be reasonable
but which may or may not be valid. Thus, there can be no assurance that
charge-offs in future periods will not exceed the allowance for loan losses or
that additional increases in the allowance for loan losses will not be required.
Additions to the allowance for loan losses would result in a decrease of the
Company's net income and, possibly, its capital. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Provision and
Allowance for Loan Losses."
No Assurance of Regulatory Approvals for the New Banks. The Company must
secure the approval of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") and of the South Carolina State Board of Financial
Institutions (the "State Board") to acquire the common stock of each New Bank.
Each New Bank must also obtain approval of its charter application from the
State Board and approval of its application for deposit insurance from the
Federal Deposit Insurance Corporation (the "FDIC"). The Company anticipates that
all final regulatory approvals for the Belton Bank and the Barnwell Bank will be
received before the end of the first quarter of 1997, and the regulatory
approvals for the Newberry Bank will be received before the end of the second
quarter of 1997, although no assurances can be given as to when or whether any
or all of such approvals will be obtained. Any significant delay in the
commencement of operations by any New Bank will increase such Bank's
pre-operating expenses and may reduce such Bank's and the Company's capital and
income.
The State Board has informed the Company that final approval of the
applications for the Belton Bank, the Newberry Bank, and the Barnwell Bank will
be conditioned upon a minimum capitalization of each Bank of $3.5 million, $3.3
million, and $7.0 million, respectively. The State Board has the authority to
raise these minimum capitalization amounts and can also condition its approval
on an increase in the capitalization of the Existing Banks, and there can be no
assurance that the State Board will not do so. In such event, the Company would
likely fund the increased capitalization through the use of net proceeds from
the Offering, from dividends from the Existing Banks (to the extent available),
or through loans from third-party financial institutions (subject to obtaining
regulatory approval). There can be no assurance, however, that the Company would
be able to obtain third-party financing on acceptable terms or in amounts
sufficient to fund any increase in mandated capitalization minimums. The use by
the Company of borrowed funds for capitalization of the Banks will be less
favorable to the Company's financial condition than the use of Offering proceeds
for this purpose. See "Business" and "Government Supervision and Regulation."
Dependence on Senior Management. The Company's growth and development to
date have been largely the result of contributions of certain of the senior
executive officers of the Company and its subsidiaries, including William G.
Stevens, the Company's President and Chief Executive Officer, and James H.
Stark, the Company's Chief Financial Officer. The loss of the services of one or
more of such individuals could have a material adverse effect on the Company's
business and development. No assurance can be given that replacements for any of
these officers could be employed if these officers' services were no longer
available. The Company maintains key employee insurance on the life of Mr.
Stevens. In January 1997, James H. Stark underwent coronary surgery, and the
Company expects Mr. Stark to resume his full-time service to the Company by
March 1, 1997. See "Management."
Competition. The Existing Banks currently encounter, and the New Banks will
encounter, strong competition from the financial institutions in their
respective primary market areas. In addition, established financial institutions
not already operating in any of the Banks' primary market areas may, under South
Carolina law, open branches in such areas at future dates. In the conduct of
certain aspects of their respective banking businesses, the Banks also compete
with savings institutions, credit unions, mortgage banking companies, consumer
finance companies, insurance companies, and other institutions, some of which
are not subject to the same degree of regulation and restriction imposed upon
the Banks. Many of these competitors have substantially greater resources and
lending limits than the Banks and offer certain services that one or more of the
Banks do not currently provide. In addition, many of these competitors have
numerous branch offices located throughout their extended market areas which
provide them with a competitive advantage which the Banks do not currently have.
Furthermore, as a consequence of legislation enacted by the United States
Congress, out-of-state banks will be allowed to commence operations and compete
in the Banks' primary market areas. No assurance can be given that such
competition will not have
7
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an adverse impact on the financial condition and results of operations of the
Banks or that the Banks will ultimately be able to successfully compete with
other financial institutions in their respective markets. See
"Business -- Competition" and "Government Supervision and
Regulation -- Interstate Banking."
Potential Impact of Changes in Interest Rates. The Company's profitability
is dependent to a large extent on the net interest income of the Banks, which is
the difference between the respective Bank's interest income on interest-earning
assets and the Bank's interest expense on interest-bearing liabilities. The
Company, like most financial institution holding companies, will continue to be
affected by changes in general interest rate levels and other economic factors
beyond the Company's control. As of December 31, 1996, the Company had a
cumulative one-year negative gap position of 25.13% of total interest-bearing
assets, although immediately upon consummation of the assumption of the Carolina
First Deposits and the purchase of the Carolina First Loans and other assets,
the Company anticipates that it will have a one-year positive gap position. A
positive gap position would mean that the yield of the Company's
interest-earning assets will likely adjust to changes in market interest rates
at a faster rate than the cost of the Company's interest-bearing liabilities.
Consequently, the Company's net interest income could be adversely affected
during periods of rapidly decreasing interest rates. Although the Company has
structured its asset and liability management strategies to mitigate the impact
of changes in interest rates, there can be no assurance about how successful it
will be in doing so. See "Acquisition of Carolina First Branches" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Net Interest Income."
Lack of Established Trading Market and Possible Volatility of Stock Price.
Prior to this Offering, there has been no established or other active or liquid
market for the Common Stock. There can be no assurance as to the liquidity of
any markets that may develop for the Common Stock, the ability of holders of
Common Stock to sell their securities, or the price at which holders would be
able to sell their securities. The initial public offering price of the Common
Stock will be determined solely by negotiations among the Company and J.C.
Bradford & Co. and Edgar M. Norris & Co., Inc. as representatives (the
"Representatives") of the several underwriters named in this Prospectus (the
"Underwriters") and may bear no relationship to the market price of the Common
Stock after this Offering. See "Underwriting." The market price of the Common
Stock could be subject to significant fluctuations in response to variations in
quarterly and yearly operating results (which could be substantial in the near
term as a result of the expenses associated with the opening of each New Bank
and the losses expected from the Belton Bank and the Newberry Bank), general
trends in the Company's industry, and other factors. Furthermore, it is likely
that in some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such an event, the
price of the Common Stock would likely be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In addition, the stock market in recent years has experienced
extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of affected companies. These broad
fluctuations may adversely affect the market price of the Common Stock. See
"Market for Common Stock."
Dilution. Purchasers of Common Stock in the Offering will experience
immediate dilution in the net tangible book value per share of the Common Stock
from the public offering price. Moreover, in the near-term, the Company expects
that the Offering, the acquisition of the New Banks, and the acquisition of
certain deposits and assets associated with the Carolina First Branches will
result in dilution of the Company's return on equity and earnings per share. See
"Acquisition of the Carolina First Branches," "Dilution," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
No Dividends. The Company has never paid cash dividends on its Common Stock
and in the near-term intends to retain any future earnings to finance its
growth. As the Company's business operations will be conducted almost
exclusively through the Banks, the Company's ability to pay dividends on the
Common Stock in the future will be directly dependent on the dividends paid by
the Banks to the Company. The ability of the Banks to pay dividends to the
Company will be subject to the profitability of the Banks and to government
regulations that limit the aggregate amount of cash dividends paid to
shareholders based on then-current income levels. There can be no assurance that
the Banks' future earnings will support dividend payments to the Company.
Additionally, there is no restriction on the ability of the Company to issue
shares of stock with preferential dividend rights in the future. See "Dividend
Policy," "Government Supervision and Regulation -- Dividends," and "Description
of Securities -- Undesignated Stock."
Local Economic Conditions. The success of the Company is dependent to a
certain extent upon the general economic conditions in the geographic markets
served by the Banks. Although the Company expects that economic conditions will
continue to be favorable in these markets, no assurance can be given that these
economic conditions will continue. Adverse changes in economic conditions in the
geographic markets that the Banks serve would likely impair the Banks' ability
to
8
<PAGE>
collect loans and could otherwise have a negative effect on the financial
condition of the Company. See "Business -- Market Areas."
Shares Eligible for Future Sale. Future sales of substantial amounts of
Common Stock could adversely affect the market price of the Common Stock. Upon
consummation of the Offering, the Company will have 2,690,784 shares of Common
Stock outstanding, and all of these shares (plus any shares issued upon the
exercise of the Underwriters' over-allotment option) will be freely tradeable
without restriction or registration under the Securities Act of 1933
("Securities Act"), unless owned by an affiliate of the Company, subject to the
lock-up agreements described below, or acquired pursuant to the exercise of
stock options prior to the filing of the Form S-8 Registration Statement
described below. In addition, there are outstanding stock options that the
Company has granted to certain directors, officers, and employees of the Company
and the Banks for the purchase of an aggregate of 447,851 shares of Common
Stock, of which options for 310,801 shares are currently exercisable. The
Company's and each Bank's directors, executive officers, and organizers have
agreed with the Underwriters not to sell any Common Stock, which includes
356,084 currently outstanding shares and 378,891 shares issuable upon exercise
of options, for 180 days from the date of this Prospectus without the prior
written consent of the Representatives. The Company has filed a Form S-8
Registration Statement with the Securities and Exchange Commission registering
the issuance of the shares subject to stock options. See "Description of
Securities -- Shares Eligible for Future Sale" and "Underwriting."
Issuance of Additional Stock. Pursuant to its Articles of Incorporation,
the Company has the authority to issue additional shares of Common Stock and has
authorized 2,000,000 shares of a special class of stock which may be issued by
the Board of Directors on such terms and with such rights, preferences, and
designations as the Board of Directors may determine without any vote of the
shareholders. Issuance of such special stock, depending upon the rights,
preferences, and designations thereof, may have the effect of delaying,
deterring, or preventing a change in control of the Company. Issuance of
additional shares of Common Stock or special stock could also result in the
dilution of the voting power of the Common Stock purchased in this Offering. See
"Description of Securities -- Common Stock," " -- Undesignated Stock," and " --
Change of Control."
Anti-Takeover Provisions; Insider Control of the Company. Certain
provisions of the Company's Articles of Incorporation could delay or frustrate
the removal of incumbent directors and could make a merger, tender offer or
proxy contest involving the Company more difficult, even if such events could be
perceived as beneficial to the interests of the shareholders. The provisions
include staggered terms for the Board of Directors and requirements of
super-majority votes to approve certain business transactions. In addition,
certain provisions of state and federal law may also have the effect of
discouraging or prohibiting a future takeover attempt in which shareholders of
the Company might otherwise receive a substantial premium for their shares over
then-current market prices. Furthermore, as part of its approval of each New
Bank's application for a state bank charter, the State Board has required that
each New Bank will not enter into any agreement to merge, sell or consolidate
within five years of the date it commences operations. To the extent that these
provisions are effective in discouraging or preventing takeover attempts, they
may tend to reduce the market price for the Common Stock offered hereby.
Directors and executive officers of the Company and the Existing Banks currently
own in the aggregate approximately 29.0% of the outstanding shares of Common
Stock. In addition, based on the number of shares the Company anticipates will
be purchased in the Offering by organizers of the New Banks, following
completion of the Offering, directors, executive officers, and organizers of the
Company and the Banks are expected to own in the aggregate at least 23.8% of the
outstanding shares of Common Stock (22.0% if the Underwriters' over-allotment
option is exercised in full). Because directors and executive officers of the
Company and the Existing Banks are entitled to purchase shares in the Offering,
these percentages may actually be higher than 23.8% and 22.0%. Therefore, to the
extent they vote together, the directors and executive officers of the Company
and the Banks will have the ability to exert significant influence over the
election of the Company's Board of Directors and other corporate actions
requiring shareholder approval. See "Management -- Ownership of the Common
Stock" and "Description of Securities -- Change of Control."
Common Stock Not Insured. The shares of Common Stock offered hereby, and
the shares of common stock of each New Bank that are expected to be purchased by
the Company, are not deposits or other obligations of the Company and are not
guaranteed by the Company, will not be insured by the FDIC, and may not be used
as collateral to secure a loan from any of the Banks.
Government Regulation. The banking industry is heavily regulated. This
regulation is intended primarily for the protection of depositors of the Banks,
not shareholders, and could adversely affect the operations of the Banks, such
as their ability to make loans and attract deposits. During 1989, 1991, and 1994
the United States Congress enacted three major pieces of
9
<PAGE>
banking legislation: The Financial Institutions Reform, Recovery and Enforcement
Act of 1989, the Federal Deposit Insurance Corporation Improvement Act of 1991,
and the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.
These three Acts have significantly changed the commercial banking industry
through, among other things, revising and limiting the types and amounts of
investment authority, significantly increasing minimum regulatory capital
requirements, broadening the scope and power of federal bank and thrift
regulators over financial institutions and affiliated persons in order to
protect the deposit insurance funds and depositors, and significantly enhancing
the abilities of banks and bank holding companies to engage in interstate bank
acquisition and branching activities. Additional legislation affecting financial
institutions has been proposed and may be enacted, and regulations now affecting
the Company and the Banks may be modified at any time. There can be no assurance
that such new legislation or modifications would not adversely affect the
business of the Company and the Banks. The Banks are also affected by the
Federal Reserve's monetary policies, and there can be no assurance that actions
by the Federal Reserve will not have an adverse effect on the deposit levels,
loan demand, or the business and earnings of any of the Banks. See "Government
Supervision and Regulation."
THE COMPANY
The Company is a bank holding company headquartered in Greenwood, South
Carolina which currently operates through two community banks and is in the
process of acquiring three de novo community banks in non-metropolitan markets
in the State of South Carolina. The Company pursues a community banking business
which is characterized by personalized service and local decision-making and
emphasizes the banking needs of individuals and small to medium-sized
businesses.
The Company was formed in 1988 to serve as a holding company for the
Greenwood Bank, principally in response to perceived opportunities resulting
from the takeovers of several South Carolina-based banks by large southeastern
regional bank holding companies. In many cases, when these consolidations occur,
local boards of directors are dissolved and local management is relocated or
terminated. The Company believes this situation creates favorable opportunities
for new community banks with local management and local directors. Management
believes that such banks can be successful in attracting individuals and small
to medium-sized businesses as customers who wish to conduct business with a
locally owned and managed institution that demonstrates an active interest in
their business and personal financial affairs. The Company anticipates that the
Barnwell Bank and the Belton Bank will open during the first quarter of 1997 and
that the Newberry Bank will open during the second quarter of 1997.
In 1994, the Company made the strategic decision to expand beyond the
Greenwood County area by creating an organization of independently managed
community banks that serve their respective local markets but which share a
common vision and benefit from the strength, resources, and economies of a
larger institution. In June 1995, the Company opened the Clemson Bank in
Clemson, South Carolina. The Company is in the process of acquiring three
additional de novo banks which are being formed in Belton, Newberry, and
Barnwell, South Carolina. The Company intends to open the Belton Bank and the
Newberry Bank in traditional de novo fashion by capitalizing the banks and
seeking local deposits to fund loan growth. Immediately upon opening, however,
the Barnwell Bank will acquire certain deposits and assets associated with the
Carolina First Branches. As of December 31, 1996, the Carolina First Branches
had approximately $53.7 million in deposits and $15.2 million in loans.
The address of the Company's principal executive offices is 109 Montague
Street, Greenwood, South Carolina 29646, and the Company's telephone number at
such address is (864) 941-8200.
ACQUISITION OF THE CAROLINA FIRST BRANCHES
Description of the Acquisition
The Company, the Barnwell Bank, and Carolina First Bank ("Carolina First")
entered into a Purchase and Assumption Agreement dated January 21, 1997 (the
"Agreement") for the acquisition by the Barnwell Bank from Carolina First of
certain assets and the assumption of certain liabilities (the "Acquisition")
relating to the five Carolina First Branches, which are located in the
communities of Barnwell, Blackville, Salley, Springfield, and Williston, South
Carolina. The Company anticipates that the Acquisition will close during the
first quarter of 1997. At the closing, and subject to the terms of the
Agreement, the Barnwell Bank is expected to assume the Carolina First Deposits
and pay Carolina First a premium of 5.25% on the assumed Carolina First Deposits
other than certificates of deposit with a balance in excess of $100,000 (the
"Carolina First Core Deposits"). As of December 31, 1996, the Carolina First
Deposits totaled $53.7 million and the Carolina First Core Deposits totaled
$47.5 million. In addition, the Agreement contemplates that the Barnwell Bank
will acquire the Carolina
10
<PAGE>
First Loans, as well as the real property owned or leased by Carolina First for
operation of the Carolina First Branches and related furniture, equipment, and
other fixed operating assets (the "Carolina First Assets"). The Barnwell Bank
also expects to retain all of the Carolina First employees currently associated
with the Carolina First Branches. The Agreement provides the Company and the
Barnwell Bank the right to reject any loans. In connection with the evaluation
of the Acquisition, the Company is examining the Carolina First Loans using
substantially the same underwriting criteria, analyses, and collateral
evaluations that the Company has traditionally used in the ordinary course of
its business.
The Acquisition will be accounted for as a purchase, with the 5.25% premium
to be attributed to the value of the Carolina First Core Deposits and amortized
over a fifteen-year period on a straight-line basis. The Barnwell Bank will
acquire the Carolina First Loans at face value and the Carolina First Assets at
Carolina First Bank's book value, which approximates fair value. The face value
of the Carolina First Loans as of December 31, 1996, was approximately $15.2
million, and the total purchase price of the Carolina First Assets is
approximately $1.9 million. Payment of the premium on the Carolina First Core
Deposits, as well as the purchase price for the Carolina First Loans and
Carolina First Assets, will be effectuated through an appropriate reduction of
the cash received to fund deposits assumed by the Barnwell Bank. Accordingly,
the Barnwell Bank expects to receive approximately $34.5 million in cash from
Carolina First at the closing in connection with its assumption of Carolina
First Deposits of $53.7 million (plus accrued interest payable of $554,000) as
of December 31, 1996, after deduction of (a) the deposit premium of
approximately $2.5 million, (b) the purchase price of the Carolina First Loans
of approximately $15.4 million (including accrued interest on the loans), and
(c) the purchase price of the Carolina First Assets of approximately $1.9
million.
The closing of the Acquisition is contingent upon receipt by the parties of
all necessary regulatory approvals, including approval of the State Board. The
Company expects the State Board to grant approval for the Acquisition on the
condition that the Company contribute at least $7.0 million in capital to the
Barnwell Bank. See "Use of Proceeds." However, there can be no assurance that
the Company and the Barnwell Bank will obtain approval of the State Board.
Effect of the Acquisition
Management believes that the Acquisition will benefit the Company because
it will help the Company achieve its goal of forming a network of independently
operated community banks that serve their respective local markets but which
share a common vision and benefit from the strength, resources, and economies of
a larger institution. The Carolina First Branches are located in
non-metropolitan markets similar to the Company's existing markets. The Carolina
First Branches are ranked either first or second in deposit market share as of
June 30, 1996, in all five of the communities in which they are located, and the
Carolina First Branch is the only commercial bank in three of the communities
(Blackville, Salley, and Springfield). Based on the Barnwell Bank's local
management and responsive approach to loan applications, personalized service,
and knowledge of these markets, the Company believes that these markets offer
significant future growth opportunities.
The Company believes that the Carolina First Deposits are largely stable
core deposit funds, similar to the Existing Banks' deposit bases. After
providing for purchased loans, branch facilities and equipment, and the deposit
premium, the Barnwell Bank will receive approximately $34.5 million in cash
(assuming the acquisition of approximately $53.7 million in deposits), which
will be temporarily placed in the Barnwell Bank's investment portfolio. As a
result of the addition of the core deposits of the Carolina First Branches and
the initial investment of proceeds from the Acquisition into short-term
investments, the interest rate risk profile of the Company will change from
being liability sensitive prior to the Acquisition to being asset sensitive
following the Acquisition. Through the Barnwell Bank, the Company intends to
deploy this cash in investment securities, loans in the market areas of the
Carolina First Branches, and loan participations purchased from other financial
institutions, principally from the Company's other Banks. Prior to investing in
loans, the Barnwell Bank will invest the acquired funds in United States
government or United States agency securities. The Company expects that these
investment securities will earn interest at rates lower than the interest rates
that would be earned on loans, and the Company's net interest margin will
therefore decrease in the short to medium-term. The Company believes that the
net interest margin will increase over the long-term as the Barnwell Bank
invests the acquired funds in loans at market rates. There can be no assurance,
however, that the Barnwell Bank will be able to invest the acquired funds in
loans at market rates or that the Barnwell Bank will be able to earn a favorable
net interest margin through investing the acquired funds in investment
securities until loans can be made or loan participations can be purchased. As
with any fixed-rate investment, market value appreciation or depreciation of
investment securities will occur depending upon the movement of interest rates.
Given fluctuations in market conditions, there can be no assurance that
management's current strategy for allocating the acquired funds to loans and
investment securities will be the investment allocation ultimately pursued by
the Company.
11
<PAGE>
Unaudited Pro Forma Financial Information
The following unaudited pro forma balance sheet has been derived from the
historical balance sheet of the Company, adjusted to give effect to the proposed
acquisition of selected assets and the assumption of selected liabilities in
connection with the acquisition of the Carolina First Branches by the Barnwell
Bank, the issuance and sale of Common Stock through the Offering, and the
purchase of all of each New Bank's common stock as though such transactions had
occurred on December 31, 1996. The unaudited pro forma balance sheet is not
necessarily indicative of the financial position that would have been achieved
had the transactions reflected therein occurred on such date. The pro forma
adjustments with respect to the acquisition of the Carolina First Branches
reflect December 31, 1996, balances which are in accordance with the terms of
the Agreement and are subject to change prior to the closing date in accordance
with the terms of the Agreement. The unaudited pro forma balance sheet also does
not purport to project the financial position of the Company as of the period
shown or for any future period.
PRO FORMA CONSOLIDATED BALANCE SHEET
PENDING ACQUISITION AND OFFERING
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Adjustments as of
December 31, 1996
As
Reported Acquisition (1) Offering (2)
<S> <C> <C> <C>
(Dollars in thousands)
Assets:
Cash and cash equivalents................................................. $ 4,627 $34,489(3) $ 13,318
Securities available-for-sale............................................. 23,280 -- --
Loans..................................................................... 80,546 15,152 --
Less allowance for loan losses.......................................... (837 ) -- --
Loans, net............................................................ 79,709 15,152
Premises, furniture & equipment, net...................................... 3,523 1,892 950
Accrued interest receivable............................................... 1,114 238 --
Intangible assets, net.................................................... 47 2,491(4) 600(5)
Other assets.............................................................. 3,659 -- --
Total assets........................................................ $115,959 $54,262 $ 14,868
Liabilities and Shareholders' Equity:
Deposits:
Noninterest bearing..................................................... $12,226 $ 4,936 $ --
Interest bearing........................................................ 77,636 48,772 --
Total deposits........................................................ 89,862 53,708
Federal funds purchased and securities sold under agreements to
repurchase.............................................................. 6,783 -- --
Advances from the Federal Home Loan Bank.................................. 4,889 -- --
Accrued interest payable.................................................. 462 554 --
Other liabilities......................................................... 407 -- --
Total liabilities................................................... 102,403 54,262 --
Shareholders' equity:
Common stock............................................................ 1,219 -- 1,465
Surplus................................................................. 12,004 -- 13,403
Unrealized gain (loss) on securities available-for-sale, net of deferred
taxes................................................................. 35 -- --
Retained earnings....................................................... 298 -- --
Total shareholders' equity.......................................... 13,556 -- 14,868
Total liabilities and shareholders' equity.......................... $115,959 $54,262 $ 14,868
<CAPTION>
Pro
Forma
<S> <C>
Assets:
Cash and cash equivalents................................................. $ 52,434
Securities available-for-sale............................................. 23,280
Loans..................................................................... 95,698
Less allowance for loan losses.......................................... (837)
Loans, net............................................................ 94,861
Premises, furniture & equipment, net...................................... 6,365
Accrued interest receivable............................................... 1,352
Intangible assets, net.................................................... 3,138
Other assets.............................................................. 3,659
Total assets........................................................ $185,089
Liabilities and Shareholders' Equity:
Deposits:
Noninterest bearing..................................................... $ 17,162
Interest bearing........................................................ 126,408
Total deposits........................................................ 143,570
Federal funds purchased and securities sold under agreements to
repurchase.............................................................. 6,783
Advances from the Federal Home Loan Bank.................................. 4,889
Accrued interest payable.................................................. 1,016
Other liabilities......................................................... 407
Total liabilities................................................... 156,665
Shareholders' equity:
Common stock............................................................ 2,684
Surplus................................................................. 25,407
Unrealized gain (loss) on securities available-for-sale, net of deferred
taxes................................................................. 35
Retained earnings....................................................... 298
Total shareholders' equity.......................................... 28,424
Total liabilities and shareholders' equity.......................... $185,089
</TABLE>
The accompanying notes are an integral part of the pro forma consolidated
balance sheet.
(1) Reflects pending acquisition of certain deposits and assets associated with
the Carolina First Branches after giving effect to the consummation of the
Acquisition and related purchase accounting adjustments by the Company as if
they occurred on December 31, 1996. Assumes that the book value of the
assets to be acquired and the liabilities to be assumed approximates their
respective fair values.
(2) Reflects the sale of 1,465,000 shares of Common Stock in the Offering at
$11.00 per share, less estimated offering expenses, underwriting discounts,
and advisory fees of approximately $1.2 million. The proceeds of the
Offering will be used to acquire all of the issued common stock of the New
Banks.
(3) Consideration received from Carolina First in connection with the
Acquisition in accordance with the Agreement.
(4) Core deposit premium of $2.5 million to be amortized on a straight-line
basis over 15 years.
(5) Organizational and pre-opening costs totaling $600,000 to be amortized on a
straight-line basis over five years.
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of 1,465,000 shares of Common
Stock in the Offering are estimated to be approximately $14.9 million ($17.1
million if the Underwriters' over-allotment option is exercised in full),
assuming a public offering price of $11.00 per share and after deducting the
underwriting discount and expenses payable by the Company. Of these net
proceeds, the Company intends to use $7.0 million to capitalize the Barnwell
Bank, $3.5 million to capitalize the Belton Bank, and $3.3 million to capitalize
the Newberry Bank, in each case upon receipt of final regulatory approvals. As
soon as reasonably possible after the formation and capitalization of the
Barnwell Bank, the Barnwell Bank will purchase the Carolina First Branches,
paying a premium on the Carolina First Core Deposits (estimated to be $47.5
million) of approximately $2.5 million from the $7.0 million capitalization
received by the Barnwell Bank from the Company. See "Acquisition of Carolina
First Branches."
Any remaining balance of the net proceeds from the Offering will be
available for general corporate purposes aimed primarily at the expansion of the
Company's business. While the Company does not intend actively to search for
opportunities to expand into additional markets, the Company may consider
opportunities that arise from time to time, most likely through acquisitions of
existing institutions or branches rather than through the formation of
additional de novo banks. The Company has no specific acquisition plans at the
current time other than the New Banks and the Carolina First Branches. See
"Business -- Growth Strategy."
The Company has entered into development agreements with the organizers of
each of the New Banks which obligate the Company to pay or reimburse the
organizers for the organizational and pre-opening expenses relating to each New
Bank only upon the Company's acquisition of that Bank's stock. Consequently, of
the capital received by each New Bank from the sale of all of its common stock
to the Company, approximately $350,000 to $600,000 is expected to be used by
each New Bank to repay all of the loans obtained by such New Bank's organizers
from the Greenwood Bank in order to finance equipment and furnishings, land
costs associated with the main office location, and organizational and
pre-opening expenses of such New Bank. Of the $7.0 million total capitalization
received by the Barnwell Bank, approximately $2.5 million will be used to fund
the premium on the Carolina First Core Deposits (estimated to be $47.5 million)
in connection with the acquisition of the Carolina First Branches. The balance
of each New Bank's proceeds from the sale of the common stock to the Company
will be commingled with funds obtained by such New Bank from other sources,
principally expected to be customer deposits, and will be employed in banking
operations, including making loans to customers, making investments, and, until
operations begin to generate income, payment of current operating expenses
(including management salaries). The amount and manner in which these funds will
be used will be subject to the discretion of the management of each New Bank
based upon current market conditions and, therefore, cannot currently be
definitively quantified.
MARKET FOR COMMON STOCK
The Company has filed an application for its Common Stock to be approved
for listing on the American Stock Exchange under the symbol "CYL," subject to
official notice of issuance. Although the Common Stock has been quoted on the
OTC Bulletin Board, trading and quotations of the Common Stock have been limited
and sporadic. Management is not aware of the prices at which all shares of
Common Stock have traded. As of January 23, 1997, there were 1,225,784 shares of
Common Stock outstanding held by approximately 1,340 shareholders of record.
DIVIDEND POLICY
The Company has not declared or distributed any cash dividends to its
shareholders since its organization in 1988, and it is not likely that any cash
dividends will be declared in the near term. The Board of Directors of the
Company intends to follow a policy of retaining any earnings to provide funds to
operate and expand the business of the Company and the Banks for the foreseeable
future. The future dividend policy of the Company is subject to the discretion
of the Board of Directors and will depend upon a number of factors, including
future earnings, financial condition, cash requirements, and general business
conditions. The Company's ability to distribute cash dividends will depend
entirely upon the Banks' abilities to distribute dividends to the Company. As
state banks, the Banks are subject to legal limitations on the amount of
dividends each is permitted to pay. In particular, the Banks must receive the
approval of the State Board prior to paying dividends to the Company.
Furthermore, neither the Banks nor the Company may declare or pay a cash
dividend on any of their capital stock if they are insolvent or if the payment
of the dividend would render them insolvent or unable to pay their obligations
as they become due in the ordinary course of business. See "Government
Supervision and Regulation -- Dividends."
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<PAGE>
DILUTION
At December 31, 1996, the Company had a net tangible book value of
approximately $13.5 million, or $11.08 per share. Net tangible book value per
share represents the amount of the Company's shareholders' equity, less
intangible assets, divided by the number of shares of Common Stock outstanding.
Dilution per share to new investors represents the difference between the amount
per share paid by purchasers of shares of Common Stock in the Offering made
hereby and the pro forma net tangible book value per share of Common Stock
immediately after completion of the Offering. After (i) giving effect to the
sale by the Company of 1,465,000 shares of Common Stock offered hereby at an
assumed public offering price of $11.00 per share, (ii) deducting estimated
offering expenses, and (iii) giving effect to the application of the estimated
net proceeds as set forth under "Use of Proceeds," the pro forma net tangible
book value of the Company at December 31, 1996 would have been approximately
$25.3 million, or $9.42 per share. This represents an immediate decrease in net
tangible book value of $1.66 per share to existing shareholders and an immediate
dilution of $1.58 per share to new investors. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share.................................................................... $11.00
Net tangible book value per share at December 31, 1996................................................... $11.08
Decrease per share attributable to new investors......................................................... (.51)
Decrease per share attributable to acquisition of intangible assets...................................... (1.15)
Pro forma net tangible book value per share after the Offering............................................. 9.42
Dilution per share to new investors........................................................................ $ 1.58
</TABLE>
Assuming the Underwriters' over-allotment option is exercised in full, pro
forma net tangible book value upon completion of the Offering would be $9.48 per
share, the immediate decrease in pro forma net tangible book value of shares to
existing shareholders would be $1.60 per share, and the immediate dilution to
new investors would be $1.52 per share.
The following table sets forth on a pro forma basis, as of December 31,
1996 (a) the number of shares of Common Stock purchased from the Company prior
to the Offering and the number of shares expected to be purchased in the
Offering, and (b) the total consideration and average price per share paid to
the Company with respect to Common Stock held by the existing shareholders of
the Company and to be paid by new investors in the Offering.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average Price
Number(1) Percent Amount Percent Per Share(1)
<S> <C> <C> <C> <C> <C>
Existing shareholders........................................... 1,219,109 45.4% $11,523,106 41.7% $ 9.45
New investors................................................... 1,465,000 54.6 16,115,000 58.3 11.00
Total......................................................... 2,684,109 100.0% $27,638,106 100.0%
</TABLE>
(1) Adjusted for the 5% Common Stock dividends in September 1993, April 1994,
August 1995, and May 1996.
The foregoing tables assume no exercise of outstanding stock options. As of
the date of this Prospectus, there are outstanding options to purchase an
aggregate of 447,851 shares of Common Stock at exercise prices ranging from
$7.92 to $12.38. To the extent outstanding options are exercised, or shares
reserved for future issuance are issued, there will be further dilution to new
investors.
14
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1996, and as adjusted to reflect the sale of 1,465,000
shares of Common Stock pursuant to the Offering at an assumed public offering
price of $11.00 per share and the application of the net proceeds therefrom as
set forth under "Use of Proceeds."
<TABLE>
<CAPTION>
December 31, 1996
Actual As Adjusted
<S> <C> <C>
(In thousands)
Long-term debt:
Federal Home Loan Bank advance (maturity exceeding one year)........................................ $ 150 $ 150
Shareholders' equity:
Common stock, $1.00 par value; 10,000,000 shares authorized, 1,219,109 shares issued and
outstanding -- actual; 2,684,109 shares issued and outstanding -- as adjusted (1)................ 1,219 2,684
Capital surplus..................................................................................... 12,004 25,407
Retained earnings................................................................................... 298 298
Unrealized gain (loss) on securities available for sale, net of taxes............................... 35 35
Total shareholders' equity....................................................................... 13,556 28,424
Total capitalization........................................................................... $ 13,706 $28,574
</TABLE>
(1) Excludes 447,851 shares of Common Stock issuable upon exercise of stock
options outstanding as of the date of the Prospectus, at exercise prices
ranging from $7.92 to $12.38 per share. Also excludes 6,675 shares issued
upon exercise of stock options in January 1997.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the five years ended
December 31, 1996 are derived from the consolidated financial statements and
other data of the Company. The consolidated financial statements for the year
ended December 31, 1992 through 1996, were audited by Tourville, Simpson &
Henderson, independent auditors. The selected consolidated financial data should
be read in conjunction with the consolidated financial statements of the
Company, including the accompanying notes, included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
1992 1993 1994 1995
<S> <C> <C> <C> <C>
(Dollars in thousands)
Income Statement Data:
Interest income...................................................... $ 3,315 $ 3,794 $ 4,430 $ 6,147
Interest expense..................................................... 1,642 1,600 1,693 2,948
Net interest income.................................................. 1,673 2,194 2,647 3,199
Provision for loan losses............................................ 227 80 14 112
Net interest income after provision for loan losses.................. 1,446 2,114 2,633 3,087
Net securities gains (losses)........................................ 21 22 (79) (22)
Noninterest income................................................... 610 754 593 799
Noninterest expense.................................................. 1,787 2,121 2,261 3,069
Income before income taxes, extraordinary credit and accounting
change............................................................. 290 769 886 795
Applicable income taxes.............................................. 103 256 301 261
Income before extraordinary credit and accounting change............. 187 513 585 534
Extraordinary credit................................................. 102 -- -- --
Accounting change.................................................... -- 47 -- --
Net income........................................................... $ 289 $ 560 $ 585 $ 534
Balance Sheet Data:
Assets............................................................... $ 49,281 $ 58,970 $ 65,071 $ 96,100
Earning assets....................................................... 44,636 53,891 58,182 87,980
Securities (1)....................................................... 7,466 7,949 7,617 22,446
Loans (2)............................................................ 34,493 44,634 50,565 63,204
Allowance for loan losses............................................ 500 567 581 671
Deposits............................................................. 40,970 45,992 49,146 73,138
Federal Home Loan Bank advances...................................... 2,627 6,756 5,925 6,244
Shareholders' equity................................................. 4,844 5,420 6,079 12,932
Weighted Average Shares Outstanding (3)................................ 745,272 745,645 804,822 1,070,135
Per Share Data (3):
Net income (3)....................................................... $ 0.39 $ 0.75 $ 0.80 $ 0.55
Book value (period end) (4).......................................... 7.89 8.80 9.62 10.68
Tangible book value (period end) (4)................................. 7.73 8.71 9.58 10.64
Performance Ratios:
Return on average assets............................................. 0.66% 1.03% 0.97% 0.68%
Return on average equity............................................. 6.15 10.94 10.17 5.69
Net interest margin (5).............................................. 4.17 4.39 4.78 4.49
Efficiency (6)....................................................... 78.31 71.95 69.81 76.78
Asset Quality Ratios:
Allowance for loan losses to period end loans (2).................... 1.45% 1.27% 1.15% 1.06%
Net charge-offs to average loans..................................... 0.18 0.03 -- 0.03
Nonperforming assets to period end loans and foreclosed property
(2)(7)............................................................. 0.52 0.40 0.04 0.02
Capital and Liquidity Ratios:
Average equity to average assets..................................... 10.69% 9.39% 9.46% 11.99%
Leverage (4.00% required minimum).................................... 9.62 9.10 9.42 13.21
Risk-based capital
Tier 1............................................................. 12.17 10.89 11.04 18.46
Total.............................................................. 13.46 12.04 12.09 19.41
Average loans to average deposits.................................... 88.21 90.52 98.21 93.03
<CAPTION>
1996
<S> <C>
Income Statement Data:
Interest income...................................................... $ 8,114
Interest expense..................................................... 4,006
Net interest income.................................................. 4,108
Provision for loan losses............................................ 187
Net interest income after provision for loan losses.................. 3,921
Net securities gains (losses)........................................ 17
Noninterest income................................................... 1,209
Noninterest expense.................................................. 4,141
Income before income taxes, extraordinary credit and accounting
change............................................................. 1,006
Applicable income taxes.............................................. 300
Income before extraordinary credit and accounting change............. 706
Extraordinary credit................................................. --
Accounting change.................................................... --
Net income........................................................... $ 706
Balance Sheet Data:
Assets............................................................... $ 115,959
Earning assets....................................................... 104,526
Securities (1)....................................................... 23,280
Loans (2)............................................................ 80,546
Allowance for loan losses............................................ 837
Deposits............................................................. 89,862
Federal Home Loan Bank advances...................................... 4,889
Shareholders' equity................................................. 13,556
Weighted Average Shares Outstanding (3)................................ 1,356,626
Per Share Data (3):
Net income (3)....................................................... $ 0.54
Book value (period end) (4).......................................... 11.12
Tangible book value (period end) (4)................................. 11.08
Performance Ratios:
Return on average assets............................................. 0.67%
Return on average equity............................................. 5.41
Net interest margin (5).............................................. 4.28
Efficiency (6)....................................................... 77.28
Asset Quality Ratios:
Allowance for loan losses to period end loans (2).................... 1.04%
Net charge-offs to average loans..................................... 0.03
Nonperforming assets to period end loans and foreclosed property
(2)(7)............................................................. 0.23
Capital and Liquidity Ratios:
Average equity to average assets..................................... 12.37%
Leverage (4.00% required minimum).................................... 11.62
Risk-based capital
Tier 1............................................................. 15.58
Total.............................................................. 16.54
Average loans to average deposits.................................... 88.06
</TABLE>
(1) Securities held to maturity are stated at amortized cost, and securities
available for sale are stated at fair value.
(2) Loans are stated net of unearned income, before allowance for loan losses.
(3) All share and per share data have been adjusted to reflect the 5% Common
Stock dividends in September 1993, April 1994, August 1995, and May 1996.
Net income per share is computed using the weighted average number of
outstanding shares of Common Stock and dilutive common stock equivalents
from stock options (using treasury stock method).
(4) Excludes the effect of any outstanding stock options.
(5) Net interest income divided by average earning assets.
(6) Noninterest expense divided by the sum of net interest income and
noninterest income, net of gains and losses on sales of assets.
(7) Nonperforming loans and nonperforming assets do not include loans past due
90 days or more that are still accruing interest.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Basis of Presentation
The following discussion should be read in conjunction with the preceding
"Selected Financial Data" and the Company's Financial Statements and the Notes
thereto and the other financial data included elsewhere in this Prospectus. The
financial information provided below has been rounded in order to simplify its
presentation. However, the ratios and percentages provided below are calculated
using the detailed financial information contained in the Financial Statements,
the Notes thereto and the other financial data included elsewhere in this
Prospectus.
General
The Company is a bank holding company headquartered in Greenwood, South
Carolina which currently operates through two community banks and is in the
process of acquiring three de novo community banks in non-metropolitan markets
in the State of South Carolina. The Company pursues a community banking business
which is characterized by personalized service and local decision-making and
emphasizes the banking needs of individuals and small to medium-sized
businesses.
The Company was formed in 1988 to serve as a holding company for the
Greenwood Bank. In June 1995, the Company opened the Clemson Bank in Clemson,
South Carolina. The Company is in the process of acquiring the New Banks and
intends to open the Belton Bank and Newberry Bank in traditional de novo fashion
by capitalizing the banks and seeking local deposits to fund loan growth. In
contrast, immediately after it is capitalized, the Barnwell Bank will acquire
certain deposits and assets associated with the Carolina First Branches. As of
December 31, 1996, the Carolina First Branches had $53.7 million in deposits and
$15.2 million in loans. See "Acquisition of Carolina First Branches."
As a one-bank holding company for the Greenwood Bank, the Company grew from
$21.5 million in assets, $11.7 million in loans, $16.6 million in deposits, and
$4.6 million in shareholders' equity at December 31, 1989, to $65.1 million in
assets, $50.6 million in loans, $49.1 million in deposits, and $6.1 million in
shareholders' equity at December 31, 1994. The opening of the Clemson Bank in
June 1995 resulted in a year-over-year decrease in the Company's earnings per
share for the year ended December 31, 1995, due to substantial start-up
expenditures, as well as the time and expense required to attract customers,
deposits, and earning assets. The Clemson Bank achieved profitability in
September 1996, and at December 31, 1996, the Company had $116.0 million in
assets, $80.5 million in loans, $89.9 million in deposits, and $13.6 million in
shareholders' equity. Based upon levels at December 31, 1996, and giving effect
to this Offering and the acquisition of certain deposits and assets associated
with the Carolina First Branches, the Company would have $185.1 million in
assets, $95.7 million in loans, $143.6 million in deposits, and $28.4 million in
shareholders' equity. See "Acquisition of the Carolina First
Branches -- Unaudited Pro Forma Financial Information."
Management has emphasized maintaining strong asset quality through a credit
underwriting and review system which includes both bank level and centralized
controls. Over the five-year period ended December 31, 1996, the Company had an
average net charge-off ratio of 0.05%. At December 31, 1996, nonperforming
assets as a percentage of total loans was 0.23%.
Net income for the year ended December 31, 1996 was negatively affected by
expenditures associated with the development and organization of the New Banks.
Management also expects that net income for the year ending December 31, 1997
will be negatively affected by losses expected from the Belton Bank and Newberry
Bank while these New Banks are achieving their critical mass and generating
customers, deposits, and earning assets. Due to the acquisition of certain
deposits and assets associated with the Carolina First Branches, management
anticipates that the Barnwell Bank will be profitable for the year ending
December 31, 1997; however, there can be no assurance that the Barnwell Bank
will be profitable.
In the near term, the Company expects that, as a result of the increased
number of shares of Common Stock after the Offering, the expenses incurred in
connection with the acquisition of the New Banks, and the losses expected from
the Belton Bank and Newberry Bank, the Company will experience a dilution of its
return on equity and earnings per share. In addition, tangible book will be
negatively affected by the intangibles associated with the acquisition of the
Carolina First Branches. The Company believes that the dilution of earnings per
share, return on equity, and tangible book value per share will be outweighed by
the long-term benefits and shareholder value the Company expects to derive from
the purchase of the New Banks and the acquisition of the Carolina First
Branches. However, there can be no assurance that the Company will be able to
achieve these goals.
17
<PAGE>
Results of Operations
Year ended December 31, 1996, compared with year ended December 31, 1995
Net interest income increased $909,000, or 28.4%, to $4.1 million in 1996
from $3.2 million in 1995. The increase in net interest income was due primarily
to an increase in average earning assets. Average earning assets increased $24.8
million, or 34.8%, primarily as a result of the opening of the Clemson Bank in
June 1995, the opening of a new Greenwood Bank branch in February 1995, and the
continuing growth of the Greenwood Bank.
The Company's net interest spread and net interest margin were 3.50% and
4.28%, respectively, in 1996 as compared to 3.72% and 4.49% in 1995. The
decrease in the net interest spread and the net interest margin was primarily
the result of the growth in the volume of investment securities, traditionally
lower yielding assets than loans, as a percentage of average earning assets in
order to improve liquidity and lower the loans-to-assets ratio.
The provision for loan losses was $187,000 in 1996 compared to $112,000 in
1995. The increase in the provision was primarily the result of general growth
in the Company's loan portfolio. The Company experienced net charge-offs of
$21,000 in 1996, resulting in a ratio of net charge-offs to average loans of
0.03%.
Noninterest income increased $449,000, or 57.8%, to $1.2 million in 1996
from $777,000 in 1995, primarily attributable to increased service charges on
deposit accounts, increased fees from mortgage loan originations, and increased
commissions on sales of mutual funds. In 1996, the Company's mortgage loan
origination fees increased due to the decrease in mortgage lending rates. During
1996, the Company originated $8.7 million of mortgage loans held for sale
compared to $4.8 million in 1995, resulting in a $92,000 increase in residential
mortgage origination fees to $207,000 in 1996 from $115,000 in 1995.
Noninterest expense increased $1.1 million, or 34.9%, to $4.1 million in
1996 from $3.1 million in 1995. The primary component of noninterest expense is
salaries and benefits, which increased $549,000, or 38.9%, to $2.0 million in
1996 from $1.4 million in 1995. The increase is primarily attributable to an
increase in the number of employees due to the opening in 1995 of the Clemson
Bank and the Greenwood Bank's trust and mutual funds departments. The Company
has also hired additional employees in anticipation of opening the New Banks.
Net occupancy expense for 1996 was $287,000, an increase of $105,000 compared to
$182,000 in 1995, and furniture and equipment expense increased $65,000 to
$305,000 in 1996 from $240,000 in 1995. The increase is attributable to
increased depreciation charges due to the purchase of a new operations center
during the first quarter of 1996 and the upgrade and acquisition of computer
equipment during 1995 and 1996. Management believes that these investments have
positioned the Company for the acquisition of the New Banks. The Company's
efficiency ratio in 1996 was 77.28%, compared to 76.78% in 1995.
Net income increased $172,000, or 32.2%, to $706,000 in 1996 from $534,000
in 1995. The increase in net income was due primarily to increases in net
interest income and noninterest income. Return on average assets during 1996 was
0.67% compared to 0.68% during 1995, and return on average equity was 5.41%
during 1996 compared to 5.69% during 1995.
Year ended December 31, 1995, compared with year ended December 31, 1994
Net interest income increased $552,000, or 20.9%, to $3.2 million in 1995
from $2.6 million in 1994. The increase in net interest income was due primarily
to an increase in average earning assets. Average earning assets increased $15.8
million, or 28.7%, primarily as a result of the opening of the Clemson Bank in
June 1995 and the opening of a new Greenwood Bank branch in February 1995.
The Company's net interest spread and net interest margin were 3.72% and
4.49%, respectively, in 1995, as compared to 4.32% and 4.78% in 1994. These key
ratios were affected by higher costs of deposits due to rising short-term
interest rates and increased competition for deposits in the Existing Bank's
market areas. These ratios were also affected by strategies to improve liquidity
and reduce the loans-to-funds and loans-to-assets ratios.
The provision for loan losses was $112,000 in 1995, compared to $14,000 in
1994. The increase in the provision was primarily the result of general growth
in the Company's loan portfolio. The Company experienced net charge-offs of
$21,000 in 1995, resulting in a ratio of net charge-offs to average loans of
0.03%.
18
<PAGE>
Noninterest income increased $264,000, or 51.3%, to $777,000 in 1995 from
$514,000 in 1994, primarily attributable to increased service charges on deposit
accounts and commissions on sales of mutual funds by the Greenwood Bank's mutual
funds department which was established in 1995.
Noninterest expense increased $808,000, or 35.7%, to $3.1 million in 1995
from $2.3 million in 1994. The primary component of noninterest expense is
salaries and benefits, which increased $303,000, or 27.3%, in 1995 compared to
1994. The increase is attributable to an increase in the employee base due to
the opening of the Clemson Bank and the opening of the Greenwood Bank's trust
and mutual funds departments. The total of net occupancy expense and furniture
and equipment expense increased $185,000, or 78.1%, to $422,000 in 1995, from
$237,000 in 1994. This increase is attributable to an increase in depreciation
expense resulting from additions to premises and equipment in preparation for
opening the Clemson Bank and a new Greenwood Bank branch. The Company's
efficiency ratio in 1995 was 76.78%, compared to 69.81% in 1994.
Net income decreased $51,000, or 8.7%, to $534,000 in 1995 from $585,000 in
1994. The decrease in net income was due to the increase in noninterest expense
associated primarily with the organization of the Clemson Bank. Return on
average assets during 1995 was 0.68% compared to 0.97% during 1994, and return
on average equity was 5.69% during 1995 compared to 10.17% during 1994. The
decrease in return on average equity was attributable to the issuance of 520,422
additional shares of Common Stock in connection with the capitalization of the
Clemson Bank.
Net Interest Income
General. The largest component of the Company's net income is its net
interest income, which is the difference between the income earned on assets and
interest paid on deposits and borrowings used to support such assets. Net
interest income is determined by the yields earned on the Company's
interest-earning assets and the rates paid on its interest-bearing liabilities,
the relative amounts of interest-earning assets and interest-bearing
liabilities, and the degree of mismatch and the maturity and repricing
characteristics of its interest-earning assets and interest-bearing liabilities.
Net interest income divided by average interest-earning assets represents the
Company's net interest margin.
19
<PAGE>
Average Balances, Income Expenses and Rates. The following tables set
forth, for the periods indicated, certain information related to the Company's
average balance sheet and its average yields on assets and average costs of
liabilities. Such yields are derived by dividing income or expense by the
average balance of the corresponding assets or liabilities. Average balances
have been derived from the daily balances throughout the periods indicated.
Average Balances, Income and Expenses and Rates
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1995 1996
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Assets:
Earning Assets
Loans (1)................................. $46,305 $ 3,909 8.44 % $55,018 $ 5,146 9.35 % $ 71,298 $ 6,622 9.29 %
Investment securities (2)................. 7,801 383 4.91 14,419 894 6.21 23,188 1,402 6.05
Funds sold and other...................... 1,238 48 3.88 1,777 107 6.02 1,538 90 5.85
Total earning assets.................... 55,344 4,340 7.84 71,214 6,147 8.63 96,024 8,114 8.45
Cash and due from banks..................... 2,006 2,758 3,080
Premises and equipment...................... 1,760 2,288 3,408
Other assets................................ 2,053 2,646 3,776
Allowance for loan losses................... (569) (601) (746)
Total assets............................ $60,594 $78,305 $105,542
Liabilities:
Interest-Bearing Liabilities
Interest-bearing transaction accounts..... $ 5,597 103 1.84 $ 6,136 113 1.84 $ 7,719 151 1.96
Savings deposits.......................... 11,805 324 2.74 14,693 590 4.02 21,175 928 4.38
Time deposits............................. 23,518 937 3.98 30,053 1,719 5.72 41,476 2,346 5.66
Other short-term borrowings............... 683 31 4.54 2,479 145 5.73 5,070 283 5.58
Federal Home Loan Bank advances........... 6,501 298 4.58 6,655 381 5.73 5,436 298 5.48
Total interest-bearing liabilities...... 48,104 1,693 3.52 60,016 2,948 4.91 80,876 4,006 4.95
Demand deposits............................. 6,228 8,258 10,591
Accrued interest and other liabilities...... 530 643 1,015
Shareholders' equity........................ 5,732 9,388 13,060
Total liabilities and shareholders'
equity................................ $60,594 $78,305 $105,542
Net interest spread......................... 4.32 % 3.72 % 3.50 %
Net interest income......................... $ 2,647 $ 3,199 $ 4,108
Net interest margin......................... 4.78 % 4.49 % 4.28 %
</TABLE>
(1) The effect of loans in nonaccrual status and fees collected is not
significant to the computations. All loans and deposits are domestic.
(2) Average investment securities include the valuation allowance on securities
available for sale.
20
<PAGE>
Analysis of Changes in Net Interest Income. The following tables set forth
the effect which the varying levels of earning assets and interest-bearing
liabilities and the applicable rates have had on changes in net interest income
from 1994 to 1995 and 1995 to 1996.
Analysis of Changes in Net Interest Income
<TABLE>
<CAPTION>
Year Ended December 31,
1995 Compared With 1994 1996 Compared With 1995
Variance Due to Variance Due to
Volume (1) Rate (1) Total Volume Rate Total
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Earning Assets
Loans.................................................... $ 787 $ 450 $1,237 $1,512 $(36) $1,476
Investment securities.................................... 389 122 511 532 (24) 508
Funds sold and other..................................... 32 27 59 (14) (3) (17)
Total interest income............................... 1,208 599 1,807 2,030 (63) 1,967
Interest-Bearing Liabilities
Interest-bearing deposits:
Interest-bearing transaction accounts................. 10 -- 10 31 7 38
Savings and market rate investments................... 92 174 266 280 58 338
Certificates and other time deposits.................. 304 478 782 646 (19) 627
Total interest-bearing deposits..................... 406 652 1,058 957 46 1,003
Other short-term borrowings.............................. 103 11 114 145 (7) 138
Federal Home Loan Bank advances.......................... 7 76 83 (68) (15) (83)
Total interest expense.............................. 516 739 1,255 1,034 24 1,058
Net interest income................................. $ 692 $ (140) $ 552 $ 996 $(87) $ 909
</TABLE>
(1) Volume-rate changes have been allocated to each category based on the
percentage of the total change.
21
<PAGE>
Interest Sensitivity. The Company monitors and manages the pricing and
maturity of its assets and liabilities in order to diminish the potential
adverse impact that changes in interest rates could have on its net interest
income. The principal monitoring technique employed by the Company is the
measurement of the Company's interest sensitivity "gap," which is the positive
or negative dollar difference between assets and liabilities that are subject to
interest rate repricing within a given period of time. Interest rate sensitivity
can be managed by repricing assets or liabilities, selling securities
available-for-sale, replacing an asset or liability at maturity, or adjusting
the interest rate during the life of an asset or liability. Managing the amount
of assets and liabilities repricing in this same time interval helps to hedge
the risk and minimize the impact on net interest income of rising or falling
interest rates.
The following table sets forth the Company's interest rate sensitivity at
December 31, 1996.
Interest Sensitivity Analysis
<TABLE>
<CAPTION>
December 31, 1996
After One After Three Greater Than
Within Through Through Within One Year or
One Month Three Months Twelve Months One Year Nonsensitive Total
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Assets
Earning Assets
Loans (1)............................... $ 35,146 $ 7,008 $ 12,747 $ 54,901 $ 25,459 $80,360
Securities (2).......................... 502 1,010 1,027 2,539 20,741 23,280
Funds sold and other.................... 700 -- -- 700 -- 700
Total earning assets.................. 36,348 8,018 13,774 58,140 46,200 104,340
Liabilities
Interest-bearing liabilities
Interest-bearing deposits
Demand deposits....................... 8,296 -- -- 8,296 -- 8,296
Savings deposits...................... 22,716 -- -- 22,716 -- 22,716
Time deposits......................... 11,494 6,527 23,807 41,828 4,796 46,624
Total interest-bearing deposits....... 42,506 6,527 23,807 72,840 4,796 77,636
Other short-term borrowings............. 6,783 -- -- 6,783 -- 6,783
Federal Home Loan Bank advances......... 2,600 1,674 465 4,739 150 4,889
Total interest-bearing liabilities.... 51,889 8,201 24,272 84,362 4,946 89,308
Period gap................................... $(15,541 ) $ (183) $ (10,498) $(26,222) $ 41,254
Cumulative gap............................... $(15,541 ) $(15,724) $ (26,222) $(26,222) $ 15,032
Ratio of cumulative gap to total earning
assets....................................... (14.89 )% (15.07)% (25.13)% (25.13)% 14.41%
</TABLE>
(1) Excludes nonaccrual loans.
(2) Excludes investment in the Federal Home Loan Bank and Federal Reserve Bank
stock and other nonmarketable equity securities included in other assets
totaling approximately $2.2 million.
The above table reflects the balances of interest-earning assets and
interest-bearing liabilities at the earlier of their repricing or maturity
dates. Overnight federal funds are reflected at the earliest pricing interval
due to the immediately available nature of the instruments. Debt securities are
reflected at each instrument's ultimate maturity date. Scheduled payment amounts
of fixed rate amortizing loans are reflected at each scheduled payment date.
Scheduled payment amounts of variable rate amortizing loans are reflected at
each scheduled payment date until the loan may be repriced contractually; the
unamortized balance is reflected at that point. Interest-bearing liabilities
with no contractual maturity, such as savings deposits and interest-bearing
transaction accounts, are reflected in the earliest repricing period due to
contractual arrangements which give the Company the opportunity to vary the
rates paid on those deposits within a thirty-day or shorter period. Fixed rate
time deposits, principally certificates of deposit, are reflected at their
contractual maturity date.
The Company generally would benefit from increasing market rates of
interest when it has an asset-sensitive gap position and generally would benefit
from decreasing market rates of interest when it is liability-sensitive. The
Company is
22
<PAGE>
liability sensitive over the one month, three month, and one year time frames.
However, the Company's gap analysis is not a precise indicator of its interest
sensitivity position. The analysis presents only a static view of the timing of
maturities and repricing opportunities, without taking into consideration that
changes in interest rates do not affect all assets and liabilities equally. For
example, rates paid on a substantial portion of core deposits may change
contractually within a relatively short time frame, but those rates are viewed
by management as significantly less interest-sensitive than market-based rates
such as those paid on non-core deposits. Accordingly, management believes a
liability-sensitive gap position is not as indicative of the Company's true
interest sensitivity as it would be for an organization which depends to a
greater extent on purchased funds to support earning assets. Net interest income
may be impacted by other significant factors in a given interest rate
environment, including changes in the volume and mix of earning assets and
interest-bearing liabilities.
Provision and Allowance for Loan Losses
General. The Company has developed policies and procedures for evaluating
the overall quality of its credit portfolio and the timely identification of
potential problem credits. On a quarterly basis, each Existing Bank's Board of
Directors reviews and approves the appropriate level for that Bank's allowance
for loan losses based upon management's recommendations, the results of the
internal monitoring and reporting system, analysis of economic conditions in its
markets, and a review of historical statistical data for both the Company and
other financial institutions.
Additions to the allowance for loan losses, which are expensed as the
provision for loan losses on the Company's income statement, are made
periodically to maintain the allowance at an appropriate level based on
management's analysis of the potential risk in the loan portfolio. Loan losses
and recoveries are charged or credited directly to the allowance. The amount of
the provision is a function of the level of loans outstanding, the level of
nonperforming loans, historical loan loss experience, the amount of loan losses
actually charged against the reserve during a given period, and current and
anticipated economic conditions.
The Company's allowance for loan losses is based upon judgments and
assumptions of risk elements in the portfolio, future economic conditions and
other factors affecting borrowers. The process includes identification and
analysis of loss potential in various portfolio segments utilizing a credit risk
grading process and specific reviews and evaluations of significant problem
credits. In addition, management monitors the overall portfolio quality through
observable trends in delinquency, charge-offs, and general and economic
conditions in the service area. The adequacy of the allowance for loan losses
and the effectiveness of the Company's monitoring and analysis system are also
reviewed periodically by the banking regulators and the Company's independent
auditors.
Based on present information and an ongoing evaluation, management
considers the allowance for loan losses to be adequate to meet presently known
and inherent risks in the loan portfolio. Management's judgment as to the
adequacy of the allowance is based upon a number of assumptions about future
events which it believes to be reasonable but which may or may not be valid.
Thus, there can be no assurance that charge-offs in future periods will not
exceed the allowance for loan losses or that additional increases in the
allowance for loan losses will not be required. The Company does not allocate
the allowance for loan losses to specific categories of loans but evaluates the
adequacy on an overall portfolio basis utilizing a risk grading system. See
"Potential Problem Loans."
23
<PAGE>
The following table sets forth certain information with respect to the
Company's allowance for loan losses and the composition of charge-offs and
recoveries for each of the last five years.
Allowance for Loan Losses
<TABLE>
<CAPTION>
Year Ended December 31,
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Total loans outstanding at end of period, net of unearned income........... $34,493 $44,634 $50,565 $63,204 $80,546
Average loans outstanding, net of unearned income.......................... $32,190 $39,641 $46,305 $55,018 $71,298
Balance of allowance for loan losses at beginning of period................ $ 331 $ 500 $ 567 $ 581 $ 671
Loan losses:
Commercial, financial and agricultural................................... 48 5 -- 17 --
Real estate -- mortgage.................................................. -- -- -- -- --
Consumer................................................................. 10 12 4 4 21
Total loan losses...................................................... 58 17 4 21 21
Recoveries of previous loan losses:
Commercial, financial and agricultural................................... -- -- -- -- --
Real estate -- mortgage.................................................. -- -- -- -- --
Consumer................................................................. -- 4 4 -- --
Total recoveries....................................................... -- 4 4 -- --
Net loan losses............................................................ 58 13 -- 21 21
Provision for loan losses.................................................. 227 80 14 112 187
Balance of allowance for loan losses at end of period...................... $ 500 $ 567 $ 581 $ 671 $ 837
Allowance for loan losses to period end loans.............................. 1.45% 1.27% 1.15% 1.06% 1.04%
Net charge-offs to average loans........................................... 0.18 0.03 -- 0.03 0.03
</TABLE>
Nonperforming Assets. The following table sets forth the Company's
nonperforming assets for the dates indicated.
Nonperforming Assets
<TABLE>
<CAPTION>
December 31,
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Nonaccrual loans........................................................................ $ 85 $179 $ 3 $ 13 $ 186
Restructured or impaired loans.......................................................... -- -- -- -- --
Total nonperforming loans........................................................... 85 179 3 13 186
Other real estate owned................................................................. 97 -- 19 -- --
Total nonperforming assets.......................................................... $182 $179 $ 22 $ 13 $ 186
Loans 90 days or more past due and still
accruing interest..................................................................... $ -- $ -- $ 39 $ 60 $ 54
Nonperforming assets to period end loans and
foreclosed property................................................................... 0.52% 0.40% 0.04% 0.02% 0.23%
</TABLE>
Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection efforts, that
the borrower's financial condition is such that the collection of interest is
doubtful. A delinquent loan is generally placed in nonaccrual status when it
becomes 90 days or more past due. When a loan is placed in nonaccrual status,
all interest which has been accrued on the loan but remains unpaid is reversed
and deducted from earnings as a reduction of reported interest income. No
additional interest is accrued on the loan balance until the collection of both
principal and interest becomes reasonably certain. When a problem loan is
finally resolved, there may ultimately be an actual writedown or charge-off of
the principal balance of the loan which would necessitate additional charges to
earnings. For all periods presented, the additional interest income, which would
have been recognized into earnings if the Company's nonaccrual loans had been
current in accordance with their original terms, is immaterial.
Total nonperforming assets increased $173,000 to $186,000 at December 31,
1996, from $13,000 at December 31, 1995. This increase was primarily due to a
$122,000 loan collateralized by a second mortgage that was placed in nonaccrual
status in January 1996. Nonperforming assets were 0.23% of total loans and
foreclosed property at December 31, 1996. The allowance for loan losses to
period end nonperforming assets was 450.00% at December 31, 1996.
24
<PAGE>
Potential Problem Loans. At December 31, 1996, through their internal
review mechanisms the Existing Banks had identified $985,000 of criticized loans
and $2.6 million of classified loans. The results of this internal review
process are the primary determining factor in management's assessment of the
adequacy of the allowance for loan losses. See "Provision and Allowance for Loan
Losses."
Noninterest Income and Expense
Noninterest Income. The largest component of noninterest income is service
charges on deposit accounts, which totaled $515,000 in 1996, a 31.0% increase
over the 1995 level of $393,000. The increase in other noninterest income was
primarily due to the growth of the Greenwood Bank and increased fee income from
the origination of residential mortgage loans and from sales of mutual funds by
the mutual funds department which was formed in 1995.
The following table sets forth, for the periods indicated, the principal
components of noninterest income:
Noninterest Income
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1995 1996
<S> <C> <C> <C>
(Dollars in thousands)
Service charges on deposit accounts............................................................... $305 $393 $ 515
Residential mortgage origination fees............................................................. 114 115 207
Securities gains (losses)......................................................................... (79) (22) 17
Fees from sales of mutual funds................................................................... -- 49 132
Other............................................................................................. 174 242 355
Total noninterest income................................................................... $514 $777 $1,226
</TABLE>
Noninterest Expense. The following table sets forth, for the periods
indicated, the primary components of noninterest expense:
Noninterest Expense
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1995 1996
<S> <C> <C> <C>
(Dollars in thousands)
Salaries and employee benefits................................................................... $1,108 $1,411 $1,960
Net occupancy expense............................................................................ 116 182 287
Furniture and equipment expense.................................................................. 121 240 305
Director and committee fees...................................................................... 90 72 114
Amortization of intangibles and other assets..................................................... 31 33 14
Data processing and supplies..................................................................... 37 110 176
Mortgage loan department expense................................................................. 40 44 80
Banking assessments.............................................................................. 109 59 3
Professional fees................................................................................ 92 116 132
Postage and freight and carriers................................................................. 51 90 117
Supplies......................................................................................... 96 186 228
Credit card expenses............................................................................. 44 65 94
Other............................................................................................ 326 461 631
Total noninterest expense................................................................. $2,261 $3,069 $4,141
Efficiency ratio................................................................................. 69.81% 76.78% 77.28%
</TABLE>
Salaries and employee benefits increased $549,000, or 38.9%, to $2.0
million in 1996 from $1.4 million in 1995, primarily as a result of an increase
in the number of employees due to the opening in 1995 of the Clemson Bank, a
Greenwood Bank branch office, and the Greenwood Bank's trust and mutual funds
departments. The Company has also hired new employees in anticipation of opening
the New Banks. In addition, the Company continued to upgrade its data processing
operations in order to service both the Greenwood Bank and the Clemson Bank, as
well as to position the Company to pursue its strategy of forming a network of
independently managed community banks. In December 1994, the Company installed a
new mainframe-based computer system. In 1996, the Company purchased a separate
facility to use for data processing and bookkeeping. The Company also purchased
imaging equipment and software that will allow the Banks to provide better
service to their customers and assist employees in performing their day-to-day
duties. The Company is amortizing the cost of
25
<PAGE>
the imaging equipment and software and the computer over five years. The factors
above, combined with an increase in the cost of computer supplies, resulted in
increases in net occupancy expense, furniture and equipment expense, and data
processing and supplies expense. The Company's efficiency ratio, which is
noninterest expense as a percentage of the total of net interest income plus
noninterest income, net of gains and losses on the sale of assets, was 77.28% in
1996 compared to 76.78% in 1995 and 69.81% in 1994.
Earning Assets
Loans. Loans are the largest category of earning assets and typically
provide higher yields than the other types of earning assets. Associated with
the higher loan yields are the inherent credit and liquidity risks which
management attempts to control and counterbalance. Loans averaged $71.3 million
in 1996 compared to $55.0 million in 1995, an increase of $16.3 million, or
29.6%. At December 31, 1996, total loans were $80.5 million, compared to $63.2
million at December 31, 1995.
The increase in loans during 1996 was primarily due to the continued demand
for real estate loans in the Greenwood market, the loan growth at the Clemson
Bank, and an increase in the Greenwood Bank's customer base resulting from the
purchase of a local financial institution by an out-of-state competitor and the
closing or sale of local branches by large regional banks. The following table
sets forth the composition of the loan portfolio by category at the dates
indicated and highlights the Company's general emphasis on mortgage lending.
Composition of Loan Portfolio
<TABLE>
<CAPTION>
December 31,
1992 1993 1994 1995 1996
Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Commercial, financial and
agricultural.............. $8,933 25.90% $10,684 23.94% $12,231 24.19% $13,349 21.12% $15,348
Real estate
Construction.............. 2,236 6.48 11,556 25.89 5,906 11.68 8,483 13.42 9,962
Mortgage -- residential... 11,148 32.32 11,258 25.22 14,978 29.62 22,515 35.62 31,519
Mortgage -- nonresidential... 9,586 27.79 7,504 16.81 13,436 26.57 14,190 22.45 17,616
Consumer.................... 2,535 7.35 3,585 8.03 3,953 7.82 4,591 7.27 5,947
Other....................... 55 0.16 47 0.11 61 0.12 76 0.12 154
Total loans............... 34,493 100.00% 44,634 100.00% 50,565 100.00% 63,204 100.00% 80,546
Allowance for loan losses... (500 ) (567 ) (581 ) (671 ) (837)
Net loans................. $33,993 $44,067 $49,984 $62,533 $79,709
<CAPTION>
1996
Percent
of Total
<S> <C>
Commercial, financial and
agricultural.............. 19.05%
Real estate
Construction.............. 12.37
Mortgage -- residential... 39.13
Mortgage -- nonresidential 21.87
Consumer.................... 7.38
Other....................... 0.20
Total loans............... 100.00
Allowance for loan losses...
Net loans.................
</TABLE>
The principal component of the Company's loan portfolio is real estate
mortgage loans. At December 31, 1996, this category totaled $49.1 million and
represented 61.0% of the total loan portfolio, compared to $36.7 million, or
58.1%, at December 31, 1995.
In the context of this discussion, a "real estate mortgage loan" is defined
as any loan, other than loans for construction purposes, secured by real estate,
regardless of the purpose of the loan. It is common practice for financial
institutions in the Company's market areas to obtain a security interest in real
estate whenever possible, in addition to any other available collateral. This
collateral is taken to reinforce the likelihood of the ultimate repayment of the
loan and tends to increase the magnitude of the real estate loan portfolio
component.
Residential mortgage loans, which is the largest category of the Company's
loans, increased $9.0 million, or 40.0%, to $31.5 million at December 31, 1996,
from $22.5 million at December 31, 1995. Residential real estate loans consist
of first and second mortgages on single or multi-family residential dwellings.
Nonresidential mortgage loans, which include commercial loans and other loans
secured by multi-family properties and farmland and is the second largest
category of the Company's loans, increased $3.4 million, or 24.1%, to $17.6
million at December 31, 1996, from $14.2 million at December 31, 1995. The
increase in real estate lending was attributable to the continued demand for
residential and commercial real estate loans in the Greenwood market, the
Company's ability to attract new customers from a local competitor that was
acquired by an out-of-state bank in 1996 and from local branch offices of large
regional banks that were closed during the year, continued increases in
residential construction lending, and loan growth at the Clemson Bank, which had
$7.8 million in real estate loans as of December 31, 1996 compared to $4.2
million as of December 31, 1995. The Existing Banks have been able to compete
favorably for residential mortgage loans with other financial institutions by
offering fixed rate products having three and five year call provisions.
Generally, the Existing Banks limit their loan-to-value ratios to 80%.
26
<PAGE>
Commercial, financial and agricultural loans increased $2.0 million, or
15.0%, to $15.3 million at December 31, 1996, from $13.3 million at December 31,
1995. This increase was primarily attributable to the continued economic
development in Greenwood County and the growth of the Clemson Bank.
Consumer loans increased $1.4 million, or 29.5%, to $5.9 million at
December 31, 1996, from $4.6 million at December 31, 1995. The growth in
consumer loans is primarily attributable to overall growth in the Company's loan
portfolio.
The Company's loan portfolio reflects the diversity of its markets. The
home office and branch offices of the Greenwood Bank are located in Greenwood
County, South Carolina. The economy of Greenwood contains elements of medium and
light manufacturing, higher education, regional healthcare, and distribution
facilities. The Clemson Bank office is currently located in a temporary facility
in Clemson, South Carolina. Due to its proximity to a major interstate highway
and Clemson University, a state-supported university, management expects the
area to remain stable with continued growth. Outside the incorporated city
limits of Greenwood and Clemson, the economy includes manufacturing,
agriculture, timber, and recreational activities. The Company does not engage in
foreign lending.
The repayment of loans in the loan portfolio as they mature is also a
source of liquidity for the Company. The following table sets forth the
Company's loans maturing within specified intervals at December 31, 1996.
Loan Maturity Schedule and Sensitivity to Changes in Interest Rates
<TABLE>
<CAPTION>
December 31, 1996
Over One Year
One Year Through Over Five
or Less Five Years Years Total
<S> <C> <C> <C> <C>
(Dollars in thousands)
Commercial, financial and agricultural...................................... $ 11,503 $ 3,845 $ -- $15,348
Real estate................................................................. 35,642 22,578 877 59,097
Consumer and other.......................................................... 4,351 1,655 95 6,101
Loans maturing after one year with:
Fixed interest rates............................................................................................... $26,135
Floating interest rates............................................................................................ 2,915
$29,050
</TABLE>
The information presented in the above table is based on the contractual
maturities of the individual loans, including loans which may be subject to
renewal at their contractual maturity. Renewal of such loans is subject to
review and credit approval, as well as modification of terms upon their
maturity. Consequently, management believes this treatment presents fairly the
maturity and repricing structure of the loan portfolio shown on the above table.
Investment Securities. The investment securities portfolio is a significant
component of the Company's total earning assets. Total securities averaged $23.2
million in 1996, compared to $14.4 million in 1995 and $7.8 million in 1994. At
December 31, 1996, the total securities portfolio was $23.3 million, and all
securities were designated as available-for-sale and were recorded at estimated
fair market value. The increase in the portfolio during 1996 was primarily due
to strategies implemented by management in 1995 and maintained in 1996 to
improve liquidity and lower the loans-to-assets ratio.
The following table sets forth the book value of the securities held by the
Company at the dates indicated.
Book Value of Securities
<TABLE>
<CAPTION>
December 31,
1994 1995 1996
<S> <C> <C> <C>
(Dollars in thousands)
U.S. Treasury................................................................................. $4,889 $ 5,952 $ 6,420
U.S. government agencies...................................................................... 1,044 11,546 11,150
State, county and municipal securities........................................................ 1,684 4,550 5,367
Mortgage-backed securities.................................................................... -- 398 343
Total securities....................................................................... $7,617 $22,446 $23,280
</TABLE>
27
<PAGE>
The following table sets forth the scheduled maturities and average yields
of securities held at December 31, 1996.
Investment Securities Maturity Distribution and Yields
<TABLE>
<CAPTION>
December 31, 1996
After One But After Five But
Within One Year Within Five Within Ten
Years Years After Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
U.S. Treasury.......................................... $1,605 6.52 % $ 4,815 6.00 % $ -- -- % $ -- -- %
U.S. government agencies............................... -- -- 5,127 6.24 6,023 6.79
State and political subdivisions....................... 934 4.32 902 4.50 1,105 4.72 2,426 5.00
Total (1)....................................... $2,539 5.71 % $10,844 6.00 % $7,128 6.47 % $2,426 5.00 %
</TABLE>
(1) Excludes mortgage-backed securities totaling $343,000 with a yield of 6.91%.
Other attributes of the securities portfolio, including yields and
maturities, are discussed above in " -- Net Interest Income -- Interest
Sensitivity."
Short-Term Investments. Short-term investments, which consist primarily of
federal funds sold and interest-bearing deposits with other banks, averaged $1.5
million in 1996, compared to $1.8 million in 1995 and $1.2 million in 1994. At
December 31, 1996, short-term investments totaled $700,000. These funds are a
primary source of the Existing Banks' liquidity and are generally invested in an
earning capacity on an overnight basis.
Deposits and Other Interest-Bearing Liabilities
Average interest-bearing liabilities increased $20.9 million, or 34.8%, to
$80.9 million in 1996, from $60.0 million in 1995. Average interest-bearing
deposits increased $19.5 million, or 38.3%, to $70.4 million in 1996, from $50.9
million in 1995. These increases resulted from increases in most categories of
interest-bearing liabilities, primarily as a result of the opening of the
Clemson Bank and the Greenwood Bank branch. The Company has also been able to
attract new accounts from former South Carolina-based banks that have been
acquired by large southeastern regional bank holding companies and from local
branches of regional banks which have been closed or sold.
Deposits. Average total deposits increased $21.8 million, or 36.9%, to
$81.0 million during 1996, from $59.1 million during 1995. At December 31, 1996,
total deposits were $89.9 million compared to $73.1 million a year earlier, an
increase of 22.9%.
The following table sets forth the deposits of the Company by category at
the dates indicated.
Deposits
<TABLE>
<CAPTION>
December 31,
1992 1993 1994 1995 1996
Percent Percent Percent Percent
of of of of
Amount Deposits Amount Deposits Amount Deposits Amount Deposits Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Demand deposit
accounts............... $4,620 11.28% $4,974 10.81% $6,968 14.18% $9,447 12.92% $12,226
NOW accounts............. 5,161 12.60 5,050 10.98 7,158 14.56 8,028 10.98 8,296
Money market accounts.... 6,179 15.08 5,679 12.35 4,815 9.80 9,498 12.98 14,035
Savings accounts......... 5,009 12.22 6,360 13.83 6,818 13.87 7,922 10.83 8,681
Time deposits less than
$100,000............... 14,193 34.64 15,503 33.71 15,893 32.34 26,161 35.77 34,745
Time deposits of $100,000
or over................ 5,808 14.18 8,426 18.32 7,494 15.25 12,082 16.52 11,879
Total deposits..... $40,970 100.00% $45,992 100.00% $49,146 100.00% $73,138 100.00% $89,862
<CAPTION>
1996
Percent
of
Deposits
<S> <C>
Demand deposit
accounts............... 13.61%
NOW accounts............. 9.23
Money market accounts.... 15.62
Savings accounts......... 9.66
Time deposits less than
$100,000............... 38.66
Time deposits of $100,000
or over................ 13.22
Total deposits..... 100.00%
</TABLE>
Core deposits, which exclude certificates of deposit of $100,000 or more,
provide a relatively stable funding source for the Company's loan portfolio and
other earning assets. The Company's core deposits increased $16.8 million in
1996, primarily as a result of the opening of the Clemson Bank and a Greenwood
Bank branch in Ninety Six, South Carolina and
28
<PAGE>
deposit runoff from a locally-owned financial institution which was acquired by
an out-of-state regional bank. Management also believes the Company's focus on
quality service has contributed to the growth.
Deposits, and particularly core deposits, have historically been the
Company's primary source of funding and have enabled the Company to meet
successfully both its short-term and long-term liquidity needs. Management
anticipates that such deposits will continue to be the Company's primary source
of funding in the future. The Company's loan-to-deposit ratio was 89.6% at
December 31, 1996, and 86.4% at the end of 1995, and the ratio averaged 88.1%
during 1996. The maturity distribution of the Company's time deposits over
$100,000 at December 31, 1996, is set forth in the following table.
Maturities of Certificates of Deposit
of $100,000 or More
<TABLE>
<CAPTION>
December 31, 1996
After Three After Six
Within Three Through Through After Twelve
Months Six Months Twelve Months Months Total
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
Certificates of deposit of $100,000 or more.............. $4,517 $ 2,772 $ 3,785 $805 $11,879
</TABLE>
Approximately 38.0% of the Company's time deposits over $100,000 had
scheduled maturities within three months and more than 60.0% had maturities
within six months. Large certificate of deposit customers tend to be extremely
sensitive to interest rate levels, making these deposits less reliable sources
of funding for liquidity planning purposes than core deposits. Some financial
institutions partially fund their balance sheets using large certificates of
deposit obtained through brokers. These brokered deposits are generally
expensive and are unreliable as long-term funding sources. Accordingly, the
Company does not solicit brokered deposits.
Borrowed Funds. Borrowed funds consist primarily of short-term borrowings
in the form of federal funds purchased from correspondent banks, securities sold
under agreements to repurchase, and advances from the Federal Home Loan Bank.
Average short-term borrowings were $5.1 million in 1996, an increase of
$2.6 million from 1995. The increase is primarily due to the Company's increased
use of repurchase agreements with an unrelated financial institution. Average
borrowings under this agreement were $2.8 million in 1996 compared to $226,000
in 1995. Average Federal Home Loan Bank advances during 1996 were $5.4 million
compared to $6.7 million during 1995, a decrease of $1.3 million. Although
management expects to continue using short-term borrowing and Federal Home Loan
Bank advances as secondary funding sources, core deposits will continue to be
the Company's primary funding source.
Capital
The Federal Reserve Board and bank regulatory agencies require bank holding
companies and financial institutions to maintain capital at adequate levels
based on a percentage of assets and off-balance sheet exposures, adjusted for
risk weights ranging from 0% to 100%. Under the risk-based standard, capital is
classified into two tiers. The Federal Reserve guidelines contain an exemption
from the capital requirements for bank holding companies with less than $150
million in consolidated assets. Prior to the Offering, the Company has had less
than $150 million in assets and, consequently, has not been subject to these
rules. Following the Offering and the Acquisition, however, the Company expects
to have in excess of $150 million, in which case the Federal Reserve's
requirements will apply to the Company. Tier 1 capital of the Company consists
of common shareholders' equity, excluding the unrealized gain (loss) on
available-for-sale securities, minus certain intangible assets. The Company's
Tier 2 capital consists of general reserve for loan losses subject to certain
limitations. A bank holding company's qualifying capital base for purposes of
its risk-based capital ratio consists of the sum of its Tier 1 and Tier 2
capital. The regulatory minimum requirements are 4% for Tier 1 and 8% for total
risk-based capital.
The holding company and banking subsidiaries are also required to maintain
capital at a minimum level based on total assets, which is known as the leverage
ratio. Only the strongest bank holding companies and banks are allowed to
maintain capital at the minimum requirement. All others are subject to
maintaining ratios 100 to 200 basis points above the minimum.
29
<PAGE>
The Company exceeded the Federal Reserve's fully phased-in regulatory
capital ratios at December 31, 1994, 1995 and 1996, as set forth in the
following table.
Analysis of Capital
<TABLE>
<CAPTION>
December 31,
1994 1995 1996
<S> <C> <C> <C>
(Dollars in thousands)
Tier 1 capital........................................................................... $ 6,131 $12,693 $13,474
Tier 2 capital........................................................................... 580 671 837
Total qualifying capital............................................................... $ 6,711 $13,364 $14,311
Risk-adjusted total assets (including
off-balance sheet exposures)........................................................... $55,516 $68,743 $86,512
Tier 1 risk-based capital ratio.......................................................... 11.04% 18.46% 15.57%
Total risk-based capital ratio........................................................... 12.09 19.41 16.54
Tier 1 leverage ratio.................................................................... 9.42 13.21 11.62
</TABLE>
Each of the Existing Banks is required to maintain risk-based and leverage
ratios similar to those required for the Company. Each of the Existing Banks
exceeded these regulatory capital ratios at December 31, 1996, as set forth in
the following table.
Bank Capital Ratios
<TABLE>
<CAPTION>
December 31, 1996
Tier 1 Total Tier 1
Risk-Based Risk-Based Leverage
<S> <C> <C> <C>
Greenwood Bank............................................................................ 9.97% 10.91% 7.34%
Clemson Bank.............................................................................. 30.76 32.01 23.60
</TABLE>
Following the purchase of the New Banks and the assumption of the Carolina
First Deposits and the purchase of the Carolina First Loans and Carolina First
Assets associated with the Carolina First Branches, and assuming net proceeds of
$14.9 million from the Offering, the Company's Tier 1 leverage ratio will
increase from 11.62% to 13.88% and its tangible book value per share will
decrease from $11.08 to $9.42, and the capital ratios of the Existing Banks will
not be affected.
Liquidity Management and Capital Resources
Liquidity management involves monitoring the Company's sources and uses of
funds in order to meet its day-to-day cash flow requirements while maximizing
profits. Liquidity represents the ability of a company to convert assets into
cash or cash equivalents without significant loss and to raise additional funds
by increasing liabilities. Without proper liquidity management, the Company
would not be able to perform the primary function of a financial intermediary
and would, therefore, not be able to meet the needs of the communities it
serves.
Liquidity management is made more complex because different balance sheet
components are subject to varying degrees of management control. For example,
the timing of maturities of the investment portfolio is very predictable and
subject to a high degree of control at the time investment decisions are made.
However, net deposit inflows and outflows are far less predictable and are not
subject to nearly the same degree of control.
During 1995, management implemented strategies to decrease the
loans-to-assets and loans-to-funds ratios. The Company continues to operate
within the recommendations of the Board of Directors with a loans-to-assets
ratio of 69.5% and a loans-to-funds ratio of 79.3% as of December 31, 1996.
Although the amount of advances from the FHLB has decreased approximately $1.4
million from the December 31, 1995 balance of approximately $6.2 million,
management expects to continue using these advances as a source of funding.
Additionally, the Company has approximately $9.3 million of unused lines of
credit for federal funds purchases and a $5.0 million line of credit from
another financial institution. The Company also has approximately $23.3 million
of securities available for sale as a secondary source of liquidity.
The Company depends on dividends from the Existing Banks as its primary
source of liquidity. The ability of the Banks to pay dividends is subject to
general regulatory restrictions which may, but are not expected to, have a
material negative impact on the liquidity available to the Company. The Company
does not plan to pay cash dividends for the near term. The Company has paid
stock dividends in September 1993, April 1994, August 1995, and May 1996 and may
do so in the future.
30
<PAGE>
The Company financed the formation of the Greenwood Bank and the Company's
initial operations with the proceeds of a $5.0 million offering of Common Stock
in 1988, of which $4.0 million was used to capitalize the Greenwood Bank. In
addition, the Company raised approximately $6.25 million through an offering of
Common Stock in 1995. The Company used $4.5 million of the proceeds of this
offering to capitalize the Clemson Bank and used the balance to purchase
computer and other equipment, to open a new branch in Ninety Six, South
Carolina, and for general working capital. The Company intends to use the net
proceeds of the Offering to capitalize each of the New Banks. See "Use of
Proceeds." The Company anticipates that the net proceeds of the Offering will be
adequate for the capitalization of each New Bank and the Company's capital needs
for the foreseeable future. However, the State Board could require the Company
to increase the capitalization of any of the Banks. See "Risk Factors." In such
event, the Company would likely fund the increased capitalization through the
use of any remaining net proceeds of the Offering, from dividends from the
Existing Banks (to the extent available), or through loans from third parties
(subject to obtaining regulatory approval). See "Government Supervision and
Regulation -- Dividends."
Accounting Rule Changes
Accounting for Stock-Based Compensation. In October 1995, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") 123, "Accounting for Stock-Based Compensation," effective for
transactions entered into in fiscal years that begin after December 15, 1995.
SFAS 123 recommends that companies account for stock compensation on a fair
value based method which requires compensation cost to be measured at the grant
date based on the value of the award and to be recognized over the service
period. As an alternative, companies may continue to record compensation cost
based on the excess, if any, of the quoted market price of the stock at the
grant date (or other measurement date) over the amount an employee must pay to
acquire the stock. However, if a company elects this method, it must include in
the financial statements certain disclosures which reflect pro forma amounts as
if the fair value method had been used. As permitted by SFAS 123, the Company
continued its current method of accounting for stock options with pro forma
amounts for 1995 and 1996 disclosed in the 1996 financial statements.
Impact of Inflation
Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Company and its subsidiaries are primarily monetary in
nature. Therefore, interest rates have a more significant effect on the
Company's performance than do the effects of changes in the general rate of
inflation and change in prices. In addition, interest rates do not necessarily
move in the same direction or in the same magnitude as the prices of goods and
services. As discussed previously, management seeks to manage the relationships
between interest sensitive assets and liabilities in order to protect against
wide interest rate fluctuations, including those resulting from inflation. See
" -- Net Interest Income -- Interest Sensitivity" and "Risk
Factors -- Government Regulation."
Industry Developments
Certain recently enacted and proposed legislation could have an effect on
both the costs of doing business and the competitive factors facing the
financial institutions industry. The Company is unable at this time to assess
the impact of this legislation on its financial condition or results of
operations. See "Government Supervision and Regulation -- General."
31
<PAGE>
BUSINESS
General
The Company is a bank holding company headquartered in Greenwood, South
Carolina which currently operates through two community banks and is in the
process of acquiring three de novo community banks in non-metropolitan markets
in the State of South Carolina. The Company pursues a community banking business
which is characterized by personalized service and local decision-making and
emphasizes the banking needs of individuals and small to medium-sized
businesses.
The Company was formed in 1988 to serve as a holding company for the
Greenwood Bank, principally in response to perceived opportunities resulting
from the takeovers of several South Carolina-based banks by large southeastern
regional bank holding companies. In many cases, when these consolidations occur,
local boards of directors are dissolved and local management is relocated or
terminated. The Company believes this situation creates favorable opportunities
for new community banks with local management and local directors. Management
believes that such banks can be successful in attracting individuals and small
to medium-sized businesses as customers who wish to conduct business with a
locally owned and managed institution that demonstrates an active interest in
their business and personal financial affairs.
In 1994, the Company made the strategic decision to expand beyond the
Greenwood County area by creating an organization of independently managed
community banks that serve their respective local markets but which share a
common vision and benefit from the strength, resources, and economies of a
larger institution. In June 1995, the Company opened the Clemson Bank in
Clemson, South Carolina. The Company is in the process of acquiring the three
New Banks which are being formed in Belton, Barnwell, and Newberry, South
Carolina. The Company intends to open the Belton Bank and Newberry Bank in
traditional de novo fashion by capitalizing the banks and seeking local deposits
to fund loan growth. In contrast, immediately after opening, the Barnwell Bank
will acquire certain deposits and assets associated with the Carolina First
Branches. As of December 31, 1996, the Carolina First Branches had approximately
$53.7 million in deposits and $15.2 million in loans. The Company anticipates
that the Barnwell Bank and the Belton Bank will open during the first quarter of
1997, and that the Newberry Bank will open in the second quarter of 1997.
As a one-bank holding company for the Greenwood Bank, the Company grew from
approximately $21.5 million in assets, $11.7 million in loans, $16.6 million in
deposits, and $4.6 million in shareholders' equity at December 31, 1989, to
approximately $65.1 million in assets, $50.6 million in loans, $49.1 million in
deposits, and $6.1 million in shareholders' equity at December 31, 1994. The
opening of the Clemson Bank in June 1995 resulted in a lowering of the Company's
earnings per share for the year ended December 31, 1995, due to substantial
start-up expenditures, as well as the time required to attract customers,
deposits, and earning assets. The Clemson Bank achieved profitability in
September 1996, and at December 31, 1996, the Company had approximately $116.0
million in assets, $80.5 million in loans, $89.9 million in deposits, and $13.6
million in shareholders' equity. Based upon levels at December 31, 1996, and
giving effect to this Offering and the acquisition of certain deposits and
assets associated with the Carolina First Branches, the Company would have
approximately $185.1 million in assets, $95.7 million in loans, $143.6 million
in deposits, and $28.4 million in shareholders' equity.
Operating Strategy
Independent Community Banks. The foundation of the Company's strategy is to
operate a multi-community bank organization which emphasizes decision-making at
the local Bank level combined with strong corporate technological, marketing,
and managerial support. The Company's operating model is for each Bank to
operate with independent management and Boards of Directors consisting of
individuals with extensive knowledge of the local community and the authority to
make credit decisions. The Company believes this operating strategy has enabled
the Existing Banks, and will enable the New Banks, to attract customers who wish
to conduct their business with a locally owned and managed institution with
strong ties and an active commitment to the community.
Centralized Corporate Support. The Company intends to provide the Banks
with strong support from its corporate office, including centralized policy
oversight, back-office support, credit review, and strategic planning. This
corporate support system will enable the Company to achieve administrative
economies of scale while capitalizing on the responsiveness to client needs of
its decentralized community bank network. With the support from its significant
investment in infrastructure, particularly a management information system which
will link the Company to the Banks and facilitate data processing, compliance,
and reporting requirements, the Company believes it has the operational and
administrative capacity to accommodate the addition of the New Banks and
effectively manage the Company's growth for the foreseeable future.
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<PAGE>
Local Ownership. The management of each Bank believes that each Bank's
ability to compete with other financial institutions in its respective market
area is enhanced by its posture as a locally managed bank with a broad base of
local ownership. The organizers of each of the New Banks, all of whom reside in
the market area in which their respective Bank operates, have indicated that
they each intend to purchase a significant amount of Common Stock in the
Offering. In addition, the Company anticipates a significant percentage of the
remaining shares of Common Stock sold in the Offering will be sold to
individuals residing in the areas served by the Banks. The Company believes that
local ownership of the Company's Common Stock is a highly effective means of
attracting customers, fostering loyalty to the Banks, and maintaining asset
quality.
Outstanding Asset Quality. The Company believes that the outstanding asset
quality it has experienced to date is principally due to the closeness of the
lenders, senior officers, and directors of the Existing Banks to their customers
and their significant knowledge of the communities in which they reside. Over
the five year period ended December 31, 1996, the Company had an average net
charge-off ratio of 0.05%. The Company believes that it has assembled a team of
highly skilled, experienced bankers to operate the New Banks and anticipates
that these senior officers, combined with committed Boards of Directors with
significant ownership interest in the Company, will enable the New Banks to
maintain the excellent asset quality the Company has experienced.
Growth Strategy
Following the Offering, the Company intends to focus on the development of
the New Banks and the continued growth of the Existing Banks. Each Bank's growth
is expected to come primarily from within such Bank's primary market area
through increased loan and deposit business. The Company will continue to focus
on acquiring market share, particularly from the large southeastern regional
bank holding companies, by emphasizing local management and decision-making and
personal services to business customers and individuals. Specifically, the
Company's competitive strategy consists of approving loan requests more quickly
with a local loan committee, operating with more flexible, but equally prudent,
lending policies, personalizing service by establishing a long-term banking
relationship with the customer, and having a higher ratio of employees to
customers to ensure a higher level of service. A key element of the Company's
near term growth strategy is to grow the New Banks and the Clemson Bank, which
achieved profitability in September 1996, into high performing community banking
institutions whose assets and expenses are appropriate for their levels of
capitalization and which will become major contributors to the Company's
earnings. While the Company does not intend actively to search for opportunities
to expand into additional markets, the Company may consider opportunities that
arise from time to time, though most likely through acquisitions of existing
institutions or branches rather than through formation of additional de novo
banks. The Company has no specific acquisition plans at the current time other
than the New Banks and the Carolina First Branches.
Market Areas
The Company currently operates principally in two market areas: (1)
Greenwood County, South Carolina; and (2) Pickens County, South Carolina. The
Company will also operate in the following three primary market areas upon the
acquisition of the New Banks: (1) Anderson County, South Carolina; (2) Barnwell
County, South Carolina; and (3) Newberry County, South Carolina. Upon the
acquisition of the Carolina First Branches, the Barnwell Bank will also have an
office in each of Aiken and Orangeburg Counties, South Carolina.
Anderson County. The Company intends to serve the Anderson County, South
Carolina area through the Belton Bank. The city of Belton is located in Anderson
County and has a population of approximately 4,646. The city of Belton is
located 11 miles from the city of Anderson, the county seat of Anderson County.
As of December 1995, Anderson County had a population of approximately 152,600.
In 1990, Anderson County had a per capita income of approximately $12,027, as
compared to $11,897 for the State of South Carolina as a whole, and $14,420 for
the United States as a whole. As of October 1996, the unemployment rate for the
county was 5.0%. The economic base for Anderson County relies heavily upon
manufacturing, as well as retail and wholesale trade.
Barnwell County. The Company intends to serve the Barnwell County, South
Carolina area through the Barnwell Bank. The city of Barnwell, located 60 miles
from Columbia, South Carolina, is the county seat of Barnwell County and has a
population of approximately 6,000. As of December 1995, Barnwell County had a
population of approximately 21,000. In 1990, Barnwell County had a per capita
income of approximately $10,611. As of October 1996, the unemployment rate for
the county was 11.1%. The economic base for Barnwell County relies heavily upon
manufacturing.
Greenwood County. The Company serves the Greenwood County, South Carolina
area through the Greenwood Bank. The city of Greenwood, located 43 miles from
Greenville, South Carolina, is the county seat of Greenwood County and has a
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population of approximately 21,000. As of December 1995, Greenwood County had a
population of approximately 61,500. In 1990, Greenwood County had a per capita
income of approximately $11,429. As of October 1996, the unemployment rate for
the county was 7.0%. The economic base for Greenwood County relies heavily upon
manufacturing.
Newberry County. The Company intends to serve the Newberry County, South
Carolina area through the Newberry Bank. The city of Newberry, located 35 miles
from Columbia, South Carolina, is the county seat of Newberry County and has a
population of approximately 10,850. As of December 1995, Newberry County had a
population of approximately 34,100. In 1990, Newberry County had a per capita
income of $10,487. As of October 1996, the unemployment rate for the county was
5.7%. The economic base for Newberry County relies heavily upon manufacturing.
Pickens County. The Company serves the Pickens County, South Carolina area
through the Clemson Bank. The city of Clemson, located 30 miles from Greenville,
South Carolina, is the home of Clemson University and has a permanent population
of approximately 11,000. As of December 1995, Pickens County had a population of
approximately 102,000. In 1990, Pickens County had a per capita income of
approximately $11,427. As of October 1996, the unemployment rate for the county
was 4.1%. The economic base for Pickens County relies heavily upon Clemson
University and manufacturing.
The Existing Banks
The Greenwood Bank, a state chartered Federal Reserve member bank, has
three banking locations, two of which are located in Greenwood, South Carolina,
and the other located in Ninety Six, South Carolina. The Clemson Bank, a state
chartered nonmember bank, has one banking location located in Clemson, South
Carolina.
The following table sets forth certain information concerning the Greenwood
Bank and the Clemson Bank at December 31, 1996:
<TABLE>
<CAPTION>
Number of Total Total Total
Bank Locations Assets Loans Deposits
<S> <C> <C> <C> <C>
(Dollars in thousands)
Greenwood Bank................................................................... 3 $96,729 $69,347 $ 76,960
Clemson Bank..................................................................... 1 17,597 12,066 13,429
</TABLE>
Each Existing Bank offers a full range of commercial banking services,
including checking and savings accounts, NOW accounts, IRA accounts, and other
savings and time deposits of various types ranging from money markets to
long-term certificates of deposit. The Existing Banks also offer a full range of
consumer credit and short-term and intermediate-term commercial and personal
loans. Each Existing Bank conducts residential mortgage loan origination
activities pursuant to which mortgage loans are sold to investors in the
secondary markets. Servicing of such loans is not retained by the Existing
Banks.
The Greenwood Bank also offers trust and related fiduciary services.
Discount securities brokerage services are available through a third-party
brokerage service which has contracted with Community Financial Services, Inc.,
a wholly-owned subsidiary of the Greenwood Bank.
The Company performs data processing functions for the Existing Banks upon
terms that the managements of both Existing Banks believe is competitive with
those offered by unaffiliated third-party service bureaus. The Company also
administers certain operating functions for the Existing Banks where cost
savings can be achieved. Included in such operations are regulatory compliance,
personnel, and internal audit functions. The Company's costs associated with the
performance of such services are allocated between the Existing Banks based on
each Bank's total assets.
The New Banks
The Company intends to open the Belton Bank and the Newberry Bank in
traditional de novo fashion, capitalizing the banks with $3.5 million and $3.3
million, respectively, and seeking local deposits to fund loan growth. The
Company, however, intends to capitalize the Barnwell Bank with $7.0 million and
for the Barnwell Bank to acquire the five Carolina First Branches. As of
December 31, 1996, the Carolina First Branches had approximately $53.7 million
in deposits and $15.2 million in loans. The Company anticipates that this
acquisition will be consummated by the end of the first quarter of 1997. See
"Risk Factors -- General Risks of the Acquisition of the Carolina First
Branches" and " -- No Assurance of Obtaining Regulatory Approvals for the New
Banks."
The New Banks will engage in the commercial banking business in their
respective communities. The Company believes that there is a need for, and that
the Barnwell, Belton, and Newberry communities will support, new locally
operated community banks. Although the Company could obtain a banking presence
in the Barnwell, Belton, or Newberry markets by
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<PAGE>
opening a branch office of one of the Existing Banks there, management of the
Company believes that separate banks with their own local boards of directors
and their own policies, tailored to the local market, is a preferable approach.
Each New Bank will provide personalized banking services, with emphasis on the
financial needs and objectives of individuals and small to medium-sized
businesses. Additionally, substantially all credit and related decisions will be
made by the Bank's local management and board of directors, thereby facilitating
prompt response. Each New Bank will emphasize a commitment to the industrial and
business growth of its primary market area.
The principal business of each New Bank will be to accept deposits from the
public and to make loans and other investments. Each New Bank intends to offer
the same full range of deposit and other services that are currently offered by
the Existing Banks. See "The Existing Banks." The principal sources of funds for
each New Bank's loans and investments are expected to be demand, time, savings
and other deposits, repayment of loans, and borrowings. In addition, a portion
of the net proceeds of this Offering, once contributed to the capital of each
New Bank, will be used by each New Bank to fund loans. The principal source of
income for each New Bank is expected to be interest collected on loans and other
investments. The principal expenses of each New Bank are expected to be interest
paid on savings and other deposits, employee compensation, office expenses, and
other overhead expenses. Initially, the New Banks will not offer trust or
fiduciary services.
Each New Bank will use facilities of the Company for data processing which
should result in a significant monetary savings for each New Bank. The Company
owns its computer and item-sorting equipment. The capacity of such equipment
considerably exceeds the initial needs of the Existing Banks, and, therefore,
the Company will be able to provide data processing services to the New Banks.
Presently, financial institutions in South Carolina that elect not to install
on-premises data processing capability purchase data processing services from
service bureaus. The Company will be able to offer such services to the New
Banks upon terms that management believes would be competitive with those
offered by such service bureaus. It is likely that the Banks will also elect to
jointly administer certain operating functions between themselves where cost
savings can be achieved. Included in possible shared operations are regulatory
compliance, accounts payable, personnel, and internal audit functions.
Lending Activities
General. Through the Banks, the Company offers a range of lending services,
including real estate, consumer, and commercial loans, to individuals and small
business and other organizations that are located in or conduct a substantial
portion of their business in the Banks' market areas. The Company's total loans
at December 31, 1996, were $80.5 million, or 77.1% of total earning assets. The
interest rates charged on loans vary with the degree of risk, maturity, and
amount of the loan, and are further subject to competitive pressures, money
market rates, availability of funds, and government regulations. The Company has
no foreign loans or loans for highly leveraged transactions.
The Company's primary focus has been on commercial and installment lending
to individuals and small to medium-sized businesses in its market areas, as well
as residential mortgage loans. These loans totaled approximately $70.4 million,
and constituted approximately 87.4% of the Company's loan portfolio, at December
31, 1996.
The following table sets forth the composition of the Company's loan
portfolio for each of the five years in the period ended December 31, 1996.
Loan Composition
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural................................. 25.90% 23.94% 24.19% 21.12% 19.05%
Real estate:
Construction......................................................... 6.48 25.89 11.68 13.42 12.37
Mortgage:
Residential....................................................... 32.32 25.22 29.62 35.62 39.13
Commercial(1)..................................................... 27.79 16.81 26.57 22.45 21.87
Consumer and other..................................................... 7.51 8.14 7.94 7.39 7.58
Total loans..................................................... 100.00% 100.00% 100.00% 100.00% 100.00%
Total loans (dollars)........................................... $34,493 $44,634 $50,565 $63,204 $80,546
</TABLE>
(1) The majority of these loans are made to operating businesses where real
property has been taken as additional collateral.
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<PAGE>
Loan Approval. Certain credit risks are inherent in making loan. These
include prepayment risks, risks resulting from uncertainties in the future value
of collateral, risks resulting from changes in economic and industry conditions,
and risks inherent in dealing with individual borrowers. In particular, longer
maturities increase the risk that economic conditions will change and adversely
affect collectibility. The Company attempts to minimize loan losses through
various means and uses standardized underwriting criteria. These means include
the use of policies and procedures including officer and customer lending
limits, and loans in excess of certain limits must be approved by the Board of
Directors of the relevant Banks.
Loan Review. The company has a continuous loan review process designed to
promote early identification of credit quality problems. All loan officers are
charged with the responsibility of reviewing all past due loans in their
respective portfolios. Each of the Banks establishes watch lists of potential
problem loans.
Deposits
The principal sources of funds for the Banks are core deposits, consisting
of demand deposits, interest-bearing transaction accounts, money market
accounts, saving deposits, and certificates of deposit. Transaction accounts
include checking and negotiable order of withdrawal (NOW) accounts which
customers use for cash management and which provide the Banks with a source of
fee income and cross-marketing opportunities, as well as a low-cost source of
funds. Time and savings accounts also provide a relatively stable source of
funding. The largest source of funds for the Banks is certificates of deposit.
Certificates of deposit in excess of $100,000 are held primarily by customers in
the Banks' market areas. Deposit rates are set weekly by senior management of
each of the Banks, subject to approval by management of the Company. Management
believes that the rates the Banks offer are competitive with other institutions
in the Banks' market areas.
Competition
Banks generally compete with other financial institutions through the
selection of banking products and services offered, the pricing of services, the
level of service provided, the convenience and availability of services, and the
degree of expertise and the personal manner in which services are offered. South
Carolina law permits statewide branching by banks and savings institutions, and
many financial institutions in the state have branch networks. Consequently,
commercial banking in South Carolina is highly competitive. South Carolina law
also permits regional interstate banking whereby bank holding companies in
certain southeastern states are allowed to acquire depository institutions
within South Carolina. Many large banking organizations currently operate in the
respective market areas of the Banks, several of which are controlled by
out-of-state ownership. In addition, competition between commercial banks and
thrift institutions (savings institutions and credit unions) has been
intensified significantly by the elimination of many previous distinctions
between the various types of financial institutions and the expanded powers and
increased activity of thrift institutions in areas of banking which previously
had been the sole domain of commercial banks. Recent legislation, together with
other regulatory changes by the primary regulators of the various financial
institutions, has resulted in the almost total elimination of practical
distinctions between a commercial bank and a thrift institution. Consequently,
competition among financial institutions of all types is largely unlimited with
respect to legal ability and authority to provide most financial services.
Furthermore, as a consequence of legislation recently enacted by the United
States Congress, out-of-state banks not previously allowed to operate in South
Carolina will be allowed to commence operations and compete in the Banks'
primary service areas if the South Carolina legislature does not elect to limit
the reach of such federal legislation within South Carolina. See "Government
Supervision and Regulation -- Interstate Banking."
Each of the Banks faces increased competition from both federally-chartered
and state-chartered financial and thrift institutions, as well as credit unions,
consumer finance companies, insurance companies and other institutions in the
Banks' respective market areas. Some of these competitors are not subject to the
same degree of regulation and restriction imposed upon the Banks. Many of these
competitors also have broader geographic markets and substantially greater
resources and lending limits than the Banks and offer certain services such as
trust banking that the Banks, other than the Greenwood Bank, do not currently
provide. In addition, many of these competitors have numerous branch offices
located throughout the extended market areas of the Banks that the Company
believes may provide these competitors with an advantage in geographic
convenience that the Banks do not have at present. Such competitors may also be
in a position to make more effective use of media advertising, support services,
and electronic technology than can the Banks.
Currently there are five other commercial banks, two savings institutions,
and seven credit unions operating in the Greenwood Bank's primary service area,
and six other commercial banks, no savings institutions, and one credit union
operating in the Clemson Bank's primary service area. Currently there are two
other commercial banks, two savings institutions, and one credit union operating
in the Belton Bank's primary service area; four other commercial banks, one
savings
36
<PAGE>
institution, and one credit union operating in the Newberry Bank's primary
service area; and two other commercial banks, one savings institution, and one
credit union operating in the Barnwell Bank's primary service area.
Legal Proceedings
In the ordinary course of operations, the Company and the Banks are parties
to various legal proceedings. Management does not believe that there is any
pending or threatened proceeding against the Company or any of the Banks which,
if determined adversely, would have a material effect on the business, results
of operations, or financial position of the Company or any of the Banks.
GOVERNMENT SUPERVISION AND REGULATION
General
On September 4, 1996, the organizers of the Belton Bank received
conditional approval from the State Board for a state bank charter for the
Belton Bank. On November 26, 1996, the organizers of the Barnwell Bank amended
their application to the State Board for approval of a state bank charter for
the Barnwell Bank. The Company anticipates that the State Board review and
approval process will be completed for the Belton Bank and the Barnwell Bank
during the first quarter of 1997. The Company is in the process of applying to
the State Board and the Federal Reserve Board to acquire the New Banks as well
as applying for deposit insurance. The Company anticipates that the organizers
of the Newberry Bank will apply to the State Board for approval of a state bank
charter for the Newberry Bank prior to the end of the first quarter of 1997.
The Company and the Banks are subject to an extensive collection of state
and federal banking laws and regulations which impose specific requirements and
restrictions on, and provide for general regulatory oversight with respect to,
virtually all aspects of the Company's and the Banks' operations. The Company
and the Banks are also affected by government monetary policy and by regulatory
measures affecting the banking industry in general. The actions of the Federal
Reserve System affect the money supply and, in general, the Banks' lending
abilities in increasing or decreasing the cost and availability of funds to the
Banks. Additionally, the Federal Reserve System regulates the availability of
bank credit in order to combat recession and curb inflationary pressures in the
economy by open market operations in United States government securities,
changes in the discount rate on member bank borrowings, changes in the reserve
requirements against bank deposits and limitations on interest rates which banks
may pay on time and savings deposits.
During 1989 and 1991, the United States Congress enacted two major pieces
of banking legislation: The Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") and the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"). FIRREA and FDICIA have significantly changed
the commercial banking industry through, among other things, revising and
limiting the types and amounts of investment authority, significantly increasing
minimum regulatory capital requirements, and broadening the scope and power of
federal bank and thrift regulators over financial institutions and affiliated
persons in order to protect the deposit insurance funds and depositors. These
laws, and the resulting implementing regulations, have subjected the Banks and
the Company to extensive regulation, supervision and examination by the FDIC.
This change has resulted in increased administrative, professional and
compensation expenses in complying with a substantially increased number of new
regulations and policies. The regulatory structure created by these laws gives
the regulatory authorities extensive authority in connection with their
supervisory and enforcement activities and examination policies.
The following is a brief summary of certain statutes, rules and regulations
affecting the Company and the Banks. This summary is qualified in its entirety
by reference to the particular statutory and regulatory provisions referred to
below and is not intended to be an exhaustive description of the statutes or
regulations applicable to the business of the Company and the Banks. Any change
in applicable laws or regulations may have a material adverse effect on the
business and prospects of the Company and the Banks.
The Company
The Company is a bank holding company within the meaning of the Federal
Bank Holding Company Act of 1956, as amended (the "BHCA"), and the South
Carolina Banking and Branching Efficiency Act of 1996, as amended (the "South
Carolina Act"). The Company is registered with both the Federal Reserve System
and the State Board. The Company is required to file with both of these agencies
annual reports and other information regarding its business operations and those
of its subsidiaries. It is also subject to the supervision of, and to regular
examinations by, these agencies.
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The BHCA requires every bank holding company to obtain the prior approval
of the Federal Reserve Board before (i) it or any of its subsidiaries (other
than a bank) acquires substantially all of the assets of any bank, (ii) it
acquires ownership or control of any voting shares of any bank if after such
acquisition it would own or control, directly or indirectly, more than 5% of the
voting shares of such bank, or (iii) it merges or consolidates with any other
bank holding company. Under the South Carolina Act, it is unlawful without the
prior approval of the South Carolina Board for any South Carolina bank holding
company (i) to acquire direct or indirect ownership or control of more than 5%
of the voting shares of any bank or any other bank holding company, (ii) to
acquire all or substantially all of the assets of a bank or any other bank
holding company, or (iii) to merge or consolidate with any other bank holding
company.
The BHCA and the Federal Change in Bank Control Act, together with
regulations promulgated by the Federal Reserve Board, require that, depending on
the particular circumstances, either the Federal Reserve Board's approval must
be obtained or notice must be furnished to the Federal Reserve Board and not
disapproved prior to any person or company acquiring control of a bank holding
company, such as the Company, subject to certain exemptions for certain
transactions.
Under the BHCA, a bank holding company is generally prohibited from
engaging in, or acquiring direct or indirect control of more than 5% of the
voting shares of any company engaged in, nonbanking activities, unless the
Federal Reserve Board, by order or regulation, has found those activities to be
so closely related to banking or managing or controlling banks as to be a proper
incident thereto. Some of the activities that the Federal Reserve Board has
determined by regulation to be proper incidents to the business of a bank
holding company include making or servicing loans and certain types of leases,
engaging in certain insurance and discount brokerage activities, performing
certain data processing services, acting in certain circumstances as a fiduciary
or investment or financial adviser, owning savings associations and making
investments in certain corporations or projects designed primarily to promote
community welfare. The Company is also restricted in its activities by the
provisions of the Glass-Steagall Act of 1933, which prohibits the Company from
owning subsidiaries that are engaged principally in the issue, flotation,
underwriting, public sale or distribution of securities. The regulatory
requirements to which the Company is subject also set forth various conditions
regarding the eligibility and qualifications of its directors and officers.
The Banks
The operations of the Greenwood Bank are, and the New Banks will be,
subject to various statutory requirements and rules and regulations promulgated
and enforced primarily by the State Board, the Federal Reserve System, and the
FDIC. As a South Carolina-chartered banking corporation with FDIC deposit
insurance, the Clemson Bank is also subject to various statutory requirements
and rules and regulations promulgated and enforced primarily by the State Board
and the FDIC. The State Board and the FDIC regulate or monitor all areas of the
Existing Banks', and will regulate and monitor the areas of the New Banks',
respective operations, including security devices and procedures, adequacy of
capitalization and loss reserves, loans, investments, borrowings, deposits,
mergers, issuances of securities, payment of dividends, interest rates payable
on deposits, interest rates or fees chargeable on loans, establishment of
branches, corporate reorganizations, maintenance of books and records, and
adequacy of staff training to carry on safe lending and deposit gathering
practices.
The Federal Reserve and FDIC also require the Banks to maintain certain
capital ratios (see "Federal Capital Regulations"), and the provisions of the
Federal Reserve Act require the Greenwood Bank and the New Banks to observe
certain restrictions on any extensions of credit to the Company, or with certain
exceptions, other affiliates, on investments in the stock or other securities of
other banks, and on the taking of such stock or securities as collateral on
loans to any borrower. In addition, the Banks are prohibited from engaging in
certain tie-in arrangements in connection with any extension of credit, or the
providing of any property or service. The regulatory requirements to which the
Banks are subject also set forth various conditions regarding the eligibility
and qualification of its of directors and officers.
Dividends
Although the Company is not presently subject to any direct legal or
regulatory restrictions on dividends (other than the South Carolina state
business corporation law requirements that dividends may be paid only if such
payment would not render the Company insolvent or unable to meet its obligations
as they come due), the Company's ability to pay cash dividends will depend
entirely upon the amount of dividends paid by each of the Banks and any other
subsequently acquired entities. The Banks are subject to regulatory restrictions
on the payment of dividends, including the prohibition of payment of dividends
from each Bank's capital. All dividends of the Banks must be paid out of the
respective undivided profits then on hand, after deducting expenses, including
losses and bad debts. In addition, as a member of the Federal Reserve System,
the Greenwood Bank is prohibited from declaring a dividend on its shares of
common stock until its surplus equals its stated
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<PAGE>
capital, unless there has been transferred to surplus no less than one-tenth of
such bank's net profits of the preceding two consecutive half-year periods (in
the case of an annual dividend) and the approval of the Federal Reserve Board is
required if the total of all dividends declared by the Greenwood Bank in any
calendar year exceeds the total of its net profits for that year combined with
the Greenwood Bank's retained net profits for the preceding two years, less any
required transfers to surplus. The Banks are subject to various other federal
and state regulatory restrictions on the payment of dividends, including receipt
of the approval of the South Carolina Commissioner of Banking prior to paying
dividends to the Company.
FIRREA
FIRREA was enacted on August 9, 1989, and has had a significant impact on
the operations of all financial institutions, including the Banks. FIRREA, among
other things, abolished the Federal Savings and Loan Insurance Corporation and
established two new insurance funds under the jurisdiction of the FDIC: the
Savings Association Fund and the Bank Insurance Fund (see "FDIC Regulations").
FIRREA also imposed, with certain exceptions, a "cross guaranty" on the part of
commonly controlled depository institutions such as the Banks. Under this
provision, if one depository institution subsidiary of a multi-bank holding
company fails or requires FDIC assistance, the FDIC may assess a commonly
controlled depository institution for the estimated losses suffered by the FDIC.
Consequently, each of the Banks is subject to assessment by the FDIC related to
any loss suffered by the FDIC arising out of the operations of the other Bank.
The FDIC's claim is junior to the claims of nonaffiliated depositors, holders of
secured liabilities, general creditors and subordinated creditors but is
superior to the claims of shareholders.
FDIC Regulations
The FDIC establishes rates for the payment of premiums by federally insured
banks and thrifts for deposit insurance. Deposits in the Banks are insured by
the FDIC up to a maximum amount (generally $100,000 per depositor, subject to
aggregation rules), and the FDIC maintains an insurance fund for commercial
banks with insurance premiums from the industry used to offset losses from
insurance payouts when banks fail. The Existing Banks pay, and the New Banks
will pay, premiums to the FDIC on their deposits. In 1993, the FDIC adopted a
rule which establishes a risk-based deposit insurance premium system for all
insured depository institutions, including the Banks. Under the 1993 rule, a
depository institution pays to the FDIC a premium of from $0.00 to $0.31 per
$100 of insured deposits depending on its capital levels and risk profile, as
determined by its primary federal regulator on a semi-annual basis. During 1996,
each Existing Bank's assessment rate was $500 per quarter for insured deposits.
Federal Capital Regulations
In an effort to achieve a measure of capital adequacy that is more
sensitive to the individual risk profiles of financial institutions, pursuant to
the provisions of the FDICIA, the Federal Reserve Board, the FDIC, and other
federal banking agencies have adopted risk-based capital adequacy guidelines for
banking organizations insured by the FDIC, including each of the Banks. These
guidelines redefine traditional capital ratios to take into account assessments
of risks related to each balance sheet category, as well as off-balance sheet
financing activities. The guidelines define a two-tier capital framework. Tier 1
capital consists of common and qualifying preferred shareholders' equity, less
goodwill and other adjustments. Tier 2 capital consists of mandatory
convertible, subordinated and other qualifying term debt, preferred stock not
qualifying for Tier 1, and the allowance for credit losses up to 1.25% or
risk-weighted assets. Under the guidelines, institutions must maintain a
specified minimum ratio of "qualifying" capital to risk-weighted assets. At
least 50% of an institution's qualifying capital must be "core" or "Tier 1"
capital, and the balance may be "supplementary" or "Tier 2" capital. The
guidelines imposed on the Company and the Banks include a minimum leverage ratio
standard of capital adequacy. The leverage standard requires top-rated
institutions to maintain a minimum Tier 1 capital to assets ratio of 3%, with
institutions receiving less than the highest rating required to maintain a
minimum ratio of 4% or greater, based upon their particular circumstances and
risk profiles. As of December 31, 1995, the guidelines require achievement of a
minimum ratio of total capital to risk-weighted assets of 8% and a minimum ratio
of Tier 1 capital risk-weighted assets of 4%.
Each of the Company's and Existing Bank's leverage and risk-based capital
ratios at December 31, 1996, exceeded their respective fully phased-in minimum
requirements.
Other Regulations
Interest and certain other charges collected or contracted for by the Banks
are subject to state usury laws and certain federal laws concerning interest
rates. The Banks' loan operations are also subject to certain federal laws
applicable to credit transactions, such as the federal Truth-In-Lending Act
governing disclosures of credit terms to consumer borrowers, the
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<PAGE>
Community Reinvestment Act of 1977 requiring financial institutions to meet
their obligations to provide for the total credit needs of the communities they
serve, including investing their assets in loans to low- and moderate-income
borrowers, the Home Mortgage Disclosure Act of 1975 requiring financial
institutions to provide information to enable public officials to determine
whether a financial institution is fulfilling its obligations to help meet the
housing needs of the community it serves, the Equal Credit Opportunity Act
prohibiting discrimination on the basis of race, creed or other prohibited
factors in extending credit, the Fair Credit Reporting Act governing the manner
in which consumer debts may be collected by collection agencies, and the rules
and regulations of the various federal agencies charged with the responsibility
of implementing such federal laws. The deposit operations of the Banks also are
subject to the Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures for
complying with administrative subpoenas of financial records, and the Electronic
Funds Transfer Act and Regulation E issued by the Federal Reserve Board to
implement that Act, which govern automatic deposits to and withdrawals from
deposit accounts and customers' rights and liabilities arising from the use of
automated teller machines and other electronic banking services.
Interstate Banking
On September 29, 1994, the federal government enacted the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "1994 Act"). The
provisions of the 1994 Act became effective on September 29, 1995, at which time
eligible bank holding companies in any state were permitted, with Federal
Reserve Board approval, to acquire banking organizations in any other state. As
such, all existing regional compacts and substantially all existing regional
limitations on interstate acquisitions of banking organizations have been
eliminated.
The 1994 Act also removed substantially all of the existing prohibitions on
interstate branching by banks. On and after June 1, 1997, a bank operating in
any state may establish one or more branches within any other state without, as
currently required, the establishment of a separate banking structure within the
other state. Interstate branching is allowed earlier than the automatic phase-in
date of June 1, 1997, as long as the legislatures of both states involved have
adopted statutes expressly permitting such branching to take place at an earlier
date.
On May 7, 1996, South Carolina adopted the South Carolina Act which became
effective on July 1, 1996. The South Carolina Act permits the acquisition of
South Carolina banks and bank holding companies by, and mergers with,
out-of-state banks and bank holding companies with the prior approval of the
State Board. The South Carolina Act also permits South Carolina state banks,
with prior approval of the State Board, to operate branches outside the State of
South Carolina. Although the 1994 Act has the potential to increase the number
of competitors in the marketplace of each of the Banks, the Company cannot
predict the actual impact of such legislation on the competitive position of the
Banks.
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<PAGE>
MANAGEMENT
Currently, the Company's Board of Directors includes fifteen directors. The
Company's practice is for the Chairman of the Board and President of each Bank
to be elected or appointed to the Company's Board of Directors, and William G.
Stevens, the President of the Company, to serve on each Bank's Board of
Directors.
Executive Officers and Directors of the Company
The following sets forth certain information regarding the Company's
executive officers and directors as of the date of this Prospectus. The
Company's Articles of Incorporation provide for a classified Board of Directors,
so that, as nearly as possible, one-third of the directors are elected each year
to serve three-year terms. Executive officers of the Company serve at the
discretion of the Company's Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
William G. Stevens............................... 51 President, Chief Executive Officer and Director
James H. Stark................................... 61 Chief Financial Officer and Secretary
Patricia C. Edmonds.............................. 42 Assistant Secretary and Director
Charles J. Rogers................................ 64 Chairman of the Board
David P. Allred.................................. 58 Director
Robert C. Coleman................................ 51 Director
John W. Drummond................................. 77 Director
Wayne Q. Justesen, Jr............................ 50 Director
Thomas C. Lynch, Jr.............................. 61 Director
H. Edward Munnerlyn.............................. 53 Director
George B. Park................................... 46 Director
Joseph H. Patrick, Jr............................ 53 Director
Donna W. Robinson................................ 49 Director
George D. Rodgers................................ 52 Director
Thomas E. Skelton................................ 66 Director
Lex D. Walters................................... 58 Director
</TABLE>
William G. Stevens has served as President and Chief Executive Officer of
the Company since April 1988 and of the Greenwood Bank since January 1989. He
was employed by NCNB National Bank of South Carolina (formerly Bankers Trust)
for eighteen years prior to 1987.
James H. Stark has served as Chief Financial Officer of the Company since
September 1988 and as Senior Vice President, Cashier, and Secretary of the
Greenwood Bank since January 1989.
Patricia C. Edmonds has served as Executive Director of the Upper Savannah
Council of Governments since March 1990 and served as its Assistant Director
from 1984 to March 1989.
Charles J. Rogers has served as Chairman of the Board of Directors of the
Company since January 1989. He has served as President of The Organizational
Paths Company, a consulting firm for organizational strategies, since July 1993.
Mr. Rogers served as team leader of the Greenwood Plant of the Monsanto Chemical
Company from 1982 until June 1993.
David P. Allred is a medical doctor who has been in private practice in
Saluda, North Carolina since April 1994 and was in private practice in Beaufort,
South Carolina from July 1990 to December 1993. From September 1988 to July
1990, he was employed by the Medical University of South Carolina. From 1971
through August 1988, he was in private medical practice in Greenwood, South
Carolina.
Robert C. Coleman has owned and has served as President of Coleman Realty
Company since 1976.
John S. Drummond has owned and operated Drummond Oil Company since 1960 and
has served as a member of the South Carolina Senate since 1964.
Wayne Q. Justesen, Jr. has been employed by Greenwood Mills, Inc. ("GMI"),
a textile manufacturer, since 1978 and has served as Secretary and General
Counsel of GMI since 1983.
Thomas C. Lynch, Jr. served as a pharmacist and as President of Lynch Drug
Company, a retail pharmacy in Clemson, South Carolina, from 1963 until its sale
to Eckerd Drug, Inc. in January 1997.
41
<PAGE>
H. Edward Munnerlyn has served as President and owner of Munnerlyn Company,
a corporate apparel and uniforms company, since January 1989. Prior to 1989 he
was employed by GMI for twenty years and was Executive Vice President when he
left GMI in 1988.
George B. Park has served as President and Chief Executive Officer of Otis
S. Twilley Seed Company, Inc., a mail order seed company, since August 1993, and
as President and owner of Hopewood, Inc., a seed distribution company, since
April 1993. Mr. Park has also served as Managing Director of K. Sahin Zaden,
B.V., a flower seed breeding and production company. Prior to 1989, he was
co-owner, Vice President and Corporate Secretary of George W. Park Seed Company.
Joseph H. Patrick, Jr. has served as President and co-owner of Southern
Brick Company from 1984 to January 1996 and as President of Southern Resource,
Inc. since January 1996.
Donna W. Robinson has been employed as President and Chief Executive
Officer of the Clemson Bank since June 1995. Between September 1994 and June
1995, she was employed by the Company primarily to assist in matters relating to
the organization of the Clemson Bank. Prior to September 1994, she served as a
Vice President of Wachovia Bank of South Carolina and had been employed by such
bank or its predecessor banks since 1973.
George D. Rodgers has served as the President and owner of Palmetto
Insurance Agency, Inc. in Clemson, South Carolina since 1985.
Thomas E. Skelton has served as a professor at Clemson University since
1969, and since 1992 has served as head of the Clemson University Entomology
Department.
Lex D. Walters has served as President of Piedmont Technical College since
1968.
Directors of the Greenwood Bank
The following sets forth certain information regarding the Greenwood Bank's
directors as of the date of this Prospectus. Directors of the Greenwood Bank
serve until the next annual meeting of shareholders and until their successors
are duly elected and shall have qualified. Executive officers of the Greenwood
Bank serve at the discretion of the Greenwood Bank's Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
William G. Stevens...................................... 51 President, Chief Executive Officer and Director
Charles J. Rogers....................................... 64 Chairman of the Board
David P. Allred......................................... 58 Director
Robert C. Coleman....................................... 51 Director
John W. Drummond........................................ 77 Director
Patricia C. Edmonds..................................... 42 Director
Wayne Q. Justesen, Jr................................... 50 Director
H. Edward Munnerlyn..................................... 53 Director
George B. Park.......................................... 46 Director
Joseph H. Patrick, Jr................................... 53 Director
Lex D. Walters.......................................... 58 Director
</TABLE>
42
<PAGE>
Directors of the Clemson Bank
The following sets forth certain information regarding the Clemson Bank's
directors as of the date of this Prospectus. Directors of the Clemson Bank serve
until the next annual meeting of shareholders and until their successors are
duly elected and shall have qualified. Executive officers of the Clemson Bank
serve at the discretion of the Clemson Bank's Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Donna W. Robinson....................................... 49 President, Chief Executive Officer and Director
Thomas C. Lynch, Jr..................................... 61 Chairman of the Board
Benson L. Bagwell....................................... 53 Director
Donald S. Chamberlain................................... 61 Director
William E. Dukes........................................ 67 Director
Jan S. Fredman.......................................... 39 Director
Robert C. Hubbard, III.................................. 50 Director
Suzanne E. Morse........................................ 50 Director
Ethel C. Pettigrew...................................... 43 Director
George D. Rodgers....................................... 52 Director
Thomas E. Skelton....................................... 66 Director
William G. Stevens...................................... 51 Director
Joseph J. Turner, Jr.................................... 47 Director
Monica Zielinski........................................ 62 Director
</TABLE>
Organizers and Proposed Directors of the Barnwell Bank
The following sets forth certain information regarding the organizers and
the proposed directors of the Barnwell Bank as of the date of this Prospectus.
In addition to the following individuals, William G. Stevens, the President of
the Company and of the Greenwood Bank, will serve as a director of the Barnwell
Bank.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Marshall L. Martin, Jr.................................. 42 President, Chief Executive Officer and Director
Clinton C. Lemon, Jr.................................... 52 Chairman of the Board
Richard E. Boyles....................................... 37 Director
Albert L. Carroll....................................... 66 Director
Peggy C. Collins........................................ 60 Director
Martin O'Neal Laird (1)................................. 52 Director
Miles Loadholt.......................................... 53 Director
Leonard W. Mills (1).................................... 60 Director
Susan P. Moskow......................................... 42 Director
Michael W. Nix (1)...................................... 32 Director
J. Samuel Plexico....................................... 42 Director
Carolyne S. Williams.................................... 49 Director
W. Allen Woods.......................................... 47 Director
</TABLE>
(1) The Company anticipates that such individuals will not serve as directors of
the Barnwell Bank upon the opening of the Barnwell Bank, but will serve in
such capacity in the future upon regulatory approval.
Marshall L. Martin, Jr. has been employed by the Company since October 1996
primarily to assist in matters relating to the organization of the Barnwell Bank
and to serve as President and Chief Executive Officer of the Barnwell Bank.
Prior to that time, he served as Vice President of NationsBank, N.A. and had
been employed by such bank or its predecessor banks since 1977.
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<PAGE>
Organizers and Proposed Directors of the Belton Bank
The following sets forth certain information regarding the organizers and
the proposed directors of the Belton Bank as of the date of this Prospectus. In
addition to the following individuals, William G. Stevens, the President of the
Company and of the Greenwood Bank, will serve as a director of the Belton Bank.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
James A. Lollis......................................... 52 President, Chief Executive Officer and Director
James M. Horton......................................... 51 Chairman of the Board
Harold Clinkscales, Jr.................................. 44 Director
Patsy T. Daniel......................................... 54 Director
Thomas M. Dixon......................................... 32 Director
D. Michael Greer........................................ 41 Director
Kenneth B. Heller....................................... 45 Director
Dianne G. Henderson..................................... 51 Director
D. Brian Holliday....................................... 36 Director
B. Marshall Keys........................................ 45 Director
Paul R. Marshall........................................ 40 Director
Patrick B. O'Dell....................................... 42 Director
</TABLE>
James A. Lollis has been employed by the Company since May 1996 primarily
to assist in matters relating to the organization of the Belton Bank and to
serve as President and Chief Executive Officer of the Belton Bank. Prior to that
time, he served as Vice President/Data Processing Manager of First United
Bancorporation, Anderson, South Carolina and had been employed by such bank
holding company since May 1990.
Organizers and Proposed Directors of the Newberry Bank
The following sets forth certain information regarding the organizers and
the proposed directors of the Newberry Bank as of the date of this Prospectus.
In addition to the following individuals, William G. Stevens, the President of
the Company and of the Greenwood Bank, will serve as a director of the Newberry
Bank.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
William F. Steadman..................................... 42 President, Chief Executive Officer and Director
Earl H. Bergen.......................................... 76 Chairman of the Board
W. Edgar Baker.......................................... 54 Director
Betty F. Barber......................................... 65 Director
Warren R. Cousins....................................... 67 Director
Ronnie W. Cromer........................................ 49 Director
Rodney S. Griffin....................................... 48 Director
William P. Kunkle....................................... 64 Director
William W. Riser, Jr.................................... 77 Director
William B. Rush......................................... 43 Director
</TABLE>
William F. Steadman has been employed by the Company since October 1996
primarily to assist in matters relating to the organization of the Newberry Bank
and to serve as President and Chief Executive Officer of the Newberry Bank. He
served as Vice President Commercial Lending of The Bankers Bank of Atlanta,
Georgia from January 1996 to October 1996, and as President of Davidson Savings
Bank, Lexington, North Carolina from 1985 until January 1995.
Ownership of the Common Stock
As of the date of this Prospectus, the executive officers and directors of
the Company and the Existing Banks own in the aggregate 356,084 shares of Common
Stock and in the aggregate own options to purchase an additional 333,891 shares
of Common Stock. These individuals may, but are not obligated to, purchase
additional shares of Common Stock in this Offering. In addition, the organizers
of the New Banks have indicated that they intend, but are not obligated to,
purchase an aggregate of approximately 285,000 shares of Common Stock in the
Offering (representing approximately 19.5% of the shares of Common Stock offered
hereby). After the completion of the Offering, the Company anticipates that no
employee, executive officer, or director of the Company or the Banks will
beneficially own more than 5% of the outstanding Common Stock of the Company.
44
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company is 12,000,000 shares,
consisting of 10,000,000 shares of Common Stock, par value $1.00 per share, and
2,000,000 shares of a special class of stock, par value $1.00 per share, the
rights and preferences of which may be designated as the Board of Directors may
determine (the "Undesignated Stock"). As of the date of this Prospectus,
1,225,784 shares of Common Stock were outstanding and were held of record by
approximately 1,340 shareholders. After the completion of this Offering, there
will be 2,690,784 shares of Common Stock outstanding. No shares of Undesignated
Stock are currently outstanding.
Common Stock
Subject to the rights of the holders of any outstanding shares of
Undesignated Stock and any restrictions that may be imposed by any lender to the
Company, holders of Common Stock are entitled to receive ratably such dividends,
if any, as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." In the event of the liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share ratably, based on the number of shares held, in the assets, if any,
remaining after payment of all of the Company's debts and liabilities and the
liquidation preference of any outstanding series of Undesignated Stock.
Holders of Common Stock are entitled to one vote per share for each share
held of record on any matter submitted to the holders of Common Stock for a
vote. Because holders of Common Stock do not have cumulative voting rights with
respect to the election of directors, the holders of a majority of the shares of
Common Stock represented at a meeting can elect all of the directors. Holders of
Common Stock do not have preemptive or other rights to subscribe for or purchase
any additional shares of capital stock issued by the Company or to convert their
Common Stock into any other securities. There are no redemption or sinking fund
provisions applicable to the Common Stock.
Undesignated Stock
The Company's authorized shares of Undesignated Stock may be issued in one
or more series, and the Board of Directors is authorized, without further action
by the shareholders, to designate the rights, preferences, limitations and
restrictions of and upon shares of each series, including dividend, voting,
redemption and conversion rights. The Board of Directors also may designate par
value, preferences in liquidation, as well as any sinking fund terms and the
number of shares constituting any series or the designation of such series. The
Company believes that the availability of Undesignated Stock issuable in series
will provide increased flexibility for structuring possible future financings
and acquisitions, if any, and in meeting certain other corporate needs. It is
not possible to state the actual effect of the authorization and issuance of any
series of Undesignated Stock upon the rights of holders of Common Stock until
the Board of Directors determines the specific terms, rights and preferences of
a series of Undesignated Stock. However, such effects might include, among other
things, restricting dividends on the Common Stock, diluting the voting power of
the Common Stock, or impairing liquidation rights of such shares without further
action by holders of the Common Stock. In addition, the Board of Directors is
authorized at any time to issue Undesignated Stock with voting, conversion or
other features that may have the effect of impeding or discouraging a merger,
tender offer, proxy contest, the assumption of control by a holder of a large
block of the Company's securities or the removal of incumbent management.
Issuance of Undesignated Stock could also adversely affect the market price of
the Common Stock. The Company has no present plan to issue any shares of
Undesignated Stock.
Director Liability
The Articles provide that every person who was or is a party to, or is
threatened to be made a party to, or is otherwise involved in, any action, suit,
or proceeding, whether civil, criminal, administrative, or investigative, by
reason of the fact that such person or a person of whom such person is the legal
representative is or was a director or officer of the Company or is or was
serving at the request of the Company or for the Company's benefit as a director
or officer of another corporation, or as the Company's representative in a
partnership, joint venture, trust, or other enterprise, shall be indemnified and
held harmless to the fullest extent legally permissible under and pursuant to
the South Carolina Business Corporation Act of 1988, as amended, against all
expenses, liabilities, and losses (including without limitation attorneys' fees,
judgments, fines, and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith. Such right of
indemnification is provided as a contractual right that may be enforced in any
manner desired by such person.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the provisions in the Articles described above, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as
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<PAGE>
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person in connection with the securities being registered) the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such issue.
Under the Articles, the Board of Directors is also entitled to cause the
Company to purchase and maintain insurance on behalf of any person who is or was
a director or officer of the Company, or is or was serving at the request of the
Company as a director or officer of another corporation, or as the Company's
representative in a partnership, joint venture, trust, or other enterprise,
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not the Company would have
the power to indemnify such person.
Change of Control
General. The Articles and Bylaws of the Company and the Code of Laws of
South Carolina of 1976, as amended (the "South Carolina Code"), contain certain
provisions designed to enhance the ability of the Board of Directors to deal
with attempts to acquire control of the Company. These provisions, as well as
the right of the Board of Directors to designate the features of and issue
shares of Undesignated Stock without a shareholder vote, may be deemed to have
an anti-takeover effect and may discourage takeover attempts which have not been
approved by the Board of Directors (including takeovers that certain
shareholders may deem to be in their best interest) and may adversely affect the
price that a potential purchaser will be willing to pay for the Company's stock.
To the extent that such takeover attempts are discouraged, temporary
fluctuations in the market price of the Common Stock resulting from actual or
rumored takeover attempts may be inhibited. These provisions also could
discourage or make more difficult a merger, tender offer or proxy contest, even
though such a transaction may be favorable to the interests of shareholders.
These provisions could also potentially adversely affect the market price of the
Common Stock.
The following briefly summarizes protective provisions contained in the
Articles and the South Carolina Code and is not intended to be a complete
description of all the features and consequences of these provisions. The
following is qualified in its entirety by reference to the Articles and the
provisions of the South Carolina Code.
Supermajority Voting Provisions. The Articles provide that without the
affirmative vote of the holders of not less than 80% of the shares outstanding
and entitled to vote thereon, the Company cannot effect (a) the merger,
consolidation or exchange of the Company's shares with any other corporation,
partnership, trust, estate or association, (b) the sale or exchange of all or
substantially all of the Company's assets, (c) the issuance or delivery by the
Company of any securities of the Company in exchange or payment for properties
or assets of another entity or securities issued by such entity, or (d) the
nonjudicial dissolution of the Company (individually, a "Subject Transaction")
unless one of the following two additional requirements is met: (i) the Subject
Transaction is approved by the affirmative vote of not less than 80% of the
Company's Board of Directors, or (ii) the Subject Transaction is solely between
the Company and another entity, 50% or more of whose voting stock or voting
equity interests are held by the Company. These approval requirements
substantially increase the overall vote required to approve the Subject
Transaction. As a result, the Board of Directors is able to veto any proposed
takeover by refusing to approve the proposed Subject Transaction.
Other Constituencies. The Articles expressly permit the Board of Directors,
when evaluating any proposed tender or exchange offer, any merger, consolidation
or sale of substantially all of the assets of the Company, or any similar
extraordinary transaction, to consider (i) all relevant factors, including
without limitation the social, legal, and economic effects on the employees,
customers, suppliers and other constituencies of the Company and its
subsidiaries, on the communities and geographical areas in which the Company and
its subsidiaries operate or are located and on any of the business and
properties of the Company or any of its subsidiaries, and (ii) the consideration
being offered, not only in relation to the then current market price for the
Company's outstanding shares of capital stock, but also in relation to the then
current value of the Company in a freely negotiated transaction and in relation
to the Board of Directors' estimate of the future value of the Company
(including the unrealized value of its properties and assets) as an independent
going concern. The Board of Directors believes that these provisions are in the
long-term best interests of the Company and its shareholders.
The standard provisions of the South Carolina Code that would apply to a
Subject Transaction in the absence of the provisions in the Articles noted above
provide that, unless a corporation's articles of incorporation provide for a
higher or lower vote, certain significant corporate actions, such as a merger,
share exchange or sale of all or substantially all of the corporation's assets,
must be approved by the holders of two-thirds of the shares entitled to vote on
the matter. In a merger, the South Carolina Code does not require approval by
the shareholders of the surviving corporation if (a) the articles of
46
<PAGE>
incorporation of the surviving corporation will not differ from its articles
before the merger, (b) each shareholder of the surviving corporation whose
shares are outstanding immediately before the effective date of the merger will
hold the same number of shares, with identical designations, preferences,
limitations and relative rights, immediately after the merger, (c) the number of
voting shares outstanding immediately after the merger, plus the number of
voting shares issuable as a result of the merger, will not exceed by more than
20% the total number of voting shares of the surviving corporation outstanding
immediately before the merger, and (d) the number of participating shares
outstanding immediately after the merger, plus the number of participating
shares issuable as a result of the merger, will not exceed by more than 20% the
total number of participating shares outstanding immediately before the merger.
In a share exchange, the South Carolina Code does not require approval of the
shareholders of the acquiring corporation. The effect of the supermajority
voting provisions of the Articles is to establish a requirement for a
shareholder vote in certain mergers in which the Company is the surviving
corporation that would not otherwise have been required, and increase from
66 2/3% to 80% the percentage of shares required to approve a merger in which
such approval is required.
Control Share Acquisitions. The Company is currently subject to the South
Carolina control share acquisitions statute (the "Control Share Statute") which
is designed to afford shareholders of certain corporations (generally,
corporations which have shares registered under Section 12 of the Securities
Exchange Act of 1934 (the "Exchange Act"), have their principal place of
business or substantial assets within South Carolina and meet certain share
ownership requirements) (a "Public Corporation") protection against certain
types of acquisitions in which a person, entity or group (an "Acquiring Person")
seeks to gain voting control of such Public Corporation. With certain enumerated
exceptions, the statute applies to acquisitions of shares of a Public
Corporation which would result in an Acquiring Person's ownership of the
corporation's shares entitled to vote in the election of directors falling
within any one of the following ranges: one-fifth or more but less than one-
third of all voting power; one-third or more but less than a majority of all
voting power; or a majority or more of all voting power (a "Control Share
Acquisition"). Shares that are the subject of a Control Share Acquisition
("Control Shares") will not have voting rights unless the holders of a majority
of "disinterested shares" vote at an annual or special meeting of shareholders
of the corporation to accord the Control Shares voting rights. "Disinterested
shares" are shares other than those owned by the Acquiring Person or a member of
a group with respect to a Control Share Acquisition, any officer of the
corporation or any employee of the corporation who is also a director. Under
certain circumstances, the statute permits an Acquiring Person to call a special
shareholders meeting for the purpose of considering the grant of voting rights
to the holder of the Control Shares. Unless otherwise provided in a
corporation's articles of incorporation or bylaws before a Control Share
Acquisition has occurred, in the event Control Shares acquired in a Control
Share Acquisition are accorded full voting rights and the Acquiring Person has
acquired Control Shares with a majority or more of all voting power, all
shareholders of the Public Corporation have dissenter's rights to receive fair
value for their shares. There is currently no provision in the Articles or the
Bylaws limiting or eliminating such rights. The Control Share Statute also
enables a corporation to provide the redemption under certain circumstances of
Control Shares with no voting rights. A corporation may opt-out of the Control
Share Statute, which the Company has not done, by so providing in its articles
of incorporation. Among the acquisitions specifically excluded from the Control
Share Statute are acquisitions consummated pursuant to a merger or plan of share
exchange in compliance with law if the Public Corporation is a party to the
agreement of merger or plan of share exchange.
Business Combinations with Interested Shareholders. The Company is also
currently subject to the South Carolina business combination statute (the
"Business Combination Statute") which, with certain enumerated exceptions,
places certain restrictions on mergers, consolidations, sales of assets,
liquidations, reclassifications or other similar kinds of transactions
("Business Combinations") with or between a resident domestic corporation with
shares registered under Section 12 of the Exchange Act (a "Resident Domestic
Corporation") and any person who owns beneficially 10% or more of the voting
power of the outstanding voting shares of the Resident Domestic Corporation (an
"Interested Shareholder"). The Business Combination Statute provides that a
Resident Domestic Corporation may not engage in any Business Combination with
any Interested Shareholder of the Resident Domestic Corporation for a period of
two years following the date the person became an Interested Shareholder (the
"Share Acquisition Date") unless the Business Combination or the purchase of
shares made by the Interested Shareholder on the Share Acquisition Date is
approved by a majority of the "disinterested" members of the board of directors
of the Resident Domestic Corporation before the Interested Shareholder's Share
Acquisition Date. A member of the board is "disinterested" if the director is
not a present or former officer or employee of the Resident Domestic Corporation
or a related corporation. The Business Combination Statute further provides
that, subject to certain exceptions, a Resident Domestic Corporation may not
engage at any time in a Business Combination with an Interested Shareholder
unless the Business Combination complies with all of the requirements of the
Resident Domestic Corporation's articles of incorporation and either (a) the
Business Combination is approved by the board of directors of the Resident
Domestic Corporation before the Share Acquisition Date, or the purchase of
shares made by the Interested Shareholder on the Share Acquisition Date has been
approved by the board of directors of the Resident Domestic Corporation before
the Share Acquisition Date, (b) the
47
<PAGE>
Business Combination is approved by the affirmative vote of the holders of a
majority of the outstanding voting shares not beneficially owned by the
Interested Shareholder proposing the Business Combination at a meeting called
for that purpose no earlier than two years after the Share Acquisition Date, or
(c) the Business Combination meets certain specified fair price and form of
consideration requirements. A company may opt-out of the Business Combination
Statute, which the Company has not done, by so providing in its articles of
incorporation.
The Control Share Statute, the Business Combination Statute and the
Company's supermajority voting provisions may tend to discourage attempts by
third parties to acquire the Company in a hostile takeover effort and may
adversely affect the price that such a potential purchaser would be willing to
pay for the stock of the Company. The provisions may also make the removal of
incumbent management more difficult and may permit a minority of the directors
and the holders of a minority of the Company's outstanding stock to prevent a
Business Combination or related transaction, and may discourage certain
speculations in the Company's stock and reduce the chances of temporary
increases in the market price of the Company's stock that could be beneficial to
shareholders desiring to sell in the market at that time.
Classification of Directors. The Company's Board of Directors is classified
so that, as nearly as possible, one-third of the Board of Directors is elected
each year to serve a three-year term. This classification would delay an attempt
by dissatisfied shareholders or anyone who obtains a controlling interest in the
Company to elect a new Board of Directors, because, absent the removal,
resignation or death of the members of the Board, it would take three annual
meetings of shareholders to change fully the composition of the Board.
Removal of Directors. The Articles provide that a director of the Company
may be removed without cause only after a vote of the holders of 80% of the
outstanding Common Stock.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Registrar and
Transfer Company, Cranford, New Jersey.
Shares Eligible for Future Sale
Upon consummation of the Offering, the Company will have 2,690,784 shares
of Common Stock outstanding, and all of these shares (plus any shares issued
upon the exercise of the Underwriters' over-allotment option) will be freely
tradeable without restriction or registration under the Securities Act, unless
owned by an affiliate of the Company, subject to the lock-up agreements
described below, or acquired pursuant to the exercise of certain stock options.
Shares held by "affiliates" of the Company are subject to resale restrictions
under the Securities Act. An affiliate of an issuer is defined in Rule 144 under
the Securities Act as a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
issuer. Rule 405 under the Securities Act defines the term "control" to mean the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of the person whether through the ownership of
voting securities, by contract, or otherwise. All directors and executive
officers of the Company will likely be deemed to be affiliates. See
"Management -- Ownership of the Common Stock." Shares held by affiliates may be
eligible for sale in the open market without registration in accordance with the
provisions of Rule 144. Upon consummation of the Offering, the only outstanding
shares of Common Stock which will be "restricted securities," within the meaning
of Rule 144, will be those shares which have been issued upon exercise of
certain stock options, as all other shares of Common Stock will have been issued
pursuant to offerings registered under the Securities Act.
In general, under Rule 144 any person (or persons whose shares are
aggregated) who has beneficially owned restricted securities for at least two
years, including affiliates, and any affiliate who holds shares sold in a public
offering, may sell, within any three-month period, a number of such shares that
does not exceed the greater of (i) 1% of the then outstanding shares of the
Company's Common Stock or (ii) the average weekly trading volume of the Common
Stock during the four calendar weeks preceding the sale. Rule 144 also requires
that the securities must be sold in "brokers' transactions," as defined in the
Securities Act, and the person selling the securities may not solicit orders or
make any payment in connection with the offer or sale of securities to any
person other than the broker who executes the order to sell the securities.
After restricted securities are held for three years, a person who is not deemed
an affiliate of the Company is entitled to sell such shares under Rule 144
without regard to the volume and manner of sale limitations described above.
Sales of shares by affiliates will continue to be subject to the volume and
manner of sale limitations.
In addition, there are outstanding stock options that the Company has
granted to certain directors, officers, and employees of the Company and the
Banks for the purchase of an aggregate of 447,851 shares of Common Stock, of
which options for 310,801 shares are currently exercisable. Shares issuable upon
exercise of such options will be freely tradeable without
48
<PAGE>
restriction or registration under the Securities Act, unless owned by an
affiliate of the Company or subject to the lock-up agreement described below.
The Company's and each Bank's directors, executive officers, and organizers have
agreed with the Underwriters not to sell any Common Stock, which includes
356,084 currently outstanding shares and 378,891 shares issuable upon exercise
of options, for 180 days from the date of this Prospectus without the prior
written consent of the Representatives.
No prediction can be made of the effect, if any, that future sales of
shares of Common Stock, or the availability of shares for future sales, will
have on the market price prevailing from time to time. Sales of substantial
amounts of shares of Common Stock, or the perception that such sales could
occur, could adversely affect the prevailing market price of the shares.
49
<PAGE>
UNDERWRITING
Pursuant to the Underwriting Agreement and subject to the terms and
conditions thereof, the Underwriters named below have agreed to purchase from
the Company the respective number of shares of Common Stock set forth below.
<TABLE>
<CAPTION>
Name of Underwriter Number of Shares
<S> <C>
J.C. Bradford & Co..................................................................
Edgar M. Norris & Co., Inc..........................................................
Total............................................................................... 1,465,000
</TABLE>
The underwriting discount has been calculated on the basis of a commission
rate of 7.0% with respect to an aggregate of 1,100,000 shares of Common Stock
(or $12.1 million based on the midpoint of the filing range) to be sold by the
Company to the public, and no underwriting discount or commission with respect
to an aggregate of 365,000 shares of Common Stock (or approximately $4.0 million
based on the midpoint of the filing range) to be sold to certain purchasers
disclosed to the Underwriters. Also, in consideration of certain financial
consulting services provided to the Company, the Company shall pay to the
Underwriters a financial advisory fee of $112,000.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Common Stock
offered hereby (other than those shares covered by the over-allotment option
described below) if any are purchased. The Underwriting Agreement provides that,
in the event of a default by an Underwriter, in certain circumstances the
purchase commitments of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company has granted to the Underwriters an option, expiring on the
close of business on the 30th day after the date of this Prospectus, to purchase
up to 219,750 additional shares at the initial public offering price less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover over-allotments in
the sale of the shares of Common Stock. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Common
Stock as it was obligated to purchase pursuant to the Underwriting Agreement.
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain other dealers. After the Offering, the public
offering price and such concessions may be changed. The Representatives have
informed the Company that the Underwriters do not intend to confirm sales to
accounts over which they exercise discretionary authority.
The Offering of the Common Stock is made for delivery when, as, and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation, or modification of the offer without notice. The Underwriters
reserve the right to reject any offer for the purchase of shares.
The Company has filed an application for its Common Stock to be approved
for listing on the American Stock Exchange under the symbol "CYL," subject to
official notice of issuance. Although the Common Stock has been quoted on the
OTC Bulletin Board, trading and quotations of the Common Stock have been limited
and sporadic. The public offering price will be determined by negotiation among
the Company and the Representatives. In determining such price, consideration
will be given to, among other things, the financial and operating history and
trends of the Company, the experience of its management, the position of the
Company in its industry, the Company's prospects, and the Company's financial
results. In addition, consideration will be given to the status of the
securities markets, market conditions for new offerings of securities, and the
prices of similar securities of comparable companies.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters and controlling persons, if any, against certain civil liabilities,
including liabilities under the Securities Act, or will contribute to payments
the Underwriters or any such controlling persons may be required to make in
respect thereof.
The Company and the Company's and each Bank's directors, executive
officers, and organizers have each agreed with the Underwriters that they will
not, for a period of 180 days from the date of this Prospectus, without the
prior written consent of J.C. Bradford & Co., offer, pledge, sell, contract to
sell, grant any option for the sale of, or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any security or other instrument which
by its terms is convertible into, exercisable for, or exchangeable for shares of
such Common Stock, other than through bona fide gifts to persons who agree
50
<PAGE>
in writing to be bound by this agreement if such writing is delivered to J.C.
Bradford & Co. within five days after such gift or pledge, and, in the case of
the Company, Common Stock issued pursuant to the exercise of outstanding
options.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
are being passed upon for the Company by Nexsen Pruet Jacobs & Pollard, LLP,
Columbia, South Carolina. Certain legal matters in connection with the Offering
are being passed upon for the Underwriters by Nelson Mullins Riley &
Scarborough, L.L.P., Atlanta, Georgia.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1995 and
1996 and the consolidated statements of the operations, shareholders' equity,
and cash flows of the Company for each of the three years in the period ended
December 31, 1996, have been included in this Prospectus in reliance on the
report of Tourville, Simpson & Henderson, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-2 under the Securities Act, with respect to the
shares of Common Stock offered hereby. This Prospectus omits certain information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement and the exhibits thereto for further information about
the Company and the securities offered hereby. Statements contained herein
regarding the provisions of documents filed as exhibits to the Registration
Statement are not necessarily complete, and each such statement is qualified in
its entirety by reference to the copy of the applicable document filed with the
Securities and Exchange Commission. The Registration Statement, and the exhibits
thereto, may be obtained from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission. Such reports, proxy
statements and other information can be inspected and copied at prescribed rates
at the public reference facilities maintained by the Securities and Exchange
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Securities and Exchange Commission's regional offices at Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7
World Trade Center, New York, New York 10048. Copies of such material can be
obtained by mail from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Securities and Exchange Commission maintains a web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Securities and Exchange
Commission. The address of such site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission by the Company under the
Exchange Act, are incorporated by reference into this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended; and
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996.
All other reports and documents filed pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this Offering shall be deemed to be incorporated by reference in
this Prospectus and shall be deemed a part hereof from the date of filing of
such reports and documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document that also is,
or is deemed to be, incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Copies of the above documents (other than exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents) are available upon written or oral request, without charge, from the
Company, 109 Montague Street, Greenwood, South Carolina 29646, telephone: (864)
941-8206, Attention: James H. Stark.
51
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY CAPITAL CORPORATION
<TABLE>
<CAPTION>
Report of Independent Accountants...................................................................................... F-2
<S> <C>
Consolidated Balance Sheets at December 31, 1995 and 1996.............................................................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and 1996............................. F-4
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1994, 1995 and 1996................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996............................. F-6
Notes to Consolidated Financial Statements............................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
THE BOARD OF DIRECTORS
COMMUNITY CAPITAL CORPORATION
GREENWOOD, SOUTH CAROLINA
We have audited the accompanying consolidated balance sheets of Community
Capital Corporation and Subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Community
Capital Corporation and Subsidiaries as of December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
TOURVILLE, SIMPSON & HENDERSON
January 10, 1997
(except for Note 12, as to which
the date is January 23, 1997)
Columbia, South Carolina
F-2
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1995 1996
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks........................................................................... $ 2,949 $ 3,927
Federal funds sold................................................................................ 2,330 700
Total cash and cash equivalents................................................................. 5,279 4,627
Securities available for sale.......................................................................... 22,446 23,280
Loans receivable....................................................................................... 63,204 80,546
Less allowance for loan losses....................................................................... (671) (837)
Loans, net........................................................................................ 62,533 79,709
Premises and equipment, net............................................................................ 2,531 3,523
Accrued interest receivable............................................................................ 942 1,114
Other assets........................................................................................... 2,369 3,706
Total assets.................................................................................... $96,100 $115,959
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing................................................................................. $ 9,447 $ 12,226
Interest bearing..................................................................................... 63,691 77,636
Total deposits.................................................................................. 73,138 89,862
Federal funds purchased................................................................................ 2,034 783
Securities sold under agreements to repurchase......................................................... 1,000 6,000
Advances from the Federal Home Loan Bank............................................................... 6,244 4,889
Accrued interest payable............................................................................... 453 462
Other liabilities...................................................................................... 299 407
Total liabilities............................................................................... 83,168 102,403
Shareholders' Equity:
Common stock, $1 par value; 10,000,000 shares authorized; 1,153,060 and 1,219,109 shares issued and
outstanding at December 31, 1995 and 1996, respectively.............................................. 1,153 1,219
Capital surplus........................................................................................ 11,254 12,004
Unrealized gain on securities available for sale, net.................................................. 178 35
Retained earnings...................................................................................... 347 298
Total shareholders' equity...................................................................... 12,932 13,556
Total liabilities and shareholders' equity...................................................... $96,100 $115,959
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except for per share data)
<TABLE>
<CAPTION>
Year ended December 31,
1994 1995 1996
<S> <C> <C> <C>
INTEREST INCOME:
Loans, including fees....................................................................... $3,909 $5,146 $6,622
Securities, taxable......................................................................... 301 723 1,112
Securities, nontaxable...................................................................... 82 171 290
Federal funds sold and other................................................................ 48 107 90
Total interest income.................................................................. 4,340 6,147 8,114
INTEREST EXPENSE:
Deposits.................................................................................... 1,364 2,422 3,425
Advances from the Federal Home Loan Bank.................................................... 298 381 298
Securities sold under agreements to repurchase.............................................. -- 13 157
Federal funds purchased and other........................................................... 31 132 126
Total interest expense................................................................. 1,693 2,948 4,006
NET INTEREST INCOME........................................................................... 2,647 3,199 4,108
Loan loss provision........................................................................... 14 112 187
NET INTEREST INCOME AFTER LOAN LOSS PROVISION................................................. 2,633 3,087 3,921
OTHER INCOME:
Service charges on deposit accounts......................................................... 306 393 515
Gain (loss) on sales of securities available for sale....................................... (79) (22) 17
Residential mortgage origination fees....................................................... 113 115 207
Commissions from sales of mutual funds...................................................... -- 49 132
Other income................................................................................ 174 242 355
Total other income..................................................................... 514 777 1,226
OTHER EXPENSE:
Salaries and employee benefits.............................................................. 1,108 1,411 1,960
Net occupancy expense....................................................................... 116 182 287
Furniture and equipment expense............................................................. 121 240 305
Other operating expense..................................................................... 916 1,236 1,589
Total other expense.................................................................... 2,261 3,069 4,141
INCOME BEFORE INCOME TAXES.................................................................... 886 795 1,006
Income tax provision.......................................................................... 301 261 300
NET INCOME.................................................................................... $ 585 $ 534 $ 706
PRIMARY AND FULLY DILUTED NET INCOME PER SHARE................................................ $ 0.80 $ 0.55 $ 0.54
AVERAGE COMMON SHARES AND EQUIVALENTS OUTSTANDING............................................. 804,822 1,070,135 1,356,626
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Unrealized
Gain (Loss) on
Securities
Common Stock Capital Available For Retained
Shares Amount Surplus Sale, Net Earnings Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993........................... 532,109 $ 532 $ 4,725 $ -- $ 162 $ 5,419
Sales of stock to ESOP............................... 14,294 14 140 -- -- 154
Adoption of accounting principle..................... -- -- -- (4) -- (4)
5% stock dividend.................................... 26,599 27 246 -- (275) (2)
Change in fair value for the period.................. -- -- -- (73) -- (73)
Net income........................................... -- -- -- -- 585 585
BALANCE, DECEMBER 31, 1994........................... 573,002 573 5,111 (77) 472 6,079
Net proceeds of stock offering....................... 520,422 520 5,490 -- -- 6,010
Sales of stock to ESOP............................... 4,741 5 51 -- -- 56
Stock options exercised.............................. 300 -- 2 -- -- 2
5% stock dividend.................................... 54,595 55 600 -- (659) (4)
Change in fair value for the period.................. -- -- -- 255 -- 255
Net income........................................... -- -- -- -- 534 534
BALANCE, DECEMBER 31, 1995........................... 1,153,060 1,153 11,254 178 347 12,932
Stock options exercised.............................. 8,558 9 60 -- -- 69
5% stock dividend.................................... 57,491 57 690 -- (755) (8)
Change in fair value for the period.................. -- -- -- (143) -- (143)
Net income........................................... -- -- -- -- 706 706
BALANCE, DECEMBER 31, 1996........................... 1,219,109 $1,219 $12,004 $ 35 $ 298 $13,556
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1994 1995 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................................ $ 585 $ 534 $ 706
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.......................................................... 210 324 460
Provision for loan losses.............................................................. 14 112 187
Deferred income tax benefit............................................................ -- (43) (56)
Amortization less accretion on securities.............................................. 45 46 51
Amortization of deferred loan fees and costs, net...................................... 103 84 134
(Gain) loss on sale of securities available for sale................................... 79 22 (17)
Proceeds from sales of residential mortgages........................................... 5,814 4,651 8,768
Disbursements for residential mortgages held for sale.................................. (5,572) (4,814) (8,684)
Increase in interest receivable........................................................ (119) (426) (172)
Increase in interest payable........................................................... 17 180 9
Loss on disposal of premises and equipment............................................. -- -- 32
Increase in other assets............................................................... (551) (267) (333)
Increase (decrease) in other liabilities............................................... (76) 38 105
Net cash provided by operating activities............................................ 549 441 1,190
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans made to customers................................................... (6,295) (12,582) (17,581)
Net decrease in deposits in other banks................................................... 200 -- --
Proceeds from sales of securities available for sale...................................... 4,928 1,975 4,512
Proceeds from maturities of securities available for sale................................. 38 1,527 3,603
Purchases of securities available for sale................................................ (4,484) (15,209) (9,205)
Proceeds from maturities of securities held to maturity................................... 461 100 --
Purchases of securities held to maturity.................................................. (853) (2,891) --
Purchases of non-marketable equity securities............................................. -- (166) (947)
Proceeds from sale of other real estate owned............................................. -- 20 --
Purchases of premises and equipment....................................................... (184) (997) (1,713)
Proceeds from disposals of premises and equipment......................................... -- -- 309
Net cash used by investing activities................................................ (6,189) (28,223) (21,022)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and savings deposits............................................... 3,696 9,136 8,343
Net increase (decrease) in certificates of deposit........................................ (542) 14,856 8,381
Proceeds of advances from the Federal Home Loan Bank...................................... 117 1,900 700
Repayments of advances from the Federal Home Loan Bank.................................... (948) (1,582) (2,054)
Proceeds from issuance of common stock.................................................... -- 6,010 --
Proceeds from exercise of stock options................................................... -- 2 69
Proceeds from stock sales to employee benefit plan........................................ 154 56 --
Net increase (decrease) in federal funds purchased and securities sold under repurchase
agreements............................................................................. 3,178 (352) 3,749
Cash paid in lieu of fractional shares.................................................... (2) (4) (8)
Net cash provided by financing activities............................................ 5,653 30,022 19,180
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................................ 13 2,240 (652)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................................................ 3,026 3,039 5,279
CASH AND CASH EQUIVALENTS, END OF YEAR...................................................... $ 3,039 $ 5,279 $ 4,627
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation -- The accompanying consolidated financial statements
include the accounts of Community Capital Corporation (the "Company"), and its
wholly-owned subsidiaries, Greenwood Bank & Trust (the "Greenwood Bank") and
Clemson Bank & Trust (the "Clemson Bank" and together with the Greenwood Bank,
the "Banks"). The Clemson Bank began operations on June 22, 1995 (See Note 10).
The principal business activity of the Company and its subsidiaries is to
provide banking services to domestic markets, principally Greenwood County and
Pickens County, South Carolina. The Company provides data processing and other
services to the Banks. In consolidation, fees charged for these services and all
other intercompany items and transactions have been eliminated.
Use of Estimates -- In preparing the financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of the balance sheet date and revenues and expenses
for the period. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses, including
valuation allowances for impaired loans, the carrying amount of real estate
acquired in connection with foreclosures or in satisfaction of loans, and the
assumptions used in computing the fair value of stock options granted and the
pro forma disclosures required by Statement of Financial Accounting Standards
No. 123 (See Notes 2 and 13). Management must also make estimates in determining
the estimated useful lives and methods for depreciating premises and equipment.
While management uses available information to recognize losses on loans
and foreclosed real estate, future additions to the allowance may be necessary
based on changes in local economic conditions. In addition, regulatory agencies,
as an integral part of their examination process, periodically review the Banks'
allowances for losses on loans and foreclosed real estate. Such agencies may
require the Banks to recognize additions to the allowances based on their
judgements about information available to them at the time of their examination.
Because of these factors, it is reasonably possible that the allowances for
losses on loans and foreclosed real estate may change materially in the near
term.
Securities Available for Sale -- All debt securities have been designated
available for sale by the Company and are carried at amortized cost and adjusted
to estimated market value by recording the aggregate unrealized gain or loss in
a valuation account. Management does not actively trade securities classified as
available for sale. Reductions in market value considered by management to be
other than temporary are reported as a realized loss and a reduction in the cost
basis in the security. Generally, amortization of premiums and accretion of
discounts are charged or credited to earnings on a straight-line basis over the
life of the securities. The adjusted cost basis of securities available for sale
is determined by specific identification and is used in computing the gain or
loss from a sales transaction.
Loans -- Loans are stated at their unpaid principal balance. Interest
income is computed using the simple interest method and is recorded in the
period earned. When serious doubt exists as to the collectibility of a loan or a
loan is 90 days past due, the accrual of interest income is generally
discontinued unless the estimated net realizable value of the collateral is
sufficient to assure collection of the principal balance and accrued interest.
When interest accruals are discontinued, unpaid accrued interest is reversed and
charged against current year income.
Impairment of a loan is measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate or fair value
of the collateral if the loan is collateral dependent. When management
determines that a loan is impaired, the difference between the Company's
investment in the related loan and the present value of the expected future cash
flows, or the fair value of the collateral, is charged to bad debt expense with
a corresponding entry to a valuation account. The accrual of interest is
discontinued on an impaired loan when management determines that the borrower
may be unable to meet payments as they become due.
Allowance for Loan Losses -- Management provides for losses on loans
through specific and general charges to operations and credits such charges to
the allowance for loan losses. Specific provision for losses is determined for
identified loans based upon estimates of the excess of the loan's carrying value
over the net realizable value of the underlying collateral. General provision
for loan losses is estimated by management based upon factors including industry
loss experience for similar lending categories, actual loss experience,
delinquency trends as well as prevailing and anticipated economic conditions.
While management uses the best information available to make evaluations, future
adjustment to the allowance may be
F-7
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- Continued
necessary if economic conditions differ substantially from the assumptions used
in making the evaluation. Delinquent loans are charged against the allowance at
the time they are determined to be uncollectible. Recoveries are added to the
allowance.
Residential Mortgages Held For Sale -- The Banks' mortgage activities are
comprised of accepting residential mortgage loan applications, qualifying
borrowers to standards established by investors, funding residential mortgages
and selling mortgages to investors under pre-existing commitments. Funded
residential mortgages held temporarily for sale to investors are recorded at
cost which approximates the market value (See Note 5). Application and
origination fees collected by the Banks are recognized as income upon sale to
the investor.
Premises and Equipment -- Premises and equipment are stated at cost, less
accumulated depreciation. Gain or loss on retirement of premises and equipment
is recognized in the statements of operations when incurred. Expenditures for
maintenance and repairs are charged to expense; betterments and improvements are
capitalized. Depreciation charges are computed principally on the straight-line
method over the estimated useful lives as follows:
<TABLE>
<S> <C>
Building and improvements................................................................ 7-40 years
Furniture, fixtures and equipment........................................................ 3-10 years
</TABLE>
Other Real Estate Owned -- Other real estate owned includes real estate
acquired through foreclosure and loans accounted for as in-substance
foreclosures. Collateral is considered foreclosed in-substance when the borrower
has little or no equity in the fair value of the collateral, proceeds for
repayment of the debt can be expected to come only from the sale of the
collateral and it is doubtful that the borrower can rebuild equity or otherwise
repay the loan in the foreseeable future. Other real estate owned is carried at
the lower of cost (fair value at the date of foreclosure) or fair value minus
estimated costs to sell. Any write-downs at the date of acquisition are charged
to the allowance for possible loan losses. Expenses to maintain such assets,
subsequent changes in the valuation allowance, and gains and losses on disposal
are included in other expenses.
Investments in Equity Securities -- Other assets include the costs of the
Banks' investments in the stock of the Federal Reserve Bank and the Federal Home
Loan Bank. The stocks have no quoted market value and no ready market exists.
Investment in Federal Reserve Bank stock is required for state-chartered member
banks. Investment in Federal Home Loan Bank stock is a condition of borrowing
from the Federal Home Loan Bank, and the stock is pledged to secure the
borrowings. At December 31, 1995 and 1996, the investment in Federal Reserve
Bank stock was $127,000 and $150,000, respectively. At December 31, 1995 and
1996, the investment in Federal Home Loan Bank stock was $772,000 and $822,000,
respectively. Dividends received on Federal Reserve Bank stock and Federal Home
Loan Bank stock are included in other income.
The Company's investments in the stock of three unrelated financial
institutions are also included in other assets at cost. The Company owns less
than five percent of the outstanding shares of each institution, and the stocks
either have no quoted market value or are not readily marketable. At December
31, 1995 and 1996, the investments in the stock of the unrelated financial
institutions were $353,000 and $1,227,000, respectively. Dividends received are
included in other income.
Loan Fees and Costs -- Loan origination and commitment fees and certain
direct loan origination costs are deferred and are being amortized to income
over the contractual lives of commercial and installment loans, adjusted for
prepayments, using the level yield method. Net deferred fees and costs
associated with the origination of home equity lines of credit are being
amortized to income over the contractual life of the lending agreement using the
straight-line method.
Income taxes -- The income tax provision is the sum of amounts currently
payable to taxing authorities and the net changes in income taxes payable or
refundable in future years. Income taxes deferred to future years are determined
utilizing a liability approach. This method gives consideration to the future
tax consequences associated with differences between the financial accounting
and tax bases of certain assets and liabilities, principally the allowance for
loan losses and depreciable premises and equipment.
Cash Flow Information -- For purposes of reporting cash flows, the Company
considers certain highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents. Cash equivalents include amounts
due from depository institutions and federal funds sold. Generally, federal
funds sold are purchased for one-day periods.
F-8
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- Continued
During 1994, 1995 and 1996, the Company paid $1,676,000, $2,768,000 and
$4,007,000, respectively, for interest. In 1994, 1995 and 1996, the Company made
tax payments of $512,000, $331,000 and $290,000, respectively.
Supplemental noncash investing and financing activities are as follows:
In 1994, 1995 and 1996, the Company declared 5% stock dividends and
transferred $273,000, $655,000 and $747,000 from retained earnings (net of cash
paid for fractional shares) to common stock and capital surplus in the amounts
of $27,000, $55,000 and $57,000, respectively, and $246,000, $600,000 and
$690,000, respectively.
Changes in the valuation account of securities available for sale,
including the deferred tax effects, are considered noncash transactions for
purposes of the statement of cash flows and are presented in detail in the notes
to the financial statements.
Off-Balance-Sheet Financial Instruments -- In the ordinary course of
business, the Banks have entered into off-balance-sheet financial instruments
consisting of commitments to extend credit, commitments under credit card
arrangements and letters of credit. These financial instruments are recorded in
the financial statements when they become payable by the customer.
Concentrations of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
loans receivable, securities, federal funds sold and amounts due from banks.
Management is not aware of any concentrations of loans to classes of borrowers
or industries that would be similarly affected by economic conditions. Although
the Company's loan portfolio is diversified, a substantial portion of its
borrowers' ability to honor the terms of their loans is dependent on business
and economic conditions in Greenwood and Pickens Counties and surrounding areas.
Management does not believe credit risk is associated with obligations of the
United States, its agencies or its corporations. The Company places its deposits
and correspondent accounts with and sells its federal funds to high credit
quality institutions. By policy, time deposits are limited to amounts insured by
the FDIC. Management believes credit risk associated with correspondent accounts
is not significant.
Per Share Amounts -- Net income per share is computed by dividing net
income by the weighted average number of shares of common stock and common stock
equivalents outstanding during the period using the treasury stock method
modified for the 20% limitation. The weighted average common shares outstanding
were 804,822, 1,070,135, and 1,356,626, during December 31, 1994, 1995 and 1996,
respectively. Retroactive recognition has been given for the effect of all stock
dividends.
Common Stock Owned by the Employee Stock Ownership Plan (ESOP) -- ESOP
purchases and redemptions of the Company's common stock are at estimated fair
value as determined by independent valuations. Dividends on ESOP shares are
charged to retained earnings. All shares held by the ESOP are treated as
outstanding for purposes of computing earnings per share.
Reclassifications -- Furniture and equipment expense, which was included in
net occupancy expense in the 1994 and 1995 financial statements, has been
segregated to conform with the 1996 presentation. Certain other captions and
amounts in the 1994 and 1995 consolidated financial statements were reclassified
to conform with the 1996 presentation.
NOTE 2 -- CHANGE IN ACCOUNTING PRINCIPLE:
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 123, "Accounting for
Stock-based Compensation," effective for transactions entered into in fiscal
years that begin after December 15, 1995. SFAS 123 recommends that companies
account for stock compensation on a fair value based method which requires
compensation cost to be measured at the grant date based on the value of the
award and to be recognized over the service period. As an alternative, companies
may continue to record compensation cost based on the excess, if any, of the
quoted market price of the stock at the grant date (or other measurement date)
over the amount an employee must pay to acquire the stock (APB Opinion No. 25).
However, if a company elects this method, it must include in the financial
statements certain disclosures which reflect pro forma amounts as if the fair
value method had been used. As permitted by SFAS 123, the Company has elected to
continue its current method of accounting for stock options with pro
F-9
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 2 -- CHANGE IN ACCOUNTING PRINCIPLE: -- Continued
forma amounts disclosed in the financial statements. The pro forma disclosures
for the Company include the effects of all awards granted after December 31,
1994 as required by SFAS 123 (See Note 13).
NOTE 3 -- RESTRICTIONS ON CASH AND DUE FROM BANKS:
The Banks are required to maintain average reserve balances computed as a
percentage of deposits. At December 31, 1996, the required cash reserves were
satisfied by vault cash on hand and amounts due from correspondent banks.
NOTE 4 -- INVESTMENT SECURITIES:
Securities available for sale at December 31, 1995 and 1996 consist of the
following:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
(Dollars in thousands)
December 31, 1995:
U.S. Treasury securities...................................................... $ 5,897 $ 55 $ -- $ 5,952
Securities of other U.S. Government agencies and corporations................. 11,435 117 6 11,546
Obligations of states and local government.................................... 4,439 111 -- 4,550
Mortgage-backed securities.................................................... 394 4 -- 398
Total investment securities................................................. $22,165 $ 287 $ 6 $22,446
December 31, 1996:
U.S. Treasury securities...................................................... $ 6,395 $ 25 $ -- $ 6,420
Securities of other U.S. Government agencies and corporations................. 11,170 27 47 11,150
Obligations of states and local govenment..................................... 5,321 73 27 5,367
Mortgage-backed securities.................................................... 337 6 -- 343
Total investment securities................................................. $23,223 $ 131 $ 74 $23,280
</TABLE>
The following table summarizes the maturities of securities available for
sale as of December 31, 1996, based on the contractual maturities. Actual
maturities may differ from the contractual maturities because borrowers may have
the right to call or prepay obligations with or without penalty. There were no
securities designated held to maturity at December 31, 1995 or 1996.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
<S> <C> <C>
(Dollars in thousands)
Due in one year or less........................................................ $ 2,530 $ 2,539
Due after one year but within five years....................................... 10,825 10,844
Due after five years but within ten years...................................... 7,122 7,128
Due after ten years............................................................ 2,409 2,426
Mortgage-backed securities..................................................... 337 343
Total........................................................................ $23,223 $23,280
</TABLE>
Proceeds from sales of securities available for sale during 1994, 1995 and
1996 were $4,928,000, $1,975,000 and $4,512,000, respectively, resulting in
gross realized gains of $0, $0 and $18,000 along with gross realized losses of
$79,000, $22,000 and $1,000, respectively. There were no sales of securities
held to maturity in 1994, 1995 or 1996.
At December 31, 1995 and 1996, securities having an amortized cost of
approximately $13,822,000 and $18,310,000, respectively, and an estimated market
value of $14,018,000 and $18,392,000, respectively, were pledged as collateral
for short-term borrowings and advances from the Federal Home Loan Bank (See Note
9) to secure public and trust deposits, and for other purposes as required and
permitted by law.
F-10
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 5 -- LOANS RECEIVABLE:
Loans receivable at December 31, 1995 and 1996, are summarized as follows:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
(Dollars in
thousands)
Commercial and agricultural.................................................. $13,349 $15,348
Real estate.................................................................. 38,296 49,639
Home equity.................................................................. 6,593 9,243
Consumer -- installment...................................................... 3,722 4,592
Consumer -- credit card and checking......................................... 869 1,355
Residential mortgages held for sale and other................................ 375 369
Total loans................................................................ $63,204 $80,546
</TABLE>
At December 31, 1995 and 1996, the Banks had sold participations in loans
aggregating $5,595,000 and $2,879,000, respectively, to other financial
institutions on a nonrecourse basis. Collections on loan participations and
remittances to participating institutions conform to customary banking
practices.
The Banks accept residential mortgage loan applications and fund loans of
qualified borrowers (See Note 1). Funded loans are sold without recourse to
investors at face value under the terms of pre-existing commitments. The Banks
do not sell residential mortgages having market or interest rate risk. The Banks
do not service residential mortgage loans for the benefit of others.
At December 31, 1995 and 1996, the Banks had pledged approximately
$6,864,000 and $6,294,000, respectively, of loans on residential real estate as
collateral for advances from the Federal Home Loan Bank (See Note 9).
The Company adopted SFAS 114, "Accounting by Creditors for the Impairment
of a Loan", and SFAS 118, "Accounting By Creditors for Impairment of a
Loan -- Income Recognition and Disclosures" as of January 1, 1995. These
statements identify how creditors should measure and account for impaired loans.
Under SFAS 114 and 118, impairment of loans should be measured at the present
value of the expected future cash flows discounted at the loan's effective
interest rate or at fair value of the collateral if the loan is collateral
dependent.
Loans are defined as impaired when "based on current information and
events, it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement." All loans are subject
to this criteria except for: "smaller-balance homogeneous loans that are
collectively evaluated for impairment" and loans "measured at fair value or at
the lower of cost or fair value." The Company considers its consumer installment
portfolio, credit cards and home equity lines as meeting this criteria.
Therefore, the real estate and commercial loan portfolios are primarily affected
by these Statements.
The Company identifies impaired loans through its normal internal loan
review process. Loans on the Company's problem loan watch list are considered
potentially impaired loans. These loans are evaluated in determining whether all
outstanding principal and interest are expected to be collected. Loans are not
considered impaired if a minimal delay occurs and all amounts due including
accrued interest at the contractual interest rate for the period of delay are
expected to be collected. At December 31, 1995 and 1996, management reviewed its
problem loan watch list and determined that no impairment on loans existed that
would have a material effect on the Company's consolidated financial statements.
At December 31, 1995 and 1996, the Company had nonaccrual loans of
approximately $13,000 and $186,000, respectively, for which impairment had not
been recognized. The additional interest income which would have been recognized
into earnings if the Company's nonaccrual loans had been current in accordance
with their original terms is immaterial for all years presented.
F-11
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 5 -- LOANS RECEIVABLE: -- Continued
An analysis of the allowance for loan losses for the years ended December
31, 1994, 1995 and 1996, is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
(Dollars in
thousands)
Balance, beginning of year.................................................... $567 $580 $671
Provision for loan losses..................................................... 14 112 187
Loans charged off, net........................................................ (5) (21) (21)
Recoveries.................................................................... 4 -- --
Balance, end of year.......................................................... $580 $671 $837
</TABLE>
In the normal course of business, the Company is a party to financial
instruments with off-balance-sheet risk. These financial instruments are
commitments to extend credit and letters of credit and have elements of risk in
excess of the amount recognized in the balance sheet. Commitments to extend
credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
A commitment involves, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the consolidated balance sheets. The
Company's exposure to credit loss in the event of non-performance by the other
party to the instrument is represented by the contractual notional amount of the
instrument. Since certain commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash
requirements. Letters of credit are conditional commitments issued to guarantee
a customer's performance to a third party and have essentially the same credit
risk as other lending facilities. The Company uses the same credit policies in
making commitments to extend credit as it does for on-balance-sheet instruments.
At December 31, 1995 and 1996, the Company had unfunded commitments,
including standby letters of credit, of $11,786,000 and $16,334,000, of which
$2,393,000 and $3,692,000, respectively, were unsecured. At December 31, 1996,
the Company was not committed to lend additional funds to borrowers owing
nonaccrual loans.
NOTE 6 -- PREMISES AND EQUIPMENT:
Premises and equipment at December 31, 1995 and 1996, consists of the
following:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
(Dollars in
thousands)
Land............................................................................ $ 465 $ 501
Buildings and lease hold improvements........................................... 1,577 1,963
Furniture and equipment......................................................... 1,600 1,916
Construction in progress........................................................ -- 443
Total......................................................................... 3,642 4,823
Less, accumulated depreciation.................................................. 1,111 1,300
Net premises and equipment.................................................... $2,531 $3,523
</TABLE>
The Clemson Bank has a contract for the construction of its permanent
facility. During 1996, approximately $10,000 of interest was capitalized on the
construction. As of December 31, 1996, management estimates the cost to complete
the building to range from $600,000 to $800,000.
F-12
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 7 -- DEPOSITS:
The following is a summary of deposit accounts as of December 31, 1995 and
1996:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
(Dollars in
thousands)
Non-interest bearing demand deposits......................................... $ 9,447 $12,226
Interest-bearing demand deposits............................................. 8,028 8,296
Money market accounts........................................................ 9,498 14,035
Savings accounts............................................................. 7,922 8,681
Certificates of deposit...................................................... 38,243 46,624
Total deposits............................................................. $73,138 $89,862
</TABLE>
At December 31, 1995 and 1996, certificates of deposit of $100,000 or more
totaled approximately $12,082,000 and $11,879,000, respectively. Interest
expense on these deposits was approximately $259,000, $471,000 and $665,000 in
1994, 1995 and 1996, respectively.
As of December 31, 1995 and 1996, brokered deposits totaled approximately
$985,000 and $1,380,000, respectively. Brokered deposits are not expected to be
a long-term source of funds for the Company.
NOTE 8 -- SHORT-TERM BORROWINGS:
Securities sold under agreements to repurchase generally mature within one
to fourteen days from the transaction date. During 1996, the daily average of
securities sold under agreements to repurchase was $2,830,000, and the maximum
amount outstanding at any month end was $7,000,000. The purchaser-seller
provides safekeeping services for the Company and maintains possession of the
securities.
As of December 31, 1996, the amortized cost and market value of the
securities underlying the agreement were $7,406,000 and $7,430,000,
respectively.
NOTE 9 -- ADVANCES FROM THE FEDERAL HOME LOAN BANK:
Advances from the Federal Home Loan Bank consisted of the following at
December 31, 1996:
<TABLE>
<CAPTION>
Interest
Description Rate Balance
<S> <C> <C>
(Dollars in
thousands)
Adjustable rate advances maturing:
January 29, 1997.............................................................. 5.53% $ 700
March 23, 1997................................................................ 5.67 1,100
April 24, 1997................................................................ 5.61 1,500
Fixed rate advances maturing:
January 29, 1997.............................................................. 5.45 400
March 5, 1997................................................................. 5.31 340
May 27, 1997.................................................................. 6.34 7
August 27, 1997............................................................... 4.49 692
March 24, 1998................................................................ 7.37 150
Total...................................................................... $ 4,889
</TABLE>
Scheduled principal reductions of Federal Home Loan Bank advances are as
follows:
<TABLE>
<S> <C> <C>
1997............................................................................ $ 4,739
1998............................................................................ 150
Total...................................................................... $ 4,889
</TABLE>
F-13
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 9 -- ADVANCES FROM THE FEDERAL HOME LOAN BANK: -- Continued
As collateral, the Company has pledged first mortgage loans on one to four
family residential loans aggregating $6,294,000 (See Note 5) and debt securities
aggregating $1,755,000 (See Note 4) at December 31, 1996. In addition, the
Company's Federal Home Loan Bank stock, which is included in other assets (See
Note 1), is pledged to secure the borrowings. Certain advances are subject to
prepayment penalties.
NOTE 10 -- SHAREHOLDERS' EQUITY:
On December 20, 1996, the Company filed a registration statement with the
Securities and Exchange Commission for the purpose of registering up to
1,684,750 shares of its common stock to be sold in a public offering. The
offering is expected to be completed during the first quarter of 1997. The
proceeds from the offering will be used to acquire three banks organizing in
Barnwell, Belton, and Newberry (See Note 12).
Pursuant to a prospectus dated February 27, 1995, the Company completed a
public offering of 520,422 shares of its common stock, resulting in net proceeds
(after deducting issuance cost) of $6,010,000. On June 22, 1995, the Company
acquired all of the common stock of the Clemson Bank for $4,500,000. Immediately
upon being chartered as a state bank on June 22, 1995, the Clemson Bank assumed
ownership of its organizational partnership's assets and liabilities.
The Company declared 5% stock dividends for stockholders of record on April
1, 1994, August 1, 1995 and May 1, 1996. Accordingly, amounts equal to the
estimated fair market value of the additional shares issued have been charged to
retained earnings and credited to common stock and capital surplus. Dividends
representing fractional shares were paid in cash.
The Company has authorized 2,000,000 shares of a special class of stock,
par value $1.00 per share, the rights and preferences of which are to be
designated as the Board of Directors may determine. At December 31, 1996, no
shares of the undesignated stock had been issued or were outstanding.
NOTE 11 -- CAPITAL REQUIREMENTS:
The Banks are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a material
effect on the Company's financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Banks must meet
specific capital guidelines that involve quantitative measures of the Banks'
assets, liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Banks' capital amounts and classifications
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Banks to maintain minimum ratios of Tier 1 and total capital as a
percentage of assets and off-balance-sheet exposures, adjusted for risk weights
ranging from 0% to 100%. Tier 1 capital of the Banks consists of common
shareholders' equity, excluding the unrealized gain or loss on securities
available for sale, minus certain intangible assets. The Banks' Tier 2 capital
consists of the allowance for loan losses subject to certain limitations. Total
capital for purposes of computing the capital ratios consists of the sum of Tier
1 and Tier 2 capital. The regulatory minimum requirements are 4% for Tier 1 and
8% for total risk-based capital.
The Banks are also required to maintain capital at a minimum level based on
total assets, which is known as the leverage ratio. Only the strongest banks are
allowed to maintain capital at the minimum requirement of 3%. All others are
subject to maintaining ratios 1% to 2% above the minimum.
As of December 31, 1996, the most recent notifications from each Bank's
primary regulator categorized the Banks as well-capitalized under the regulatory
framework for prompt corrective action. There are no conditions or events that
management believes have changed the Banks' categories.
F-14
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 11 -- CAPITAL REQUIREMENTS: -- Continued
The following table summarizes the capital ratios of the Banks and the
regulatory minimum requirements at December 31, 1996.
<TABLE>
<CAPTION>
Tier 1 Total
Risk-Based Risk-Based
<S> <C> <C>
Actual ratio:
Greenwood Bank........................................................................ 9.97% 10.91%
Clemson Bank.......................................................................... 30.76 32.01
Regulatory minimum:
For capital adequacy purposes......................................................... 4.00 8.00
To be well capitalized under prompt corrective action provisions...................... 6.00 10.00
<CAPTION>
Tier 1
Leverage
<S> <C>
Actual ratio:
Greenwood Bank........................................................................ 7.34%
Clemson Bank.......................................................................... 23.60
Regulatory minimum:
For capital adequacy purposes......................................................... 4.00
To be well capitalized under prompt corrective action provisions...................... 5.00
</TABLE>
The Federal Reserve Board has similar requirements for bank holding
companies. The Company is currently not subject to these requirements because
the Federal Reserve guidelines contain an exemption for bank holding companies
with less than $150,000,000 in consolidated assets.
NOTE 12 -- ACQUISITION OF NEW BANKS AND BRANCHES:
The Company is in the process of acquiring three de novo community banks in
Barnwell, Belton, and Newberry (collectively the "New Banks"), which are
non-metropolitan markets in South Carolina. The Company intends to open the
banks in Belton and Newberry in traditional de novo fashion by capitalizing the
banks and seeking local deposits to fund loan growth.
In contrast, the Company intends for the bank in Barnwell (the "Barnwell
Bank"), after opening, to acquire certain deposits and assets associated with
five branches located in Aiken, Barnwell, and Orangeburg Counties, South
Carolina from Carolina First Bank ("Carolina First"). The Company, the Barnwell
Bank, and Carolina First have entered into a Purchase and Assumption Agreement
dated January 21, 1997 (the "Agreement") for the acquisition by the Barnwell
Bank of the branches. The Company anticipates that the acquisition of the
branches will close during the first quarter of 1997. At the closing, and
subject to the terms of the Agreement, the Barnwell Bank will pay Carolina First
a premium of 5.25% on the assumed Carolina First deposits other than
certificates of deposit greater than or equal to $100,000. The acquisition will
be accounted for as a purchase. The assets acquired and the liabilities assumed
will be recorded at Carolina First's respective book values if not materially
different from fair value. The premium will be amortized over a fifteen-year
period on a straight-line basis. The following table presents the book value of
the subject assets and liabilities of the five branches as of December 31, 1995
and 1996 per unaudited information obtained from Carolina First.
<TABLE>
<CAPTION>
December 31,
1995 1996
<S> <C> <C>
(Dollars in
thousands)
Assets:
Loans................................................................................................. $18,583 $15,152
Premises and equipment................................................................................ 1,894 1,892
Accrued interest receivable........................................................................... 301 238
Liabilities:
Deposits:
Noninterest bearing................................................................................ 3,793 4,936
CD's greater than or equal to $100,000............................................................. 6,741 6,255
Other interest bearing deposits.................................................................... 42,188 42,517
Total deposits................................................................................... 52,722 53,708
Accrued interest payable.............................................................................. 524 554
</TABLE>
F-15
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 12 -- ACQUISITION OF NEW BANKS AND BRANCHES: -- Continued
To capitalize the New Banks, the Company plans to sell up to 1,684,750
shares of its common stock. Of the expected net proceeds, the Company intends to
use $7,000,000 to capitalize the Barnwell Bank, $3,500,000 to capitalize the
bank in Belton, and $3,300,000 to capitalize the bank in Newberry. In accordance
with the agreements with the organizers of the New Banks and subject to the New
Banks being opened, the Company has agreed to include organizational and
preopening costs in the initial capitalization of the New Banks. The total of
the organizational and preopening costs is expected to range from $600,000 to
$900,000 and will be amortized over a five-year period on a straight-line basis.
The opening of the New Banks and the acquisition of the common stock of the
New Banks by the Company are subject to various regulatory approvals.
NOTE 13 -- STOCK COMPENSATION PLANS:
The Company has two stock option plans, an Employee Incentive Stock Option
Plan (the "1988 Plan") and an Incentive and Nonstatutory Stock Option Plan (the
"Stock Plan"), which are described below. As discussed in Note 2, the Company
will continue to apply APB Opinion 25 and related Interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized for either
the 1988 Plan or the Stock Plan. Had compensation cost for the Company's stock
option plans been determined based on the fair value at the grant dates for
awards under those plans consistent with the method of FASB Statement 123, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
(Dollars in
thousands,
except for per
share data)
Net Income:
As reported............................................................................................. $ 534 $ 706
Pro forma............................................................................................... 460 418
Primary and fully diluted earnings per share:
As reported............................................................................................. $0.55 $0.54
Pro forma............................................................................................... 0.43 0.33
</TABLE>
In calculating the pro forma disclosures, the fair value of options granted
is estimated as of the date granted using the Black-Scholes option pricing model
with the following weighted-average assumptions used for grants in 1995 and
1996, respectively (there were no options granted under the 1988 Plan during
1996): dividend yield of 0 percent for all years; expected volatility of 24 and
28 percent; risk-free interest rates of 6.9 percent in 1995 for the 1988 Plan
options and 7.33 and 6.71 percent for the Stock Plan options; and expected lives
of 4 years in 1995 for the 1988 Plan options and 8.5 and 5.6 years for the Stock
Plan options. Pro forma disclosure is not required for 1994. (See Note 2).
Employee Incentive Stock Option Plan -- Adopted in 1988, this plan provides
for the granting of options to purchase up to 47,648 shares, adjusted for stock
dividends of the Company's common stock, to officers and other eligible
employees of the Company and Greenwood Bank & Trust. The per-share exercise
price of the options may not be less than the fair market value of a share of
common stock on the date the option is granted. Options become exercisable one
year after the date of grant and can be exercised within five years from the
date of grant. Any options that expire unexercised or are canceled become
available for issuance.
Incentive and Nonstatutory Stock Option Plan -- During 1993 the Company
approved the terms of the Company's Incentive Stock Option and Nonstatutory
Stock Option Plan which received shareholders approval on May 16, 1994. The
Stock Plan provides for the granting of statutory incentive stock options within
the meaning of Section 422 of the Internal Revenue Code as well as nonstatutory
stock options and stock appreciation rights. Stock options and stock
appreciation rights are issuable only to employees and directors of the Company
and its subsidiaries. The per-share exercise price of incentive stock options
granted under the Stock Plan may not be less than the fair market value of a
share on the date of grant, nor can the exercise date of any option granted be
less than one year from the date of grant. Any options that expire unexercised
or are canceled become available for issuance. Options granted generally become
exercisable after one year and expire five to
F-16
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 13 -- STOCK COMPENSATION PLANS: -- Continued
ten years from the date of grant. On May 20, 1996, the shareholders approved an
amendment to the Stock Plan increasing the number of options that may be granted
to 525,000, adjusted for the effects of the stock dividend in 1996.
A summary of the status of the Company's stock option plans as of December
31, 1994, 1995 and 1996 and changes during the years ending on those dates is
presented below (all amounts have been restated to reflect stock dividends paid
in 1994, 1995 and 1996):
<TABLE>
<CAPTION>
1994 1995 1996
Weighted-Average Weighted-Average Exercise
Shares Exercise Price Shares Exercise Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year............. 36,179 $ 7.96 305,369 $ 8.57 330,681 $ 8.75
Granted...................................... 277,624 8.64 31,698 10.78 139,900 11.94
Exercised.................................... -- -- (315) 8.64 (8,733) 7.89
Canceled..................................... (8,434) 8.38 (6,071) 10.19 (6,100) 10.69
Outstanding at end of year................... 305,369 8.57 330,681 8.75 455,748 9.72
</TABLE>
Options exercisable at December 31, 1994, 1995 and 1996 were 297,674,
300,309 and 318,398, respectively.
The weighted-average fair value of options, calculated using the
Black-Scholes option pricing model, granted during 1995 and 1996 is $4.60 and
$4.66, respectively.
The following table summarizes information about the stock options
outstanding under the Company's two plans at December 31, 1996.
<TABLE>
<CAPTION>
Options Outstanding Options
Weighted-average Exercisable
Range of Number Remaining Contractual Weighted-average Number
Exercise Prices Outstanding Life Exercise Price Exercisable
<S> <C> <C> <C> <C>
$7.10 to $8.64.......................... 290,243 6.5 years $ 8.58 290,243
10.66 to 12.38.......................... 165,505 6.3 11.73 28,155
455,748 6.4 9.72 318,398
<CAPTION>
Options
Exercisable
Range of Weighted-average
Exercise Prices Exercise Price
<S> <C>
$7.10 to $8.64.......................... $ 8.58
10.66 to 12.38.......................... 10.79
8.77
</TABLE>
NOTE 14 -- RELATED PARTY TRANSACTIONS:
Certain parties (primarily directors, executive officers, principal
shareholders and their associates) were loan customers and had other
transactions in the normal course of business with the Company. Related party
loans are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unrelated persons and generally do not involve more than normal risk of
collectibility. Total loans and commitments outstanding to related parties at
December 31, 1995 and 1996, were $2,876,000 and $4,012,000, respectively. During
1996, $2,787,000 of new loans were made to related parties and repayments
totaled $1,651,000.
The Company conducts branch banking activities from two locations which are
leased from two directors under long-term leases. Land used as the site for a
branch banking location is leased from a director under a five-year operating
lease ending July 31, 1999. The Company can purchase the land at any time during
the term of the lease for $90,000.
During 1996, the Company began leasing part of a building and land as a
branch banking location from a director. The operating lease has an initial
ten-year term which expires July 31, 2006 and is renewable, at the Company's
option, for four five-year terms at an increased monthly rental. The lease
requires monthly payments of $3,500 with an increase to $3,850 per month during
the last five years of the initial lease term.
F-17
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 14 -- RELATED PARTY TRANSACTIONS: -- Continued
Rent expense under these operating lease agreements was $2,000, $5,300, and
$24,000 for the years ended December 31, 1994, 1995, and 1996, respectively.
Future obligations over the primary terms of these long-term leases as of
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
(Dollars in thousands)
<S> <C>
1997............................................................................ $ 50
1998............................................................................ 52
1999............................................................................ 48
2000............................................................................ 42
2001............................................................................ 44
After five years................................................................ 212
Total...................................................................... $448
</TABLE>
There were no unpaid amounts outstanding at December 31, 1996.
NOTE 15 -- COMMITMENTS, CONTINGENCIES AND SUBSEQUENT EVENTS:
In the ordinary course of business, the Company or its subsidiaries may,
from time to time, become a party to legal claims and disputes. At December 31,
1996, management is not aware of any pending or threatened litigation, or
unasserted claims that could result in losses, if any, that would be material to
the consolidated financial statements.
NOTE 16 -- RESTRICTION ON SUBSIDIARY DIVIDENDS:
The ability of the Company to pay cash dividends to shareholders is
dependent upon receiving cash in the form of dividends from its banking
subsidiaries. However, certain restrictions exist regarding the ability of the
subsidiaries to transfer funds in the form of cash dividends, loans or advances
to the Company. The prior approval of the Commissioner of Banking is required
and dividends are payable only from the undivided profits of the banking
subsidiaries. At December 31, 1996, the Greenwood Bank's undivided profits were
$2,099,000, and the deficit balance in the Clemson Bank's undivided profits was
$346,000.
NOTE 17 -- INCOME TAXES:
Income tax expense for the years ended December 31, 1994, 1995 and 1996
consists of the following:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
(Dollars in
thousands)
Currently payable:
Federal............................................................................................. $272 $269 $ 305
State............................................................................................... 29 35 51
301 304 356
Change in deferred income taxes:
Federal............................................................................................. (40) 101 (104)
State............................................................................................... (2) -- (33)
(42) 101 (137)
Income tax expense............................................................................. $259 $405 $ 219
Income tax expense is allocated as follows:
To continuing operations............................................................................ $301 $261 $ 300
To shareholders' equity............................................................................. (42) 144 (81)
$259 $405 $ 219
</TABLE>
F-18
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 17 -- INCOME TAXES: -- Continued
The Company's deferred tax accounts as of December 31, 1995 and 1996 are as
follows:
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
(Dollars in
thousands)
Deferred tax assets.......................................................... $298 $348
Deferred tax liabilities..................................................... 190 103
Valuation allowance.......................................................... 0 0
</TABLE>
The principal sources of temporary differences in 1994, 1995 and 1996, and
the related deferred tax effects are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
(Dollars in thousands)
Provision for bad debts.............................................................................. $ (5) $ (39) $ (45)
Tax depreciation in excess of book depreciation...................................................... 3 8 6
Net operating losses................................................................................. -- (9) (21)
Other, net........................................................................................... 2 (3) 4
Temporary differences attributable to continuing operations........................................ -- (43) (56)
Change in valuation allowance........................................................................ -- -- --
Deferred tax expense attributable to continuing operations........................................... -- (43) (56)
Deferred tax expense (benefit) attributable to shareholders' equity.................................. (42) 144 (81)
Change in deferred income taxes.................................................................... $(42) $ 101 $(137)
</TABLE>
A reconciliation of the income tax provision and the amount computed by
applying the Federal statutory rate of 34% to income before income taxes
follows:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
(Dollars in
thousands)
Income tax at the statutory rate...................................................................... $301 $270 $342
State income tax, net of federal benefit.............................................................. 16 10 10
Tax exempt interest income............................................................................ (19) (46) (84)
Disallowed interest expense........................................................................... 4 6 17
Officers' life insurance.............................................................................. 6 (1) 12
Other, net............................................................................................ (7) 22 3
Income tax provision........................................................................... $301 $261 $300
</TABLE>
F-19
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 18 -- OTHER OPERATING EXPENSES:
Other operating expenses for the years ended December 31, 1994, 1995 and
1996 are summarized below:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
(Dollars in thousands)
Federal deposit insurance assessment............................................................... $109 $ 59 $ 3
Banking and ATM supplies........................................................................... 96 186 228
Directors' fees.................................................................................... 90 72 114
Mortgage loan department expenses.................................................................. 40 44 80
Amortization of organizational costs and other assets.............................................. 31 33 14
Data processing and supplies....................................................................... 37 110 176
Postage and freight................................................................................ 51 90 117
Professional fees.................................................................................. 92 116 132
Credit card expenses............................................................................... 44 65 94
Other.............................................................................................. 326 461 631
Total $916 $1,236 $1,589
</TABLE>
NOTE 19 -- RETIREMENT AND BENEFIT PLANS:
The Company sponsors a voluntary nonleveraged employee stock ownership plan
(ESOP) as part of a 401(K) savings plan covering substantially all full-time
employees. The Company matches 50 cents per dollar, up to a maximum of 3% of
employee compensation. Company contributions to the savings plan were $19,000,
$23,000 and $33,000 in 1994, 1995 and 1996, respectively. The Company's policy
is to fund amounts accrued. At December 31, 1996, the savings plan owned 21,118
shares of the Company's common stock purchased at an average cost of $9.92 per
share adjusted for the effects of stock dividends. The estimated value of shares
held at December 31, 1996 was $211,000.
The Company has a Directors' Incentive Compensation Plan and an Officers'
Incentive Compensation Plan which provide that portions of directors' fees and
certain officers' cash awards, respectively, will be determined based upon
various performance measures of the Greenwood Bank. For the years ended December
31, 1994, 1995 and 1996, awards under the directors' plan were $42,000, $27,000
and $56,000, respectively, and awards under the officers' plan were $84,000,
$58,000 and $123,000, respectively.
The Company has an Executive Supplemental Compensation Plan which provides
certain officers with salary continuation benefits upon retirement. The plan
also provides for benefits in the event of early retirement, death or
substantial change of control of the Company. For the years ended December 31,
1994, 1995 and 1996, salary continuation expense included in salaries and
employee benefits was $12,000, $20,000 and $24,000, respectively. In connection
with the Executive Supplemental Compensation Plan, life insurance contracts were
purchased on the officers. Insurance premiums of $192,000 were paid in each of
the three years ended December 31, 1996 of which $168,000, $181,000 and $187,000
were capitalized in, 1994, 1995, and 1996, respectively, to reflect the increase
in the cash surrender value of the insurance contracts.
NOTE 20 -- UNUSED LINES OF CREDIT:
As of December 31, 1996, the Banks had unused lines of credit to purchase
federal funds from unrelated banks totaling $9,250,000. These lines of credit
are available on a one to fourteen day basis for general corporate purposes. The
lenders have reserved the right not to renew their respective lines.
The Company has a $5,000,000 line of credit with The Bankers Bank for
general operating purposes. This line is collateralized by the Company's
investments in the Greenwood Bank and the Clemson Bank. As of December 31, 1996,
there were no amounts payable on this line.
F-20
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 21 -- FAIR VALUE OF FINANCIAL INSTRUMENTS:
In December 1991, the FASB issued SFAS No. 107, "Disclosures About Fair
Value of Financial Instruments." SFAS 107 extends the existing fair value
disclosure practices for some instruments by requiring all entities to disclose
the fair value of financial instruments, both assets and liabilities recognized
and not recognized in the balance sheet, for which it is practicable to estimate
fair value.
The fair value of a financial instrument is the amount at which the asset
or obligation could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. Fair value estimates are
made at a specific point in time based on relevant market information and
information about the financial statements. Because no market value exists for a
significant portion of the financial instruments, fair value estimates are based
on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors.
The following methods and assumptions were used to estimate the fair value
of significant financial instruments:
Cash and Due from Banks -- The carrying amount is a reasonable estimate of
fair value.
Federal Funds Sold -- Federal funds sold are for a term of one day and the
carrying amount approximates the fair value.
Investment Securities -- The fair values of marketable securities
held-to-maturity are based on quoted market prices or dealer quotes. For
securities available-for-sale, fair value equals the carrying amount which is
the quoted market price. If quoted market prices are not available, fair values
are based on quoted market prices of comparable securities.
Loans -- For certain categories of loans, such as variable rate loans which
are repriced frequently and have no significant change in credit risk and credit
card receivables, fair values are based on the carrying amounts. The fair value
of other types of loans is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to the borrowers with
similar credit ratings and for the same remaining maturities.
Deposits -- The fair value of demand deposits, savings, and money market
accounts is the amount payable on demand at the reporting date. The fair values
of certificates of deposit are estimated using a discounted cash flow
calculation that applies current interest rates to a schedule of aggregated
expected maturities.
Federal Funds Purchased and Securities Sold Under Agreements to
Repurchase -- The carrying amount is a reasonable estimate of fair value because
these instruments typically have terms of one day.
Advances from the Federal Home Loan Bank -- The carrying amounts of
variable rate borrowings are reasonable estimates of fair value because they can
be repriced frequently. The fair values of fixed rate borrowings are estimated
using a discounted cash flow calculation that applies the Company's current
borrowing rate from the FHLB.
Off-Balance Sheet Financial Instruments -- The fair value of commitments to
extend credit and standby letters of credit is estimated using the fees
currently charged to enter into similar agreements taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. The contractual amount is a reasonable estimate of fair value
for the instruments because commitments to extend credit and standby letters of
credit are issued on a short-term or floating rate basis.
F-21
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 21 -- FAIR VALUE OF FINANCIAL INSTRUMENTS: -- Continued
The carrying values and estimated fair values of the Company's financial
instruments as of December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1996
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
(Dollars in thousands)
Financial Assets:
Cash and due from banks....................................................... $ 2,949 $ 2,949 $ 3,927 $ 3,927
Federal funds sold............................................................ 2,330 2,330 700 700
Securities available for sale................................................. 22,446 22,446 23,280 23,280
Loans......................................................................... 63,204 63,017 80,546 80,478
Allowance for loan losses..................................................... (671) (671) (837) (837)
Financial Liabilities:
Demand deposit, interest-bearing transaction, and savings accounts............ $ 34,894 $ 34,894 $ 43,238 $ 43,238
Certificates of deposit....................................................... 38,243 38,371 46,624 46,729
Federal funds purchased and securities sold under agreements to repurchase.... 3,034 3,034 6,783 6,783
Advances from Federal Home Loan Bank.......................................... 6,244 6,227 4,889 4,880
</TABLE>
<TABLE>
<CAPTION>
Notional Estimated Notional Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
(Dollars in thousands)
Off-Balance Sheet Financial Instruments:
Commitments to extend credit.................................................. $ 11,649 $ 11,649 $ 15,658 $ 15,658
Standby letters of credit..................................................... 137 137 676 676
</TABLE>
F-22
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 22 -- COMMUNITY CAPITAL CORPORATION (PARENT COMPANY ONLY):
Condensed financial statements for Community Capital Corporation (Parent
Company Only) for the years ended December 31, 1995 and 1996 follow:
BALANCE SHEETS
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
(Dollars in
thousands)
Assets
Cash and cash equivalents.......................................................................... $ 200 $ 104
Investment in subsidiaries......................................................................... 10,467 11,288
Securities available for sale...................................................................... 1,002 --
Premises and equipment, net........................................................................ 897 1,300
Other assets....................................................................................... 366 1,779
Total assets.................................................................................. $12,932 $14,471
Liabilities and Shareholders' Equity
Notes payable to subsidiaries...................................................................... $ -- $ 867
Other liabilities.................................................................................. -- 48
Total liabilities............................................................................. -- 915
Common stock....................................................................................... 1,153 1,219
Capital surplus.................................................................................... 11,254 12,004
Unrealized gain on securities available for sale, net.............................................. 178 35
Retained earnings.................................................................................. 347 298
Total shareholders' equity.................................................................... 12,932 13,556
Total liabilities and shareholders' equity.................................................... $12,932 $14,471
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December
31,
1994 1995 1996
<S> <C> <C> <C>
(Dollars in thousands)
Income:
Interest income on securities available for sale................................................... $ -- $ 27 $ 5
Data processing and other fees from subsidiaries................................................... -- -- 953
Other income....................................................................................... 19 93 162
Total income.................................................................................... 19 120 1,120
Expenses:
Salaries........................................................................................... 12 20 668
Net occupancy expense.............................................................................. -- 67 117
Furniture and equipment expense.................................................................... -- -- 196
Interest expense................................................................................... -- 8 47
Other operating expenses........................................................................... 90 89 473
Total expenses................................................................................ 102 184 1,501
Loss before income taxes, and equity in undistributed earnings of subsidiaries....................... (83) (64) (381)
Income tax benefit................................................................................... 35 26 125
Loss before equity in undistributed earnings of subsidiaries......................................... (48) (38) (256)
Equity in undistributed earnings of subsidiaries..................................................... 633 572 962
Net income........................................................................................... $585 $534 $ 706
</TABLE>
F-23
<PAGE>
COMMUNITY CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
NOTE 22 -- COMMUNITY CAPITAL CORPORATION (PARENT COMPANY ONLY): -- Continued
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
1994 1995 1996
<S> <C> <C> <C>
(Dollars in thousands)
Operating activities:
Net income...................................................................................... $ 585 $ 534 $ 706
Adjustments to reconcile net income to net cash used by operating activities:
Equity in undistributed earnings of subsidiaries............................................. (633) (572) (962)
Depreciation and amortization................................................................ 27 52 256
Deferred tax benefit......................................................................... (35) (10) 31
Increase (decrease) in other liabilities..................................................... (3) -- 48
Increase in other assets..................................................................... (58) (58) (676)
Net cash used by operating activities...................................................... (117) (54) (597)
Investing activities:
Purchases of premises and equipment, net........................................................ (78) (437) (603)
Purchases of securities available for sale...................................................... -- (1,000) --
Proceeds from sales of securities available for sale............................................ -- -- 1,000
Net investment in Clemson Bank.................................................................. -- (4,385) --
Purchase of equity securities................................................................... -- -- (824)
Net cash used by investing activities...................................................... (78) (5,822) (427)
Financing activities:
Proceeds from the exercise of stock options..................................................... -- 2 69
Proceeds from sales of stock to retirement plan................................................. 154 56 --
Cash paid in lieu of fractional shares.......................................................... (2) (4) (8)
Proceeds from issuance of common stock.......................................................... -- 6,010 --
Proceeds of borrowings from subsidiaries........................................................ -- -- 870
Repayments on borrowings from subsidiaries...................................................... -- -- (3)
Net cash provided by financing activities.................................................. 152 6,064 928
Net increase (decrease) in cash and cash equivalents............................................ (43) 188 (96)
Cash and cash equivalents, beginning of year.................................................... 55 12 200
Cash and cash equivalents, end of year.......................................................... $ 12 $ 200 $ 104
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
In 1994, 1995 and 1996, the Company declared 5% stock dividends and
transferred $273,000, $655,000 and $747,000, respectively, from retained
earnings to common stock and capital surplus in the amounts of $27,000, $55,000
and $57,000, respectively, and $246,000, $600,000 and $690,000, respectively.
F-24
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or any Underwriter. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person whom it is unlawful
to make such offer in such jurisdiction. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that the information herein is correct as of any time subsequent to
the date hereof or that there has been no change in the affairs of the Company
since such date.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................................... 3
Risk Factors......................................... 6
The Company.......................................... 10
Acquisition of the Carolina First Branches........... 10
Use of Proceeds...................................... 13
Market for Common Stock.............................. 13
Dividend Policy...................................... 13
Dilution............................................. 14
Capitalization....................................... 15
Selected Consolidated Financial Data................. 16
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 17
Business............................................. 32
Government Supervision and Regulation................ 37
Management........................................... 41
Description of Securities............................ 45
Underwriting......................................... 50
Legal Matters........................................ 51
Experts.............................................. 51
Available Information................................ 51
Incorporation of Certain Documents by
Reference.......................................... 51
Index to Consolidated Financial Statements........... F-1
</TABLE>
1,465,000 Shares
(Community Capital Logo appears here)
Common Stock
PROSPECTUS
J.C. Bradford &Co.
Edgar M. Norris & Co., Inc.
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses in connection with the issuance and distribution of the
securities being registered, all of which will be paid by the Registrant, are as
follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee....................................... $ 5,871
National Association of Securities Dealers Filing Fee..................................... 2,438
American Stock Exchange Listing Fee....................................................... 22,500
Legal Fees and Expenses................................................................... 90,000*
Accounting Fees and Expenses.............................................................. 35,000*
Blue Sky Fees and Expenses................................................................ 10,000*
Transfer Agent and Registrar Fees and Expenses............................................ 3,500*
Printing and Engraving Expenses........................................................... 60,000*
Miscellaneous Expenses.................................................................... 58,691*
Total.............................................................................. $288,000
</TABLE>
* Estimated.
Item 15. Indemnification of Directors and Officers.
Except as hereinafter set forth, there is no statute, charter provision,
bylaw, contract or other arrangement under which any controlling person,
director or officer of the Registrant is insured or indemnified in any manner
against liability which such person may incur in such person's capacity as such.
Section 33-8-500 et seq. of the South Carolina Business Corporation Act of
1988, as amended, provides the Registrant with broad powers and authority to
indemnify its directors and officers and to purchase and maintain insurance for
such purposes and mandates the indemnification of the Registrant's directors
under certain circumstances. The Registrant's Articles of Incorporation also
provide the Registrant with the power and authority to the fullest extent
legally permissible under the to indemnify its directors and officers, persons
serving at the request of the Registrant or for its benefit as directors or
officers of another corporation, and persons serving as the Registrant's
representatives or agents in certain circumstances. Pursuant to such authority
and the provisions of the Registrant's Articles of Incorporation, the Registrant
intends to purchase insurance against certain liabilities that may be incurred
by it and its officers and directors. Reference is also made to the discussion
in the Prospectus under the caption "Description of Securities -- Director
Liability."
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S> <C>
1.1 -- Form of Agreement with J.C. Bradford & Co. and Edgar M. Norris & Co., Inc.
3.1 * -- Articles of Incorporation of Registrant. (Incorporated by reference to Exhibit 3.1 to Registrant's Form 10-K for
the fiscal year ended December 31, 1995)
3.2 * -- Articles of Amendment to Articles of Incorporation of Registrant (re: Change of Name) (Incorporated by reference
to Exhibit 3.2 to Registrant's Form 10-K for the fiscal year ended December 31, 1995)
3.3 * -- Bylaws of Registrant. (Incorporated by reference to Exhibit 3.3 to Registrant's Form 10-K for the fiscal year
ended December 31, 1995)
4.1 ** -- Form of Common Stock Certificate. (The rights of security holders of the Registrant are set forth in the
Registrant's Articles of Incorporation and Bylaws included as Exhibits 3.1 and 3.3, respectively.)
5.1 ** -- Opinion of Nexsen Pruet Jacobs & Pollard, LLP.
10.1 * -- Registrant's Stock Option Plan for employees (1988). (Incorporated by reference to Exhibit 10.1 to Registrant's
Form 10-K for the fiscal year ended December 31, 1995)
10.2 * -- Registrant's Incentive Stock Option and Nonstatutory Stock Option Plan (1993) as Amended and Restated through
April 15, 1996. (Incorporated by reference to Exhibit to Registrant's Definitive Proxy Statement for Annual
Meeting of Shareholders held on May 20, 1996)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S> <C>
10.3 * -- Registrant's Executive Supplemental Income Plan (Summary) and form of Executive Supplemental Income Agreement.
(Incorporated by reference to Exhibit 10.3 to Registrant's Form 10-K for the fiscal year ended December 31,
1995)
10.4 * -- Registrant's Management Incentive Compensation Plans (Summary). (Incorporated by reference to Exhibit 10.4 to
Registrant's Form 10-K for the fiscal year ended December 31, 1995)
10.5 * -- Lease Agreement dated July 8, 1994 between John W. Drummond and the Registrant. (Incorporated by reference to
Exhibit 10.5 to Registrant's Form 10-K for the fiscal year ended December 31, 1995)
10.6 ** -- Lease Agreement With Options dated June 11, 1996 between Robert C. Coleman and the Registrant.
10.7 ** -- Bank Development Agreement dated May 15, 1996 between the Registrant and the organizers of The Bank of Belton
(In Organization).
10.8 ** -- Bank Development Agreement dated September 9, 1996 between the Registrant and the organizers of The Bank of
Newberry County (In Organization).
10.9 ** -- Bank Development Agreement dated November 18, 1996 between the Registrant and the organizers of The Bank of
Barnwell County (In Organization).
10.10 ** -- Line of Credit dated June 5, 1996 between Greenwood Bank & Trust and the Belton Bank Group, a partnership of the
organizers of The Bank of Belton (In Organization).
10.11 ** -- Line of Credit dated September 4, 1996 between Greenwood Bank & Trust and the Newberry Bank Group, a partnership
of the organizers of The Bank of Newberry County (In Organization).
10.12 ** -- Line of Credit dated October 21, 1996 between Greenwood Bank & Trust and the Barnwell Bank Group, a partnership
of the organizers of The Bank of Barnwell County (In Organization).
10.13 * -- Employment Contract dated November 19, 1987 between Greenwood National Bank and William G. Stevens.
(Incorporated by reference to Exhibit 10.7 to Registrant's Form 10-K for the fiscal year ended December 31,
1995)
10.14 * -- Employment and Option Agreement dated November 21, 1994 between Donna W. Robinson and the Registrant.
(Incorporated by reference to Exhibit 10.8 to Registrant's Form 10-K for the fiscal year ended December 31,
1995)
10.15 ** -- Employment and Option Agreement dated December 5, 1996 between James A. Lollis and the Registrant.
10.16 ** -- Employment and Option Agreement dated December 5, 1996 between William F. Steadman and the Registrant.
10.17 ** -- Employment and Option Agreement dated December 5, 1996 between Marshall L. Martin, Jr. and the Registrant.
10.18 -- Purchase and Assumption Agreement dated January 21, 1997 among Carolina First Bank, The Bank of Barnwell County
(In Organization) and the Registrant.
11.1 -- Statement of Computation of Per Share Earnings.
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Tourville, Simpson & Henderson.
23.2 ** -- Consent of Nexsen Pruet Jacobs & Pollard, LLP (included in their opinion filed as Exhibit 5.1)
24.1 ** -- Directors' Powers of Attorney.
27.1 -- Financial Data Schedule.
99.1 ** -- Rule 438 consents of certain persons named in the Registration Statement.
</TABLE>
* Incorporated by reference as indicated.
** Filed previously.
II-2
<PAGE>
Item 17. Undertakings.
(a) Acceleration of Effective Date. Insofar as indemnification for
liabilities under the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions described under
Item 15 above, 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 Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Securities Act
and will be governed by the final adjudication of such issue.
(b) Incorporation of Subsequent Exchange Act Documents. The Registrant
hereby undertakes that, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Act of 1934) that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Rule 430A. The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon the Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Greenwood, State of South Carolina, on January 24, 1997.
COMMUNITY CAPITAL CORPORATION
By: /s/ WILLIAM G. STEVENS
William G. Stevens
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ WILLIAM G. STEVENS* President, Chief Executive Officer and January 24, 1997
William G. Stevens Director
/s/ JAMES H. STARK* Chief Financial Officer (Principal Financial January 24, 1997
James H. Stark and Accounting Officer)
* Assistant Secretary and Director January 24, 1997
Patricia C. Edmonds
* Director January 24, 1997
David P. Allred
* Director January 24, 1997
Robert C. Coleman
* Director January 24, 1997
John W. Drummond
* Director January 24, 1997
Wayne Q. Justesen, Jr.
* Director January 24, 1997
Thomas C. Lynch, Jr.
* Director January 24, 1997
H. Edward Munnerlyn
* Director January 24, 1997
George B. Park
* Director January 24, 1997
Joseph H. Patrick, Jr.
* Director January 24, 1997
Donna W. Robinson
* Director January 24, 1997
George D. Rodgers
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
* Director January 24, 1997
Charles J. Rogers
* Director January 24, 1997
Thomas E. Skelton
* Director January 24, 1997
Lex D. Walters
*By: /s/ WILLIAM G. STEVENS January 24, 1997
William G. Stevens
(As attorney-in-fact for each of the persons
indicated)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S> <C>
1.1 Form of Agreement with J.C. Bradford & Co. and Edgar M. Norris & Co., Inc.
3.1 * Articles of Incorporation of Registrant. (Incorporated by reference to Exhibit 3.1 to Registrant's Form
10-K for the fiscal year ended December 31, 1995)
3.2 * Articles of Amendment to Articles of Incorporation of Registrant (re: Change of Name) (Incorporated by
reference to Exhibit 3.2 to Registrant's Form 10-K for the fiscal year ended December 31, 1995)
3.3 * Bylaws of Registrant. (Incorporated by reference to Exhibit 3.3 to Registrant's Form 10-K for the fiscal
year ended December 31, 1995)
4.1 ** Form of Common Stock Certificate. (The rights of security holders of the Registrant are set forth in the
Registrant's Articles of Incorporation and Bylaws included as Exhibits 3.1 and 3.3, respectively.)
5.1 ** Opinion of Nexsen Pruet Jacobs & Pollard, LLP.
10.1 * Registrant's Stock Option Plan for employees (1988). (Incorporated by reference to Exhibit 10.1 to
Registrant's Form 10-K for the fiscal year ended December 31, 1995)
10.2 * Registrant's Incentive Stock Option and Nonstatutory Stock Option Plan (1993) as Amended and Restated
through April 15, 1996. (Incorporated by reference to Exhibit to Registrant's Definitive Proxy
Statement for Annual Meeting of Shareholders held on May 20, 1996)
10.3 * Registrant's Executive Supplemental Income Plan (Summary) and form of Executive Supplemental Income
Agreement. (Incorporated by reference to Exhibit 10.3 to Registrant's Form 10-K for the fiscal year
ended December 31, 1995)
10.4 * Registrant's Management Incentive Compensation Plans (Summary). (Incorporated by reference to Exhibit
10.4 to Registrant's Form 10-K for the fiscal year ended December 31, 1995)
10.5 * Lease Agreement dated July 8, 1994 between John W. Drummond and the Registrant. (Incorporated by
reference to Exhibit 10.5 to Registrant's Form 10-K for the fiscal year ended December 31, 1995)
10.6 ** Lease Agreement With Options dated June 11, 1996 between Robert C. Coleman and the Registrant.
10.7 ** Bank Development Agreement dated May 15, 1996 between the Registrant and the organizers of The Bank of
Belton (In Organization).
10.8 ** Bank Development Agreement dated September 9, 1996 between the Registrant and the organizers of The Bank
of Newberry County (In Organization).
10.9 ** Bank Development Agreement dated November 18, 1996 between the Registrant and the organizers of The Bank
of Barnwell County (In Organization).
10.10 ** Line of Credit dated June 5, 1996 between Greenwood Bank & Trust and the Belton Bank Group, a
partnership of the organizers of The Bank of Belton (In Organization).
10.11 ** Line of Credit dated September 4, 1996 between Greenwood Bank & Trust and the Newberry Bank Group, a
partnership of the organizers of The Bank of Newberry County (In Organization).
10.12 ** Line of Credit dated October 21, 1996 between Greenwood Bank & Trust and the Barnwell Bank Group, a
partnership of the organizers of The Bank of Barnwell County (In Organization).
10.13 * Employment Contract dated November 19, 1987 between Greenwood National Bank and William G. Stevens.
(Incorporated by reference to Exhibit 10.7 to Registrant's Form 10-K for the fiscal year ended December
31, 1995)
10.14 * Employment and Option Agreement dated November 21, 1994 between Donna W. Robinson and the Registrant.
(Incorporated by reference to Exhibit 10.8 to Registrant's Form 10-K for the fiscal year ended December
31, 1995)
10.15 ** Employment and Option Agreement dated December 5, 1996 between James A. Lollis and the Registrant.
10.16 ** Employment and Option Agreement dated December 5, 1996 between William F. Steadman and the Registrant.
10.17 ** Employment and Option Agreement dated December 5, 1996 between Marshall L. Martin, Jr. and the
Registrant.
10.18 Purchase and Assumption Agreement dated January 21, 1997 among Carolina First Bank, The Bank of Barnwell
County (In Organization) and the Registrant.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S> <C>
11.1 Statement of Computation of Per Share Earnings.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Tourville, Simpson & Henderson.
23.2 ** Consent of Nexsen Pruet Jacobs & Pollard, LLP (included in their opinion filed as Exhibit 5.1)
24.1 ** Directors' Powers of Attorney.
27.1 Financial Data Schedule.
99.1 ** Rule 438 consents of certain persons named in the Registration Statement.
</TABLE>
* Incorporated by reference as indicated.
** Filed previously.
COMMUNITY CAPITAL CORPORATION
1,465,000 Shares of Common Stock
UNDERWRITING AGREEMENT
______________, 1997
J.C. BRADFORD & CO.
EDGAR M. NORRIS & CO., INC.
As Representatives of the several Underwriters
c/o J.C. Bradford & Co.
J.C. Bradford Financial Center
330 Commerce Street
Nashville, Tennessee 37201
Dear Sirs:
Community Capital Corporation, a South Carolina corporation (the
"Company"), proposes to sell to the several underwriters named in the Schedule I
hereto (collectively, the "Underwriters") for whom J.C. Bradford & Co. and Edgar
M. Norris & Co., Inc. are acting as representatives (collectively, the
"Representatives") with respect to the sale by the Company of an aggregate of
1,465,000 shares (the "Firm Shares") of the Company's common stock, par value
$1.00 per share (the "Common Stock"). The Company has also agreed to grant to
you an option (the "Option") to purchase up to an additional 219,750 shares of
Common Stock (the "Option Shares") on the terms and for the purposes set forth
in Section 1(b) hereof. The Firm Shares and the Option Shares are hereinafter
collectively referred to as the "Shares".
The Company confirms as follows its agreements with you.
1. AGREEMENT TO SELL AND PURCHASE; PUBLIC OFFERING.
(a) On the basis of the representations, warranties and
covenants herein contained, and subject to all the terms and conditions of this
Agreement, the Company agrees to sell to the Underwriters, and each of the
Underwriters, severally and not jointly, agrees to purchase from the Company at
the purchase price of $______ per share, the respective number of Firm Shares
set forth opposite such Underwriter's name in Schedule I hereto.
(b) Subject to all the terms and conditions of this Agreement,
the Company also grants the Underwriters an Option to purchase, severally and
not jointly, up to 219,750 Option Shares from the Company, each at the same
price per share as you shall pay for the Firm Shares. The Option may be
exercised only to cover
<PAGE>
over-allotments in the sale of the Firm Shares and may be exercised in whole or
in part at any time (but not more than once) on or before the 30th day after the
date of the Prospectus (as defined below) upon written or telegraphic notice
(the "Option Shares Notice") by you to the Company no later than 12:00 noon,
Nashville, Tennessee time at least two and no more than ten business days before
the date specified for closing in the Option Shares Notice (the "Option Closing
Date") setting forth the aggregate number of Option Shares to be purchased and
the date for such purchase. On the Option Closing Date, the Company will issue
and sell to the Underwriters the number of Option Shares set forth in the Option
Shares Notice, and each of the Underwriters will purchase such percentage of the
Option Shares as is equal to the percentage of Firm Shares that such Underwriter
is purchasing.
(c) After the Registration Statement becomes effective, upon the
authorization by you of the release of the Shares, the Underwriters propose to
offer the Firm Shares and the Option Shares purchased by the Underwriters for
sale at the price per share set forth in the Prospectus (the initial offering
price) and upon the terms set forth therein.
2. DELIVERY AND PAYMENT.
Delivery of the Firm Shares shall be made to you by or on
behalf of the Company against payment of the purchase price by certified or
official bank check payable in next day funds (or, at your option, by wire
transfer) to the order of the Company at the offices of J.C. Bradford & Co., 330
Commerce Street, Nashville, Tennessee 37201, or at such other place as may be
agreed upon by the Representatives and the Company at 10:00 a.m., Nashville
time, on the third full business day following the date of this Agreement, or at
such time on such other date or at such other place as may be agreed upon by the
Representatives and the Company (such date is hereinafter referred to as the
"Closing Date").
To the extent the Option is exercised, delivery of the Option
Shares against payment therefor (in the manner specified above) will take place
at the offices specified above for the Closing Date at the time and date (which
may be the Closing Date) specified in the Option Shares Notice.
Certificates evidencing the Shares shall be in definitive form
and shall be registered in such names and in such denominations as you shall
request not less than 48 hours prior to the Closing Date or the Option Closing
Date, as the case may be, by written notice to the Company. For the purpose of
expediting the checking and packaging of certificates for the Shares, the
Company agrees to make such certificates available for inspection at least 24
hours prior to the Closing Date or the Option Closing Date, as the case may be,
at a location to be designated by you, which may be in New York, New York, or
elsewhere.
2
<PAGE>
The cost of original issue tax stamps, if any, in connection
with the issuance and delivery of the Firm Shares and Option Shares by the
Company to the Underwriters shall be borne by the Company. The Company will pay
and save each of the Underwriters and any subsequent holder of the Shares
harmless from any and all liabilities with respect to or resulting from any
failure or delay in paying federal and state stamp and other transfer taxes, if
any, which may be payable or determined to be payable in connection with the
original issuance or sale to such Underwriter of the Firm Shares and Option
Shares.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents, warrants and covenants to each of the
Underwriter that:
(a) The Company meets all requirements for use of Form S-2 and
the Company has prepared and filed with the Securities and Exchange Commission
(the "Commission") a registration statement (Registration No. 333-18457) on Form
S-2 relating to the Shares, including a preliminary prospectus and such
amendments to such registration statement as may have been required to the date
of this Agreement, under the provisions of the Securities Act of 1933 (the
"Act"), and the rules and regulations of the Commission thereunder (collectively
referred to as the "Rules and Regulations"). The term "preliminary prospectus"
as used herein means a preliminary prospectus as contemplated by Rule 430 or
Rule 430A of the Rules and Regulations included at any time as part of the
registration statement. Copies of such registration statement and amendments and
of each related preliminary prospectus have been delivered to you. If such
registration statement has not become effective, a further amendment to such
registration statement, including a form of final prospectus, necessary to
permit such registration statement to become effective, will be filed promptly
by the Company with the Commission. If such registration statement has become
effective, a final prospectus containing information permitted to be omitted at
the time of effectiveness by Rule 430A of the Rules and Regulations will be
filed promptly by the Company with the Commission in accordance with Rule 424(b)
of the Rules and Regulations. The term "Registration Statement" means the
registration statement as amended at the time it becomes or became effective
(the "Effective Date"), including financial statements and all exhibits and any
information deemed to be included by Rule 430A. The term "Prospectus" means the
prospectus as first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations or, if no such filing is required, the form of final
prospectus included in the Registration Statement at the Effective Date. Any
reference herein to the Registration Statement, any preliminary prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-2 that were
filed under the Securities Exchange Act of 1934 (the "Exchange Act"), on or
before the Effective Date or the date of such preliminary prospectus or the
Prospectus, as the case may be.
3
<PAGE>
(b) On the Effective Date, the date the Prospectus is first
filed with the Commission pursuant to Rule 424(b) (if required), at all times
subsequent to and including the Closing Date and, if later, the Option Closing
Date and when any post-effective amendment to the Registration Statement becomes
effective or any amendment or supplement to the Prospectus is filed with the
Commission, the Registration Statement and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
or supplement thereto), including the financial statements included or
incorporated by reference in the Prospectus, did or will comply with all
applicable provisions of the Act, the Exchange Act, the rules and regulations of
the Commission thereunder (the "Exchange Act Rules and Regulations") and the
Rules and Regulations and did or will contain all statements required to be
stated therein in accordance with the Act, the Exchange Act, the Exchange Act
Rules and Regulation and the Rules and Regulations. On the Effective Date and
when any post-effective amendment to the Registration Statement becomes
effective, no part of the Registration Statement, the Prospectus or any such
amendment or supplement did or will contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading. At the Effective Date,
the date the Prospectus or any amendment or supplement to the Prospectus is
filed with the Commission, the Closing Date and, if later, the Option Closing
Date, the Prospectus did not or will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The foregoing representations and warranties in this Section 3(b) do
not apply to any statements or omissions made in reliance on and in conformity
with information relating to the Underwriters furnished in writing to the
Company by the Representatives specifically for inclusion in the Registration
Statement or Prospectus or any amendment or supplement thereto. The Company
acknowledges that the statements set forth under the heading "Underwriting" in
the Prospectus constitute the only information relating to the Underwriters
furnished in writing to the Company by the Representatives specifically for
inclusion in the Registration Statement.
(c) The documents that are incorporated by reference in any
preliminary prospectus and the Prospectus or from which information is so
incorporated by reference, when they became effective or were filed with the
Commission, as the case may be, complied in all material respects with the
requirements of the Act, the Exchange Act, the Exchange Act Rules and
Regulations and the Rules and Regulations, as applicable.
(d) The Company is, and at the Closing Date and Option Closing
Date will be, a corporation duly organized, validly existing and in good
standing under the laws of South Carolina, and duly registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHC Act").
The only active
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subsidiaries (as defined in the Rules and Regulations) of the Company are as
provided in Exhibit 21.1 of the Registration Statement (individually, a
"Subsidiary" and collectively, the "Subsidiaries"). Each Subsidiary (other than
Community Financial Services, Inc.) is, and at the Closing Date and Option
Closing Date will be, a bank duly organized, validly existing and in good
standing under the laws of the State of South Carolina. The Company and each of
its active Subsidiaries has, and at the Closing Date and Option Closing Date
will have, full power and authority to conduct all the activities conducted by
it, to own or lease all the assets owned or leased by it and to conduct its
business as described in the Registration Statement and the Prospectus. The
Company and each active Subsidiary is, and at the Closing Date and Option
Closing Date will be, duly licensed or qualified to do business and in good
standing as a foreign corporation in all jurisdictions in which the nature of
the activities conducted by it or the character of the assets owned or leased by
it makes such licensing or qualification necessary. Except for the stock of the
Subsidiaries and as disclosed in the Registration Statement, the Company does
not own, and at the Closing Date will not own, directly or indirectly, any
shares or stock or any other equity or long-term debt securities of any
corporation or have any equity interest in any firm, partnership, joint venture,
association or other entity, except that the Company owns approximately 1.2% of
the outstanding common stock of The Bank of Abbeville and approximately 4.9% of
the outstanding common stock of Commercial Bankshares, Inc., which for purposes
herein shall not be deemed to be "Subsidiaries." Complete and correct copies of
the Articles of Incorporation and the Bylaws of the Company and each Subsidiary
and all amendments thereto have been delivered to you, and no changes therein
will be made subsequent to the date hereof and prior to the Closing Date or, if
later, the Option Closing Date, except, in the case of the Subsidiaries which
have not yet received all necessary federal and state governmental approvals,
such changes to such Subsidiaries' Articles of Incorporation and Bylaws as may
be required by federal and state authorities to approve such Subsidiaries.
(e) The outstanding shares of the Company's Common Stock have
been, and the Shares to be issued and sold by the Company upon such issuance
will be, duly authorized, validly issued, fully paid and nonassessable and will
not be subject to any preemptive or similar right. The description of the Common
Stock in the Registration Statement and the Prospectus is, and at the Closing
Date or, if later, the Option Closing Date will be, complete and accurate in all
respects. Except as set forth in the Prospectus, the Company does not have
outstanding, and at the Closing Date will 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 shares of Common Stock, any shares of capital stock of any Subsidiary or any
such warrants, convertible securities or obligations.
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(f) The financial statements and schedules included or
incorporated by reference in the Registration Statement or the Prospectus
present fairly the consolidated financial condition of the Company as of the
respective dates thereof and the consolidated results of operations and cash
flows of the Company for the respective periods covered thereby, all in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the entire period involved, except as otherwise disclosed in
the Prospectus. The financial and statistical data set forth in the Prospectus
under the captions "Prospectus Summary," "Risk Factors," "The Company,"
"Acquisition of the Carolina First Branches," "Use of Proceeds," "Market For
Common Stock," "Dilution," "Capitalization," "Selected Consolidated Financial
Information," Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business," "Government Supervision and Regulation,"
"Management," and "Description of Securities" fairly presents the information
set forth therein on the basis stated in the Prospectus. No other financial
statements or schedules of the Company are required by the Act, the Exchange
Act, the Exchange Act Rules and Regulations, or the Rules and Regulations to be
included or incorporated by reference in the Registration Statement or the
Prospectus. Tourville, Simpson & Henderson (the "Accountants"), who have
reported on such financial statements and schedules, are independent accountants
with respect to the Company as required by the Act and the Rules and
Regulations.
(g) The Company's system of internal accounting controls taken
as a whole is sufficient to meet the broad objectives of internal accounting
control insofar as those objectives pertain to the prevention or detection of
errors or irregularities in amounts that would be material in relation to the
Company's financial statements; and, except as disclosed in the Prospectus,
neither the Company nor any of its Subsidiaries nor any employee or agent of the
Company or any Subsidiary has made any payment of funds of the Company or any
Subsidiary or received or retained any funds in violation of any law, rule or
regulation.
(h) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus and prior to the
Closing Date, or, if later the Option Closing Date, except as set forth in or
contemplated by the Registration Statement and the Prospectus, (i) there has not
been and will not have been any change in the capitalization of the Company,
other than pursuant to the exercise of employee stock options, or any material
adverse change in the business, properties, business prospects, condition
(financial or otherwise), or results of operations of the Company and its
Subsidiaries, arising for any reason whatsoever, (ii) neither the Company nor
its Subsidiaries has incurred nor will incur any material liabilities or
obligations, direct or contingent, except in the ordinary course of the banking
business of the Subsidiaries, nor has it entered into nor will it enter into any
material transactions other than pursuant to this Agreement and the transactions
referred to herein,
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and (iii) the Company has not and will not have paid or declared any dividends
or other distributions of any kind on any class of its capital stock.
(i) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940.
(j) Except as set forth in the Registration Statement and the
Prospectus, there are no actions, suits or proceedings pending or threatened
against or affecting the Company or any Subsidiary or any of their respective
officers in their capacity as such, before or by any federal or state court,
commission, regulatory body, administrative agency or other governmental body,
domestic or foreign, wherein an unfavorable ruling, decision or finding might
materially and adversely affect the Company or its Subsidiaries or its business,
properties, business prospects, condition (financial or otherwise) or results of
operations or prevent or materially hinder the consummation of this Agreement.
(k) The Company and each Subsidiary has, and at the Closing
Date will have, (i) all governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to carry on its business as
contemplated in the Prospectus, (ii) complied in all material respects with all
laws, regulations and orders applicable to it or its business, and (iii)
performed all its material obligations required to be performed by it, and is
not, and at the Closing Date and, if later, the Option Closing Date, will not
be, in default, under any contract or other instrument material to it to which
it is a party or by which its property is bound or affected. To the best
knowledge of the Company and each Subsidiary, no other party under any contract
or other instrument to which it is a party is in default in any respect
thereunder. Neither the Company nor any Subsidiary is, nor at the Closing Date,
and, if later, the Option Closing Date, will any of them be, in violation of any
provision of its Articles of Incorporation or Bylaws.
(l) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is required
for the consummation by the Company of the transactions on its part herein
contemplated, except such as have been obtained under the Act or the Rules and
Regulations and such as may be required under state securities or Blue Sky laws
or the rules of the National Association of Securities Dealers, Inc. (the
"NASD")(in particular, the Rules of Conduct) in connection with the purchase and
distribution by the Underwriters of the Shares.
(m) The Company has full corporate power and authority
to enter into this Agreement. This Agreement has been duly
authorized, executed and delivered by the Company and constitutes
a valid and binding agreement of the Company and is enforceable
against the Company in accordance with the terms hereof. The
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<PAGE>
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in the creation or imposition of any
material lien, charge or encumbrance upon any of the assets of the Company or
any Subsidiary pursuant to the terms or provisions of, or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
or give any other party a right to terminate any of its obligations under, or
result in the acceleration of any obligation under, the respective Articles of
Incorporation or Bylaws of the Company or its Subsidiaries, any indenture,
mortgage, deed of trust, voting trust agreement, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, lease, contract or
other agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary or any of its or their properties are
bound or affected, or violate or conflict with any judgment, ruling, decree,
order, statute, rule or regulation of any court or other governmental agency or
body applicable to the business or properties of the Company or any Subsidiary.
(n) The Company and each Subsidiary has good and marketable
title to all properties and assets described in the Prospectus as owned by it,
free and clear of all liens, charges, encumbrances or restrictions, except such
as are described in the Prospectus or are not material to the business of the
Company or its Subsidiaries. The Company and each Subsidiary has valid,
subsisting and enforceable leases for the properties described in the Prospectus
as leased by it, with such exceptions as are not material and do not materially
interfere with the use made and proposed to be made of such properties by the
Company and such Subsidiaries. The Company and each of its Subsidiaries owns or
leases all such properties as are necessary to its respective operations as now
conducted.
(o) There is no document or contract of a character required
to be described in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement or incorporated by reference therein
that is not described, incorporated by reference, or filed as required. All such
contracts to which the Company or any Subsidiary is a party have been duly
authorized, executed and delivered by the Company or such Subsidiary, constitute
valid and binding agreements of the Company or such Subsidiary, and are
enforceable against the Company or such Subsidiary in accordance with the terms
thereof.
(p) No statement, representation, warranty or covenant made by
the Company in this Agreement or made in any certificate or document required by
this Agreement to be delivered to you was or will be, when made, inaccurate,
untrue or incorrect.
(q) Neither the Company, nor any Subsidiary, nor, to the best
knowledge of the Company and its Subsidiaries, any of their directors, officers
or controlling persons has taken, directly or indirectly, any action designed,
or which might reasonably be expected, to cause or result, under the Act or
otherwise, in, or
8
<PAGE>
which has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares or the
Common Stock.
(r) No holder of securities of the Company has rights to
the registration of any securities of the Company because of the
filing of the Registration Statement.
(s) The Company has taken such action as necessary to have the
Shares authorized for listing on the American Stock Exchange ("AMEX") upon
official notice of issuance.
(t) As described in the Registration Statement or the
Prospectus, the Company's allowance for possible loan losses at December 31,
1996 was, as of such date, adequate in all material respects to provide for all
anticipated losses, net of recoveries related to loans previously charged-off,
on loans outstanding as of such date, and there has not been any material
adverse change in the collectability of the loan portfolio of the Company and
its Subsidiaries since December 31, 1996, except as otherwise disclosed in the
Registration Statement and the Prospectus, and the provision for possible loan
losses maintained by the Company and its Subsidiaries is adequate in all
material respects in light of anticipated loan charge-offs.
(u) Other than as contemplated by this Agreement, there is no
broker, finder or other party that is entitled to receive from the Company or
any Subsidiary any brokerage or finder's fee or other fee or commission as a
result of any of the transactions contemplated by this Agreement.
(v) The Company and its Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as management believes is appropriate to the business of the Company and
its Subsidiaries and all such policies of insurance insuring the Company, its
Subsidiaries or their businesses, assets, employees, officers and directors are
in full force and effect.
(w) The Company has timely filed all required forms, reports
and other documents with the Commission all of which complied, when filed, in
all material respects, with all applicable requirements of the Act, the Exchange
Act, the Exchange Act Rules and Regulations, and the Rules and Regulations. As
of their respective dates, such reports, forms and other documents (including
all exhibits and schedules thereto) and documents incorporated by reference
therein (the "Reports"), did not contain any untrue statement of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included or incorporated by reference in
such Reports were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may otherwise be
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<PAGE>
indicated in the notes thereto), and fairly present the financial position of
the Company as of the date thereof and the results of its operations and changes
in financial position for the periods then ended (subject, in the case of any
unaudited interim financial statements, to year-end adjustments).
4. COVENANTS OF THE COMPANY.
The Company covenants and agrees with each of the Underwriters as
follows:
(a) The Company will not, either prior to the Effective Date
or thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by an underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to you within
a reasonable period of time prior to the filing thereof and you shall not have
objected thereto in good faith.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective, and will notify you promptly, and
will confirm such advice in writing, (1) when the Registration Statement has
become effective and when any post-effective amendment thereto becomes
effective, (2) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus or for additional information, (3)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for that
purpose or the threat thereof, (4) of the happening of any event during the
period mentioned in the second sentence of Section 4(e) that in the judgment of
the Company makes any statement made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the Registration
Statement or the Prospectus in order to make the statements therein, in light of
the circumstances in which they are made, not misleading, and (5) of receipt by
the Company or any representatives or attorney of the Company of any other
communication from the Commission relating to the Company, the Registration
Statement, any preliminary prospectus or the Prospectus. If at any time the
Commission shall issue any order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible moment. If the Company has
omitted any information from the Registration Statement pursuant to Rule 430A of
the Rules and Regulations, the Company will use its best efforts to comply with
the provisions of and make all requisite filings with the Commission pursuant to
said Rule 430A and to notify the Representatives promptly of all such filings.
(c) The Company will furnish to you, without charge, three
signed copies of the Registration Statement and of any post-effective amendment
thereto, including financial statements and schedules, and all exhibits thereto
(including any document filed
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under the Exchange Act and deemed to be incorporated by reference
into the Prospectus).
(d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement. 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 Act, the Exchange Act, the
Exchange Act Rules and Regulations, and the Rules and Regulations, and shall
also file with state securities commissions in states where the Shares have been
sold by you (as you shall have advised us in writing) such reports as are
required to be filed by the securities acts and the regulations of those states.
(e) On the Effective Date, and thereafter from time to time
until expiration of the period mentioned in the next sentence, the Company will
deliver to each of you, without charge, as many copies of the Prospectus or any
amendment or supplement thereto as you may reasonably request. The Company
consents to the use of the Prospectus or any amendment or supplement thereto by
you and by all dealers to whom the Shares may be sold, both in connection with
the offering or sale of the Shares and for any period of time thereafter during
which the Prospectus is required by law to be delivered in connection therewith.
If during such period of time any event shall occur which in the judgment of the
Company or your counsel should be set forth in the Prospectus in order to make
any statement therein, in the light of the circumstances under which it was
made, not misleading, or if it is necessary to supplement or amend the
Prospectus to comply with law, the Company will forthwith prepare and duly file
with the Commission an appropriate supplement or amendment thereto, and will
deliver to each of you, without charge, such number of copies thereof as you may
reasonably request.
(f) Prior to any public offering of the Shares by you, the
Company will cooperate with you and your counsel in connection with the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you may request; provided,
that in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to general service of process in any jurisdiction where it is not now
so subject, unless required by the laws of such jurisdiction in connection with
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws thereof.
(g) During the period of five years commencing on the
Effective Date, the Company will furnish to the Representatives copies of such
financial statements and other periodic and special reports as the Company may
from time to time distribute generally to the holders of any class of its
capital stock, and will furnish to you a copy of each annual or other report it
shall be required to file with the Commission. During such period, the Company
will promptly notify you in writing if it appears to the Company that it
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is likely that the Company will not in a timely manner furnish to its
shareholders an annual report containing audited financial statements or a
quarterly report for one of the first three quarters of the fiscal year
containing unaudited financial information.
(h) The Company will make generally available to holders of
its securities as soon as may be practicable but in no event later than the last
day of the fifteenth full calendar month following the calendar quarter in which
the Effective Date falls, an earning statement (which need not be audited but
shall be in reasonable detail) for a period of at least 12 months commencing
after the Effective Date and satisfying the provisions of Section 11(a) of the
Act (including Rule 158 of the Rules and Regulations). For purposes hereof, the
delivery by the Company of the periodic reports required by Section 12 of the
Securities Exchange Act of 1934 shall be deemed sufficient to satisfy the
conditions of this paragraph.
(i) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company will pay,
or reimburse if paid by the Underwriters, all costs and expenses (other than the
fees of your counsel and your out-of-pocket cost and expenses, except as
provided below) incident to the performance of the obligations of the Company
under this Agreement, including but not limited to costs and expenses of or
relating to (1) the preparation, printing, and filing of the Registration
Statement and exhibits to it, each preliminary prospectus, the Prospectus and
any amendment or supplement to the Registration Statement or the Prospectus, (2)
the preparation and delivery of certificates representing the Shares, (3) the
printing of this Agreement and other underwriting documents, including but not
limited to Underwriter's Questionnaires, Underwriter's Powers of Attorney, Blue
Sky Memorandum, Master Agreement Among Underwriters, and Master Selected Dealer
Agreements, (4) furnishing (including costs of shipping and mailing) such copies
of the Registration Statement, the Prospectus and any preliminary prospectus,
and all amendments and supplements thereto, as may be requested for use in
connection with the offering and sale of the Shares by the Underwriters or by
dealers to whom Shares may be sold, (5) the listing of the Shares on the AMEX,
(6) any filings required to be made by you with the NASD, and the fees (not to
exceed $3,000), disbursements and other charges of your counsel in connection
therewith, (7) the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions designated
pursuant to Section 4(f), including the fees, disbursements and other charges of
your counsel in connection therewith (not to exceed $10,000), and the
preparation and printing of preliminary, supplemental and final Blue Sky
memoranda, (8) counsel to the Company, and (9) the transfer agent for the
Shares.
(j) If this Agreement shall be terminated by the Company
pursuant to any of the provisions hereof or if for any reason the
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Company shall be unable to perform its obligations hereunder, the Company will
reimburse you for all out-of-pocket expenses (including the fees, disbursements
and other charges of your counsel) reasonably incurred by you in connection
herewith (up to a maximum of $65,000 if such termination occurs prior to
commencement of the "roadshow" for the offering and $85,000 if such termination
occurs after such event).
(k) The Company will not at any time, directly or indirectly,
take any action designed, or which might reasonably be expected, to cause or
result in, or which will constitute, stabilization of the price of the shares of
Common Stock or Common Stock to facilitate the sale or resale of any of the
Shares.
(l) The Company will apply the net proceeds from the offering
and sale of the Shares to be sold by the Company in the manner set forth in the
Prospectus under "Use of Proceeds" and will timely file all reports and forms
required under the Act, the Exchange Act, the Exchange Act Rules and
Regulations, and the Rules and Regulations in connection therewith.
(m) During the period of 180 days commencing at the Closing
Date, the Company will not, without your prior written consent, grant options to
purchase shares of Common Stock at a price less than the initial public offering
price or the Common Stock's fair market value.
(n) The Company will not, and will cause each of its executive
officers, directors and each beneficial owner of more than 1.5% of the
outstanding shares of Common Stock (if any) to enter into agreements with you to
the effect that they will not, for a period of 180 days after the commencement
of the public offering of the Shares, without your prior written consent, sell,
contract to sell or otherwise dispose of any shares of Common Stock or rights to
acquire such shares (other than pursuant to stock option plans for employees or
directors or in connection with other employee incentive compensation
arrangements and other than as otherwise set forth in such agreements).
(o) If at any time during the 25 day period after the
Registration Statement is declared effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which, in your
opinion, the market price for the Shares 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), the Company will, after written
notice from you advising it as to the effect set forth above, 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.
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5. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITER.
The obligations of the Underwriters to purchase and pay for the Shares
shall be subject, in their discretion, to the accuracy of the representations
and warranties of the Company herein as of the date hereof and as of the Closing
Date and Option Closing Date as if made on and as of the Closing Date and Option
Closing Date, to the accuracy of the statements of the Company's officers made
pursuant to the provisions hereof, to the performance by the Company of all of
their covenants and agreements hereunder and to the following additional
conditions:
(a) Notification that the Registration Statement has become
effective shall be received by you not later than 5:00 p.m., Nashville,
Tennessee time, on the date of this Agreement or at such later date and time as
shall be consented to in writing by you and all filings required by Rule 424 and
Rule 430A of the Rules and Regulations shall have been made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such authorities
shall have been complied with to the satisfaction of the staff of the Commission
or such authorities and to the satisfaction of the Representatives, (iv) after
the date hereof no amendment or supplement to the Registration Statement or the
Prospectus shall have been filed unless a copy thereof was first submitted to
you and you did not object thereto in good faith, (v) the NASD, upon review of
the terms of the public offering of the Shares, shall not have objected to such
offering, such terms or the Underwriter' participation in the same, and (vi) and
you shall have received certificates, dated the Closing Date and the Option
Closing Date and signed by the Chief Executive Officer or the Chairman of the
Board of Directors of the Company and the Chief Financial Officer or the
Assistant Secretary of the Company (who may, as to proceedings threatened, rely
upon the best of their information and belief), to the effect of clauses (i),
(ii) and (iii).
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) there shall not have
been a material adverse change, or any development involving a prospective
material adverse change, in the general affairs, business, business prospects,
properties, management, key personnel, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole,
whether or not arising from transactions in the ordinary
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course of business, in each case other than as set forth in or contemplated by
the Registration Statement and the Prospectus and (ii) neither the Company nor
any of its Subsidiaries shall have sustained any material loss or interference
with its business or properties from fire, explosion, flood, hurricane or other
casualty or calamity, whether or not covered by insurance, or from any labor
dispute or any court or legislative or other governmental action, order or
decree, which is not set forth in the Registration Statement and the Prospectus,
if in your reasonable judgment any such development makes it impracticable or
inadvisable to consummate the sale and delivery of the Shares by you at the
public offering price.
(d) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have been no
litigation or other proceeding instituted against the Company or any Subsidiary
or any of their respective officers or directors in their capacities as such,
before or by any federal, state, or local court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, in which
litigation or proceeding an unfavorable ruling, decision or finding would
materially and adversely affect the business, properties, business prospects,
condition (financial or otherwise) or results of operations.
(e) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date and, with respect to the Option Shares, at the Option Closing Date,
as if made at the Closing Date and, with respect to the Option Shares, at the
Option Closing Date, and all covenants and agreements herein contained to be
performed on the part of the Company and all conditions herein contained to be
fulfilled or complied with by the Company at or prior to the Closing Date and,
with respect to the Option Shares, at or prior to the Option Closing Date, shall
have been duly performed, fulfilled or complied with.
(f) The Underwriter shall have received an opinion, dated the
Closing Date and, with respect to the Option Shares, the Option Closing Date,
and satisfactory in form and substance to your counsel, from Nexsen Pruet Jacobs
& Pollard, LLP, counsel to the Company, to the effect that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the
State of South Carolina, with corporate power and authority to
own its properties and conduct its business as described in
the Prospectus; the Company is duly registered as a bank
holding company under the BHC Act; and the Company is
qualified to do business as a foreign corporation in good
standing in all other jurisdictions except where the failure
to so qualify would not have a material adverse effect upon
the Company;
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(ii) Each Subsidiary is a bank (except Community
Financial Services, Inc., which is a corporation) duly
organized, validly existing and in good standing under the
laws of the state of incorporation or organization, as the
case may be; each Subsidiary has the corporate power and
authority to own its properties and conduct its business as
described in the Prospectus; and each Subsidiary is qualified
to do business as a foreign corporation or bank in good
standing in all other jurisdictions except where the failure
to so qualify would not have a material adverse effect upon
the Company and its Subsidiaries taken as a whole;
(iii) As of the dates specified therein, the Company
had authorized and issued capital stock as set forth under the
caption "Capitalization" in the Prospectus. All the
outstanding shares of capital stock of each Subsidiary have
been duly and validly authorized and issued and are fully paid
and nonassessable, and, except as otherwise set forth in the
Prospectus, all outstanding shares of capital stock of the
Subsidiaries are owned by the Company free and clear of any
perfected security interest and, to the knowledge of such
counsel, after due inquiry, any other security interests,
claims, liens or encumbrances;
(iv) The Shares delivered on such Closing Date and
the Option Closing Date have been duly authorized, validly
issued and are fully paid and nonassessable, and conform to
the description thereof contained in the Prospectus;
(v) The outstanding shares of Common Stock have been
duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof contained
in the Prospectus; and the shareholders of the Company have no
preemptive or similar rights with respect to the Shares or the
Common Stock. All offers and sales of the Company's securities
during the past three years were at all relevant times duly
registered or exempt from the registration requirements of the
Act and were duly registered or the subject of an exemption
from the registration requirements of applicable state
securities or Blue Sky laws;
(vi) There are no contacts, agreements or
understandings known to such counsel between the Company and
any person granting such person the right to require the
Company to file a registration statement under the 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 in any securities being registered
pursuant to any other
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registration statement filed by the Company under the
Act;
(vii) No consent, approval, authorization or order
of, or filing with, any governmental agency or body or any
court is required for the issuance or sale of the Shares or
the consummation of the other transactions contemplated by
this Agreement, except such as have been obtained and made
under the Act, the Exchange Act and such as may be required
under state securities or Blue Sky laws;
(viii) The execution, delivery and performance of
this Agreement and the consummation of the transactions herein
contemplated, including the issuance and sale of the Shares
and compliance with the provisions thereof, will not result in
a breach or violation of any of the terms or provisions if, or
constitute a default under, (A) any statute, rule, regulation
or, to the knowledge of such counsel after reasonable
investigation, order of any governmental agency or body or any
court having jurisdiction over the Company or Subsidiaries of
the Company or any of their properties, or (B) any material
obligation, agreement, covenant or condition contained in any
agreement or instrument to the knowledge of such counsel after
reasonable investigation to which the Company or the
Subsidiaries is a party or by which the Company or the
Subsidiaries is bound or to which any of the properties of the
Company or the Subsidiaries is subject, or (C) the Articles of
Incorporation or the Bylaws of the Company or any of the
Subsidiaries; and the Company has full power and authority to
authorize, issue and sell the Shares as contemplated by this
Agreement;
(ix) The Registration Statement was declared
effective under the Act as of the date and time specified in
such opinion, the Prospectus either was filed with the
Commission pursuant to the subparagraph of rule 424(b)
specified in such opinion on the date specified therein or was
included in the Registration Statement (as the case may be),
and, to the best of the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration
Statement or any part thereof has been issued and no
proceedings for that purpose have been instituted or are
pending or contemplated under the Act; the Registration
Statement and the Prospectus, and each amendment or supplement
thereto, as of their respective effective or issue dates,
complied as to form in all material respects with the
requirements of the Act, the Exchange Act, the Rules and
Regulations, and the Exchange Act Rules and Regulations; such
counsel have no reason to believe that the Registration
Statement, or any amendment thereto, as of its effective date,
contained any untrue statement of a material fact or omitted
to state any
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material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the
Prospectus, or any supplement thereto, as of its issue date,
included any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the
statements, in light of the circumstances under which they
were made, not misleading; the descriptions in the
Registration Statement and Prospectus of statutes, legal and
governmental proceedings and contracts and other documents are
accurate in all material respects and fairly present the
information required to be shown; and such counsel does not
know of any pending or threatened legal or governmental
proceedings, statutes or regulations required to be described
in the Prospectus which are not described as required nor of
any contracts or documents of a character required to be
described in the Registration Statement or the Prospectus or
to be filed as exhibits to the Registration Statement which
are not described and filed as required; it being understood
that such counsel need express no opinion as to the financial
statements or other financial data contained in the
Registration Statement or the Prospectus or as to the section
of the Prospectus entitled "Underwriting"; and
(x) This Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and
legally binding obligation of the Company enforceable in
accordance with its terms, except (A) as such enforceability
may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance or similar laws now or hereafter in
effect relating to creditors' rights or debtors' obligations
generally; (B) that the remedies of specific performance and
injunctive and other forms of relief are subject to general
equitable principles, whether enforcement is sought at law or
in equity, and that such enforcement may be subject to the
discretion of the court before which any proceedings therefor
may be brought; and (C) as rights to indemnity and
contribution may be limited by state or federal laws relating
to securities or the policies underlying such laws.
In rendering such opinion, such counsel may rely as to matters of fact
to the extent deemed proper, on certificates of responsible officers of the
Company and its Subsidiaries and public officials.
(g) You shall have received an opinion, dated the Closing Date
and the Option Closing Date, from Nelson Mullins Riley & Scarborough, L.L.P. as
your counsel, with respect to the Registration Statement, the Prospectus and
this Agreement, which opinion shall be satisfactory in all respects to you, and
the Company shall have furnished to such counsel such documents as they request
for the purpose of enabling them to pass upon such matters.
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(h) The Representatives shall have received from the
Accountants a letter dated the date hereof, and at the Closing Date and Option
Closing Date additional letters dated the Closing Date or Option Closing Dates,
in form and substance satisfactory to the Representatives, stating that they are
independent auditors with respect to the Company within the meaning of the Act
and the applicable Rules and Regulations, and to the effect that:
(i) In their opinion, the financial statements and
schedules examined by them and included or incorporated by
reference in the Registration Statement comply as to form in
all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations and are
presented in accordance with generally accepted accounting
principles; and they have made a review in accordance with
standards established by the American Institute of Certified
Public Accountants of the interim financial statements,
selected financial and operating data, and/or condensed
financial statements derived from audited financial statements
of the Company.
(ii) The selected financial information included in
the Preliminary Prospectus and the Prospectus under the
captions "Prospectus Summary," "Summary Consolidated Financial
Data," "Management's Discussion and Analysis and Results of
Operators," and "Selected Consolidated Financial Information"
for each of the fiscal years ended December 31, 1992, 1993,
1994, 1995, and 1996 agrees with the corresponding amounts in
the audited financial statements included in the Prospectus or
previously reported on by them.
(iii) On the basis of a reading of the latest
available interim financial statements (unaudited) of the
Company, a reading of the minute books of the Company,
inquiries of officials of the Company responsible for
financial and accounting matters, and other specified
procedures, all of which have been agreed to by the
Representatives, nothing came to their attention that caused
them to believe that:
a. the unaudited financial statements
included or incorporated by reference in the
Registration Statement do not comply as to form in
all material respects with the accounting
requirements of the federal securities laws and the
related published rules and regulations thereunder or
are not in conformity with generally accepted
accounting principles applied on a basis consistent
with the basis for the audited financial statements
contained in the Registration Statement;
b. any other unaudited financial statement
data included or incorporated by reference in the
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Prospectus do not agree with the corresponding items
in the unaudited consolidated financial statements
from which data was derived and any such unaudited
data were not determined on a basis consistent with
the basis for the corresponding amounts in the
audited financial statements included in the
Prospectus;
c. at a specified date not more than five
days prior to the date of delivery of such respective
letter, there was any change in the consolidated
capital stock, decline in shareholders' equity or
increase in long-term debt of the Company, or other
items specified by the Representatives, in each case
as compared with amounts shown in the latest balance
sheets included in the Prospectus, except in each
case for changes, decreases or increases which the
Prospectus discloses have occurred or may occur or
which are described in such letters; and
d. for the period from the closing date of
the latest statements of income included in the
Prospectus to a specified date not more than five
days prior to the date of delivery of such respective
letter, there were any decreases in net revenues or
net income of the Company, or other items appearing
on the face of the statement of operations specified
by the Representatives, or any increases in any items
appearing on the face of the statement of operations
specified by the Representatives, in each case as
compared with the corresponding period of the
preceding year, except in each case for decreases
which the Prospectus discloses have occurred or may
occur or which are described in such letter.
(iv) They have carried out certain specified
procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information specified by
you which are derived from the general accounting records of
the Company, which appear in the Prospectus and have compared
and agreed such amounts, percentages and financial information
with the accounting records of the Company.
In the event that the letters to be delivered referred to
above set forth any such changes, decreases or increases, it shall be a further
condition to the obligations of the Underwriters that the Underwriters shall
have reasonably determined, after discussions with officers of the Company
responsible for financial and accounting matters and with the Accountants, that
such changes, decreases or increases as are set forth in such letters do not
reflect a material adverse change in the shareholders' equity or
20
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long-term debt of the Company as compared with the amounts shown in the latest
balance sheet of the Company included in the Prospectus, or a material adverse
change in total net revenues or net income of the Company, in each case as
compared with the corresponding period of the prior year.
(i) Concurrently with the execution and delivery of this
Agreement and at the Closing Date and, as to the Option Shares, the Option
Closing Date, there shall be furnished to you a certificate, dated the date of
its delivery, signed by each of the Chief Executive Officer and Chief Financial
Officer (or Assistant Secretary) of the Company, in form and substance
satisfactory to you, to the effect that:
(i) Each signer of such certificate has carefully
examined the Registration Statement and the Prospectus
(including any documents filed under the Exchange Act and
deemed to be incorporated by reference into the Prospectus)
and (A) as of the date of such certificate, such documents are
true and correct in all material respects, do not include any
untrue statement of material fact, and do not omit a material
fact required to be stated therein or necessary in order to
make the statements therein not untrue or misleading and (B)
in the case of the certificate delivered at the Closing Date
and the Option Closing Date, since the Effective Date no event
has occurred as a result of which it is necessary to amend or
supplement the Prospectus in order to make the statements
therein not untrue or misleading in any material respect and
there has been no document required to be filed under the
Exchange Act and the Exchange Act Rules and Regulations that
upon such filing would be deemed to be incorporated by
reference into the Prospectus that has not been so filed;
(ii) Each of the representations and warranties of
the Company contained in this Agreement were, when originally
made, and are, at the time such certificate is delivered, true
and correct in all material respects; and
(iii) Each of the covenants required herein to be
performed by the Company on or prior to the delivery of such
certificate has been duly, timely and fully performed and each
condition herein required to be complied with by the Company
on or prior to the date of such certificate has been duly,
timely and fully complied with.
(j) On or prior to the Closing Date, you shall have
received the executed agreements referred to in Section 4(n).
(k) The Shares shall be qualified for sale in such
states as you may reasonably request, each such qualification shall
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be in effect and not subject to any stop order or other proceeding on the
Closing Date and the Option Closing Date.
(l) Prior to the Closing Date, the Shares shall have been duly
authorized for listing on the AMEX upon official notice of issuance.
(m) No Underwriter shall have advised the Company that the
Registration Statement, any preliminary prospectus, the Prospectus, or any
amendment or any supplement thereto, contains an untrue statement of fact which,
in your judgment, is material, or omits to state a fact which, in your judgment,
is material and is required to be stated therein or necessary to make the
statements therein not misleading, and if such notice has been delivered to the
Company, the Company shall have cured such untrue statement of fact or stated a
statement of fact required to be stated therein.
(n) The Company shall have furnished to you such certificates,
in addition to those specifically mentioned herein, as you may have reasonably
requested as to the accuracy and completeness at the Closing Date and the Option
Closing Date of any statement in the Registration Statement or the Prospectus or
any documents filed under the Exchange Act and deemed to be incorporated by
reference into the Prospectus, as to the accuracy at the Closing Date and the
Option Closing Date of the representations and warranties of the Company herein,
as to the performance by the Company of its obligations hereunder, or as to the
fulfillment of the conditions concurrent and precedent to your obligations
hereunder.
(o) Neither the Company, nor any Subsidiary, nor any of their
directors, officers or controlling persons shall have taken, directly or
indirectly, any action designed, or which might reasonably be expected, to cause
or result, under the Act or otherwise, in, or which shall have constituted,
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares or the Common Stock.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will and hereby agrees to indemnify and hold
harmless each Underwriter, the directors, officers, employees and agents of each
Underwriter, and each person, if any, who controls each Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims (as defined in Section 101 of the United
States Bankruptcy Code), liabilities, expenses and damages (including any and
all investigative, legal and other expenses reasonably incurred in connection
with,and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they, or any of them, may become subject under the
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, liabilities, expenses
or damages arise out of or are based in whole or in part
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upon (i) any inaccuracy in the representations and warranties of the Company
contained herein, (ii) any failure of the Company to perform its obligations
hereunder or under law, or (iii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement to the
Registration Statement or the Prospectus or in any documents filed under the
Exchange Act and deemed to be incorporated by reference into the Prospectus or
any Blue Sky application or filing, or the omission or alleged omission to state
in any such document a material fact required to be stated in it or necessary to
make the statements in it not misleading; provided, that the Company will not be
liable to the extent that such loss, claim, liability, expense or damage arises
from the sale of the Shares in the public offering to any person by an
Underwriter and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
relating to an Underwriter furnished in writing to the Company by an Underwriter
expressly for inclusion in the Registration Statement, any preliminary
prospectus or the Prospectus; and provided further, that the foregoing indemnity
agreement is subject to the conditions that, insofar as it relates to any untrue
statement, alleged untrue statement, omission, or alleged omission made in any
preliminary prospectus but eliminated or remedied in the Prospectus, such
indemnity agreement shall not inure to the benefit of any Underwriter from whom
the person asserting any loss, claim, damage, or liability purchased any Offered
Securities that are the subject thereof (or to the benefit of any person who
controls such Underwriter), if a copy of the Prospectus was not sent or given to
such person within the time required by the Act and the Rules and Regulations
and the Prospectus would have cured the defect giving rise to such loss, claim,
damage, or liability. The Company acknowledges that the statements set forth
under the heading "Underwriting" in any preliminary prospectus and the
Prospectus constitute the only information relating to any Underwriter furnished
in writing to the Company by you expressly for inclusion in the Registration
Statement, any preliminary prospectus or the Prospectus. This indemnity
agreement will be in addition to any liability that the Company might otherwise
have.
(b) Each Underwriter will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company, and each officer of the Company who signs the Registration Statement to
the same extent as the foregoing indemnity from the Company to the Underwriters,
but only insofar as losses, claims, liabilities, expenses or damages arise out
of or are based on any untrue statement or omission or alleged untrue statement
or omission made in reliance on and in conformity with information relating to
you furnished in writing to the Company by you expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus. The
Company acknowledges that the statements set forth under the heading
"Underwriting" in any preliminary prospectus and the Prospectus constitute the
only
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information relating to the Underwriters furnished in writing to the Company by
the Underwriter expressly for inclusion in the Registration Statement, any
preliminary prospectus or the Prospectus. This indemnity will be in addition to
any liability that the Underwriters might otherwise have.
(c) Any party that proposes to assert the right to be
indemnified under this Section 6 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 6, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve it from any liability that it may have to any indemnified party
under the foregoing provisions of this Section 6 unless, and only to the extent
that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the
indemnifying party will be entitled to participate in and, to the extent that it
elects by delivering written notice to the indemnified party promptly after
receiving notice of the commencement of the action from the indemnified party,
jointly with any other indemnifying party similarly notified, to assume the
defense of the action, with counsel reasonably satisfactory to the indemnified
party, and after notice from the indemnifying party to the indemnified party of
its election to assume the defense, the indemnifying party will not be liable to
the indemnified party for any legal or other expenses except as provided below
and except for the reasonable costs of investigation subsequently incurred by
the indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (3) a conflict
or potential conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in which case
the indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party), or (4) the indemnifying party has
not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified party
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or parties. All such fees, disbursements and other charges will be reimbursed by
the indemnifying party promptly as they are incurred. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent (which consent will not be unreasonably withheld).
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but for
any reason is held to be unavailable from the Company or the Underwriters, the
Company and the Underwriters will contribute to the total losses, claims,
liabilities, expenses and damages (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, but after
deducting any contribution received by the Company from persons other than the
Underwriters, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and directors
of the Company, who may be liable for contribution) to which the Company and the
Underwriter may be subject in such proportion as shall be appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriter on the other. The relative benefits received by the Company on the
one hand and the Underwriter 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, in each case as set forth in the table
on the cover page of the Prospectus. If, but only if, the allocation provided by
the foregoing sentence is not permitted by applicable law, the allocation of
contribution shall be made in such proportion as is appropriate to reflect not
only the relative benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the Underwriters, on the
other, with respect to the statements or omissions which resulted in such loss,
claim, liability, expense or damage, or action in respect thereof, as well as
any other relevant equitable considerations with respect to such offering. Such
relative fault shall be determined by reference to whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation (even if the Underwriter were treated as one entity for such purpose)
or by any other method of allocation which does not take into account the
equitable considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, liability, expense or damage,
or action in respect thereof, referred to above in this Section 6(d) shall be
deemed to include, for purpose of
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<PAGE>
this Section 6(d), 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 Section 6(d), an Underwriter
shall not be required to contribute any amount in excess of the underwriting
discounts received by it, and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) will be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 6(d), any person who controls a
party to this Agreement within the meaning of the Act will have the same rights
to contribution as that party, and each officer of the Company who signed the
Registration Statement will have the same rights to contribution as the Company,
subject in each case to the provisions hereof. Any party entitled to
contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution maybe made under
this Section 6(d), will notify any such party or parties from whom contribution
may be sought, but the omission to notify will not relieve the party or parties
from whom contribution may be sought from any other obligation it or they may
have under this Section 6(d). No party will be liable for contribution with
respect to any action or claim settled without its written consent (which
consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in
this Section 6 and the representations, warranties and covenants of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any investigation made by the Underwriters or on their behalf,
(ii) acceptance of any of the Shares and payment therefor, or (iii) any
termination of this Agreement.
7. TERMINATION.
The Underwriters' obligations under this Agreement may be terminated at
any time on or prior to the Closing Date (or, with respect to the Option Shares,
on or prior to the Option Closing Date), by notice to the Company from the
Representatives without liability on the part of any of the Underwriters to the
Company, if, prior to delivery and payment for the Shares (or the Option Shares,
as the case may be), in your sole judgment, (i) trading in any of the equity
securities of the Company shall have been suspended by the Commission, the AMEX,
or by any other exchange that lists the Shares, (ii) trading in securities
generally on the New York Stock Exchange, the AMEX, or the over-the-counter
market shall have been suspended or limited or minimum or maximum prices shall
have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement, shall
have been imposed upon trading in securities generally by such exchange or by
order of the Commission or any court of other governmental authority, (iii) a
general banking moratorium shall have been declared by either federal or state
authorities, or (iv) any material adverse change in the
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financial or securities markets in the United States or in political, financial
or economic conditions in the United States or any outbreak or material
escalation of hostilities or declaration by the United States of a national
emergency or war or other calamity or crisis shall have occurred the effect of
any of which is such as to make it, in your sole judgment, impracticable or
inadvisable to market the Shares on the terms and in the manner contemplated by
the Prospectus.
8. SUBSTITUTION OF UNDERWRITER.
If any Underwriter shall fail or refuse to purchase any of the Firm
Shares which it has agreed to purchase hereunder, and the aggregate number of
Firm Shares which such defaulting Underwriter agreed but failed or refused to
purchase is not more than one-tenth of the aggregate number of Firm Shares, the
other Underwriters shall be obligated, severally, to purchase the Firm Shares
that such defaulting Underwriter agreed but failed or refused to purchase, in
the proportions which the number of Firm Shares which they have respectively
agreed to purchase pursuant to Section 1 bears to the aggregate number of Firm
Shares which all such non-defaulting Underwriters have so agreed to purchase, or
in such other proportions as you may specify; provided, that in no event shall
the maximum number of Firm Shares which an Underwriter has been obligated to
purchase pursuant to Section 1 be increased pursuant to this Section 8 by more
than one-ninth of such number of Firm Shares without the prior written consent
of such Underwriter. If an Underwriter shall fail or refuse to purchase any Firm
Shares and the aggregate number of Firm Shares which such defaulting Underwriter
agreed but failed or refused to purchase exceeds one-tenth of the aggregate
number of the Firm Shares and arrangements satisfactory to the non-defaulting
Underwriters or the Company for the purchase of such Firm Shares are not made
within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriters or the Company for the
purchase or sale of any Shares under this Agreement. In any such case, the
Underwriters or the Company shall have the right to postpone the Closing Date,
but in no event for longer than seven days, in order that the required changes,
if any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken pursuant to this
Section 8 shall not relieve any defaulting Underwriter from liability in respect
to any default of such Underwriter under this Agreement.
9. MISCELLANEOUS.
Notice given pursuant to any of the provisions of this Agreement shall
be in writing and, unless otherwise specified, shall be mailed or delivered (a)
if to the Company, at the office of the Company, 109 Montague Street, Greenwood,
South Carolina 29648, Attention: William G. Stevens, or (b) if to you, at the
offices of J.C. Bradford & Co., J.C. Bradford Financial Center, 330 Commerce
Street, Nashville, Tennessee 37201, Attention:
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Michael C. Nunan. Any such notice shall be effective only upon receipt. Any
notice under Section 7 or 8 may be made by telecopier or telephone, but if so
made shall be subsequently promptly confirmed in writing.
This Agreement has been and is made solely for the Underwriters' and
the Company's benefits and of the controlling persons, directors and officers
referred to in Section 6, and their respective representatives, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. The term "successors and assigns" as used in this Agreement
shall not include a purchaser, as such purchaser, of Shares from an Underwriter.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Tennessee.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
The Company and you each hereby irrevocably waive any right they may
have to a trial by jury in respect of any claim based upon or arising out of
this Agreement or the transactions contemplated hereby.
You hereby represent and warrant to the Company that you have authority
to act hereunder on behalf of the Underwriters, and any action hereunder taken
by you will be binding upon the Underwriters.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and you.
Very truly yours,
COMMUNITY CAPITAL CORPORATION
By:
William G. Stevens
President and Chief Executive Officer
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Confirmed and accepted as of the date first above written.
J. C. BRADFORD & CO.
EDGAR M. NORRIS & CO., INC.
For themselves and as
Representatives of the Several
Underwriters
By: J.C. Bradford & Co.
By:_________________________________
Name:
Title:
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SCHEDULE I
Number of
Name Shares
J.C. Bradford & Co. . . . . . . . . . . . . . . . .
Edgar M. Norris & Co., Inc. . . . . . . . . . . . .
TOTAL . . . . . . . .
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PURCHASE AND ASSUMPTION AGREEMENT
This PURCHASE AND ASSUMPTION AGREEMENT (this "Agreement") dated as of
January 21, 1997, by and among Carolina First Bank, a South Carolina banking
corporation headquartered in Greenville, South Carolina ("Seller"), Community
Capital Corporation, a South Carolina corporation ("CCC"), and The Bank of
Barnwell County, a South Carolina state bank in organization
("Purchaser"):
Preamble
WHEREAS Purchaser is in the process of organizing and establishing a
banking operation;
WHEREAS Seller wishes, upon the terms and conditions set forth herein,
to sell certain assets and to transfer certain deposit and other liabilities
associated with its operations to Purchaser;
WHEREAS Purchaser wishes to buy such assets and assume such liabilities
upon the terms and conditions set forth herein;
WHEREAS the parties hereto acknowledge that the certain assets and
deposit and other liabilities to be transferred hereunder shall not be construed
by either party to constitute a "business combination" within the contemplation
of Regulation S-X promulgated pursuant to the Securities Act of 1933, as amended
("Regulation S-X");
NOW, THEREFORE, in consideration of the premises and agreements set
forth herein, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
Article 1
Definitions
Section 1.1 Definitions. As used in this Agreement, the following
terms have the definitions indicated.
"Accrued Interest Payable" means interest on Deposits which is accrued
but has neither been posted to a deposit account nor paid as of the Closing
Date.
"Accrued Interest Receivable" means interest on loans which is accrued
but unpaid as of the Closing Date.
"Adjustment Payment Date" shall have the meaning set forth in Section
4.3.
"Assets" shall have the meaning set forth in Section 2.1.
"Agreement" shall mean this Agreement, including all schedules and
exhibits attached hereto.
"Assumed Liabilities" shall have the meaning set forth in Section 2.3.
"Branch" or "Branch Offices" means Seller's five branch offices
located in the cities of Barnwell, Williston, Blackville, Springfield and
Salley, South Carolina.
"Branch Deposit" means a Deposit, including Accrued Interest Payable
thereon, which has been opened at or assigned to the Branch Offices, other than
Excluded Deposits.
"Branch Lease" means the lease of the real estate on which the
Williston Branch is located.
"Branch Loan" means (i) any loan fully secured by any Branch Deposit,
and (ii) any checking line of credit or overdraft checking balance linked to
any Branch Deposit, and (iii) any such other loans
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associated with the Branch Offices of such types or categories and in such
amounts as are agreed upon by the parties hereto and listed on Schedule 2.1(e)
hereto (it being acknowledged that Purchaser shall not have to purchase any loan
which is not covered by clauses (i) or (ii) of this definition or which not
acceptable to it in its sole discretion as contemplated in clause (iii)), in all
cases, together with any Accrued Interest Receivable thereon, the related
Servicing Rights and all such loan documentation as may be possessed by Seller
with respect to such Branch Loans. Schedule 2.1(e) shall set forth such items as
shall be agreed upon by the parties hereto from time to time, but such Schedule
shall be finalized at least 15 days prior to Closing.
"Branch Premises" means the Real Property, and the improvements on the
Real Property and the real property subject to the Branch Lease.
"Branch Property" means all furniture, fixtures and equipment and other
tangible personal property owned by Seller and located in the Branch Offices
(except for Excluded Assets), including, without limitation, the Branch Property
described in Schedule 2.1(b) hereto.
"Brokered Deposit" means a deposit, obtained, directly or indirectly,
by or through any deposit broker as defined in Section 29(f) of the Federal
Deposit Insurance Act, 12 U.S.C. ss.1831(f) and the corresponding federal
regulations, without regard to whether or not the depository institution in
which such funds are deposited is not well capitalized for purposes of that
section.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday, or
Friday that is not a Federal or State holiday generally recognized by banks in
the State of South Carolina.
"Cash Items" means all cash items, suspense items and items in process
of collection, that are related to the Branch Deposits and Branch Loans and (i)
which, on the Closing Date, have not been outstanding and uncollected for a
period in excess of 30 days, or (ii) which otherwise are acceptable to
Purchaser.
"Closing" and "Closing Date" shall have the meanings assigned to them
in Section 4.1 of the Agreement.
"Closing Payment" shall have the meaning set forth in Section 3.2.
"Demand Deposits" means individual, partnership, corporate and any
other negotiable deposits, including, without limitation, NOW accounts.
"Deposit" shall have the meaning set forth in Section 3(1) of the
Federal Deposit Insurance Act, 12 U.S.C. ss.1813(l), including, without
limitation, individual retirement accounts ("IRA") and cash management accounts.
"Depository Institution" means any bank or savings association as those
terms are defined in Section 3(c) of the Federal Deposit Insurance Act, 12
U.S.C. ss.1813(c), and any credit union.
"Effective Time" means the 12:00 a.m. on the day following the Closing
Date.
"Employees" means the employees assigned to the Branch Offices from the
date of the Agreement through Closing.
"Equipment Leases" shall have the meaning set forth in Section 2.1(g).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"Excluded Deposits" means (i) Brokered Deposits, (ii) deposits which
are the subject of attachment, garnishment or other legal process, (iii) such
other Deposits as are described on Schedule 2.4(a) hereto, and (iv) related
Accrued Interest Payable on such Excluded Deposits.
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Funds Rate" shall be the weighted daily mean of the high and
low rates quoted for Federal Funds in the Money Rates Column of The Wall Street
Journal, or if not reported for such day, the average of such quotations for the
last previous day for which such quotations were reported, for the period
between the Closing Date and the Adjustment Payment Date.
"Final Closing Statement" shall have the meaning set forth in Section
4.3.
"Jumbo Deposit" means a certificate of deposit with a balance of one
hundred thousand dollars ($100,000) or more.
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"Net Book Value" means the value of an asset on the books of Seller as
of the Closing Date determined in accordance with Generally Accepted Accounting
Principles ("GAAP"), but without regard to any general allowance for credit
losses.
"Obligors" shall have the meaning set forth in Section 6.10(b).
"Post-Closing Delivery Date" shall have the meaning set forth in
Section 4.3.
"Purchase Value" means the value determined pursuant to Section 3.1.
"Preliminary Closing Statement" shall have the meaning set forth in
Section 4.2.
"Purchase Price" shall have the meaning set forth in Section 3.1.
"Real Property" means the real property and all rights appurtenant
thereto on which Barnwell, Blackville, Salley, and Springfield Branch Offices
are located.
"Safe Deposit Leases" means all safe deposit contracts and leases
listed on Schedule 2.1(f) for the safe deposit boxes located at the Branch
Offices (as such Exhibit may be amended by Seller as of the Effective Time),
together with Seller's keys to, and Seller's records related to, such contracts
and leases.
"Servicing Rights" means the rights to service loans including, without
limitation, any rights to receive compensation with respect to such servicing.
Article 2
Transfer of Assets and Liabilities
Section 2.1 Sale of Assets. Subject to the terms and conditions set
forth herein, on the Closing Date, Purchaser shall purchase from Seller and
Seller shall sell, assign, convey and transfer to Purchaser all of its right,
title and interest in the following assets associated with Seller and not
otherwise excluded from transfer pursuant to the provisions of Section 2.2 below
(collectively, the "Assets"):
(a) all rights under and to the Branch Lease;
(b) the Branch Property and the Branch Premises;
(c) all currency and coins on hand at the close of business on
the Closing Date;
(d) the Cash Items;
(e) the Branch Loans;
(f) the Safe Deposit Leases; and
(g) all equipment leases listed on Schedule 2.1(g) for equipment
or other Branch Property located at the Branch Offices (the
"Equipment Leases").
Section 2.2 Assets Excluded from Sale. The following assets, among
others, (collectively, the "Excluded Assets") shall not be transferred pursuant
hereto:
(a) all Seller's loans or other extensions of credit other than
the Branch Loans;
(b) all signs and automated teller machines;
(c) any intellectual property of Seller, including, without
limitation, all rights in the name
"Carolina First Bank", "Carolina First Corporation" or any
combination or derivation thereof, corporate logos,
trademarks, trade names, service marks and service names, and
any other similar intellectual property, together with any
paper stock, forms and other supplies containing such names or
intellectual property; and
(d) any other assets which Purchaser deems unnecessary or
incompatible with Purchaser's operation (e.g., teller
equipment), which is identified in reasonable detail on
Schedule 2.2(d) and any other assets listed on Schedule 2.2(d)
(as such Schedule may be amended by mutual agreement as of the
Effective Time).
Seller shall coordinate with Purchaser to remove the Excluded Assets from the
Branch Offices on or prior to the Effective Time. Seller shall remove the
Excluded Assets at its own cost and, apart from
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making any repairs necessitated by Seller's negligence in removing the Excluded
Assets or except as otherwise provided in Section 7.5 hereof, Seller shall be
under no obligation to restore the Branch Offices' premises to their original
condition, which shall be the responsibility of Purchaser.
Section 2.3 Assumption of Liabilities. Subject to the terms and
conditions set forth herein, on the Closing Date, Seller shall assign and
transfer to Purchaser, and Purchaser shall assume from Seller the following
liabilities (collectively, the "Assumed Liabilities"):
(a) the Branch Deposits and all obligations of Seller to provide
services incidental to the Branch Deposits; provided, however,
that Purchaser shall assume such obligations which are not
customarily undertaken by depository institutions in the State
of South Carolina in connection with Deposits only to the
extent such obligations are disclosed by Seller on Schedule
2.3(a) hereto (and agreed to by Purchaser) and provided,
further that Purchaser shall not assume such obligations to
the extent that such assumption is prohibited by applicable
law or by regulatory authorities;
(b) the Branch Lease and the Equipment Leases;
(c) any other liabilities set forth on Schedule 2.3(c).
Section 2.4 Liabilities Not Assumed. Except for the liabilities
specifically set forth in Section 2.3 of this Agreement or otherwise expressly
assumed herein, Purchaser is not assuming any other liabilities or obligations
of Seller, whether or not the same is in any way involved, either directly or
indirectly, with the operation by Seller of its business or to which Seller may
have become a party or liable by reason of its business. Liabilities not assumed
include, but are not limited to, the following:
(a) Excluded Deposits;
(b) Seller's cashier checks, money orders, interest checks and
expense checks issued prior to Closing, consignments of U.S.
Government E and EE bonds and any and all traveler's checks;
(c) liabilities or obligations with respect to any litigation,
suits, claims, demands or governmental proceedings arising,
commenced or made known to Seller prior to Closing;
(d) liabilities of Seller for or under any data processing
contracts;
(e) liabilities related to the safe deposit boxes at the Branch
Offices of which Seller has actual knowledge at the Closing
Date or that can reasonably be determined to have arisen prior
to the Effective Time; and
(f) all other liabilities or obligations related to or arising
from Seller's operation of the Branch Offices or Seller's
business prior to the Effective Time (except the Assumed
Liabilities).
Section 2.5 Procedures regarding Deposits Assumed. Purchaser and
Seller agree to the following with respect to the Deposits assumed:
(a) If, after the Closing Date, any such depositor, instead of
accepting the obligation of Purchaser to pay Deposit
liabilities assumed, shall demand payment from Seller for all
or any part of any such assumed Deposit Liabilities, Seller
shall not be liable or respon- sible for making such payment;
provided, that if Seller pays the same in accordance with
sound banking practices, Purchaser agrees to reimburse Seller
for any such payments to the extent that such depositor has
funds on deposit with Purchaser. Seller and Purchaser shall
make appropriate arrangements to provide for the daily
settlement with immediately available funds by Purchaser of
checks, drafts, withdrawal orders, returns and other items
presented to and paid by Seller within 120 days after the
Closing Date and drawn on or chargeable to accounts that have
been assumed by Purchaser. In order to reduce the continuing
charges to Seller through the check
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clearing system of the banking industry that will result from
check, draft or withdrawal order forms of Seller being used
after the Closing Date by the depositors whose accounts are
assumed, Purchaser agrees, at its cost and expense, and
without charge to such depositors, to notify such depositors,
on or before the Closing Date, in a form and on a date
mutually acceptable to Seller and Purchaser, of Purchaser's
assumption of Deposit liabilities and to furnish each
depositor of an assumed Demand Deposit account with checks on
the forms of Purchaser and with instructions to utilize
Purchaser's checks and to destroy unused check, draft and
withdrawal order forms of Seller. In addition, subsequent to
regulatory approval, Seller will notify the affected customers
by letter of the pending assignment of Seller's deposit
accounts to Purchaser, which notice shall be in a form
mutually agreeable to Seller and Purchaser.
(b) Purchaser agrees to pay promptly to Seller an amount
equivalent to the amount of any checks, drafts or withdrawal
orders credited to an assumed account as of the Closing Date
that are returned to Seller after the Closing Date.
(c) Seller agrees to provide to Purchaser after the Closing Date
such information as Purchaser may reasonably request to enable
it to conduct a core deposit intangibles analysis of the
Deposit liabilities.
(d) Seller will render a final statement to each depositor of an
account assumed under this Agreement as to transactions
occurring through the Effective Time and will comply with all
laws, rules and regulations regarding tax reporting of
transactions of such accounts through the Effective Time.
Seller will be entitled to impose normal (bank-wide) fees,
including but not limited to, normal quarter-end charges on
savings accounts, or if the Closing does not occur at the end
of a quarter, a prorata portion of the normal quarter- end
charges on savings accounts, and service charges on a per-item
basis, but Seller will not impose periodic fees or blanket
charges in connection with such final statements.
(e) As of the Effective Time, Purchaser, at its expense, will
notify all Automated Clearing House ("ACH") originators of the
transfers and assumptions made pursuant to the Agreement. For
a period of 120 days beginning on the Effective Time, Seller
will honor all ACH items related to accounts assumed under
this Agreement which are mistakenly routed or presented to
Seller. Seller will make no charge to Purchaser for honoring
such items. Items mistakenly routed or presented after the
120-day period should be returned to the presenting party.
(f) After the Closing Date, Purchaser agrees to use its best
efforts to collect from Purchaser's customers amounts equal to
any Visa or MasterCard charge backs under the MasterCard and
Visa Merchant Agreements between Seller and its customers or
amounts equal to any deposit items returned to Seller after
the Closing Date by its Federal Reserve Bank which were
honored by Seller prior to the Closing Date and remit such
amounts so collected to Seller. Purchaser agrees to
immediately freeze and remit to Seller any funds up to the
amount of the charged back or returned item that had been
previously credited by Seller if such funds are available at
the time of notification by Seller to Purchaser of the charged
back or returned item. Notwithstanding the foregoing,
Purchaser shall have no duty to remit funds for any item or
charge that has been improperly returned or charged to Seller.
Section 2.6 Interest Adjustment. Purchaser and Seller agree to make
such adjustment to interest paid on the Branch Deposits as may be necessary to
reconcile the differences in their respective methods of calculation of interest
to insure that depositors are paid the full amount of interest due to them.
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Section 2.7 Safe Deposit Business. On and after the Effective Time,
Purchaser will assume and discharge Seller's obligations with respect to the
safe deposit box business at the Branch Offices in accordance with the terms and
conditions of contracts or rental agreements related to such business which are
assigned to Purchaser, and Purchaser will maintain all facilities necessary for
the use of such safe deposit boxes by persons entitled to use them. On and after
the Effective Time, Purchaser shall maintain and safeguard the records related
to such safe deposit box business transferred hereunder, and Purchaser shall be
responsible for granting access to and protecting the contents of safe deposit
boxes at the Branch Offices. Safe deposit box rental payment (not including late
payment fees) applicable for periods both prior to and after the Effective Time
and collected by Seller on or before the Effective Time shall be prorated as of
the Effective Time.
Section 2.8 Branch Loans Transferred. (a) In connection with the
transfer of any loans requiring notice to the borrower, Seller agrees to comply
with all notice and reporting requirements of the loan documents or of any law
or regulation.
(b) All Branch Loans or other indebtedness transferred under this
Agreement will be transferred without recourse and without any warranties or
representations as to their collectibility or the creditworthiness of any of the
Obligors of such Branch Loans.
(c) On and after the Closing Date, Purchaser will be responsible for
maintaining and safeguarding all Branch Loan files, documents and records (which
have been transferred to Purchaser by Seller) in accordance with applicable law
and sound banking practices.
Article 3
Purchase Price
Section 3.1 Purchase Price. As consideration for the purchase of the
Assets and the assumption of liabilities hereunder, Purchaser shall pay to
Seller, in the form and subject to the conditions set forth below, an aggregate
purchase price calculated as follows (the "Purchase Price"):
(a) One Hundred Percent (100%) of the Net Book Value of the Branch
Property and Branch Premises as shown on the books of Seller
as of the Closing Date; plus
(b) One Hundred Percent (100%) of the face value of all currency
and coins on hand at the Branch Offices on the Closing Date;
plus
(c) One Hundred Percent (100%) of the face value of all Cash
Items; plus
(d) One Hundred Percent (100%) of the Net Book Value of the Branch
Loans; minus
(e) Ninety-four and three/quarters Percent (94.75%) of the total
amount of the Branch Deposits on deposit in Seller on the
Closing Date excluding Jumbo Deposits; minus
(f) One hundred Percent (100.00%) of the total amount of the
Branch Deposits which are Jumbo Deposits.
It is expressly understood that such Purchase Price is determined for
purposes of calculating amounts due from the Purchaser to the Seller or from the
Seller to the Purchaser and, except as may otherwise be stated explicitly by the
parties, does not represent any agreement between the parties as to the
determination of values of Assets for accounting or tax purposes.
Section 3.2 Payment of the Purchase Price. If the results of the above
calculations are positive, that amount shall be paid by Purchaser to Seller, but
if the results of the above calculation are negative, that amount shall be paid
by Seller to Purchaser (in either case, the "Closing Payment"). The components
of the Purchase Price shall be set forth on the Preliminary Closing Statement.
All sums shall be paid in cash at Closing, by way of wire transfer of funds.
Amounts paid at Closing shall be subject to subsequent adjustment based on the
Final Closing Statement.
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Article 4
The Closing
Section 4.1 The Closing. The closing of the transactions contemplated
here (the "Closing") shall take place on a date (the "Closing Date") as soon as
reasonably practicable after receipt of all regulatory approvals and consents
required in connection herewith and the expiration of all waiting periods
required by law or regulation in connection with such approvals and consents, at
the offices of Wyche, Burgess, Freeman & Parham, P.A. or at such other place and
time as the parties hereto may mutually agree; provided, however, that in the
event that Closing has not occurred by April 30, 1997, either party hereto shall
have the right to terminate this Agreement.
Section 4.2 Preliminary Closing Statement. Seller shall prepare a
closing statement (the "Preliminary Closing Statement") in accordance with GAAP
as of a date not earlier than 45 days prior to the Closing Date reflecting the
calculation of the Purchase Price, including the assets to be sold and assigned
hereunder and the liabilities to be transferred and assumed hereunder; provided,
however, that the Preliminary Closing Statement shall reflect actual balances as
of a date not more than 7 days prior to the Closing Date for coins and currency
and deposits.
Section 4.3 Post-Closing Adjustments. (a) Not later than 10 calendar
days after the Closing Date (the "Post-Closing Delivery Date"), Seller shall
deliver to Purchaser a final closing statement dated as of the Closing Date and
prepared in accordance with GAAP reflecting the Assets sold and assigned and the
liabilities transferred and assumed hereunder as of the Closing Date (the "Final
Closing Statement"). Seller shall afford Purchaser and its accountants and
attorneys the opportunity to review all work papers and documentation used by
Seller in preparing the Final Closing Statement and cooperate with Purchaser to
provide it information reasonably necessary to document this transfer as the
transfer of a business under Rule 3.05 of Regulation S-X. Within 10 calendar
days following the Post-Closing Delivery Date (the actual date being "Adjustment
Payment Date"), Seller and Purchaser shall effect the transfer of any funds as
may be necessary to reflect changes in such assets and liabilities between the
Preliminary Closing Statement and the Final Closing Statement together with
interest thereon computed from the Closing Date to the Adjustment Payment Date
at the applicable Federal Funds Rate. Adjustments shall be made for all items
which would adjust the amount of assets transferred and liabilities assumed,
including but not limited to, not-sufficient-funds checks, mis-postings and
accounting errors. Without limiting the foregoing, if the balance due on any
Branch Loan purchased has been reduced by Seller as a result of a payment by
check received prior to the Effective Time, which item is returned after the
Closing Date, the asset value represented by the Branch Loan transferred shall
be correspondingly increased and an amount in cash equal to such increase shall
be paid by Purchaser to Seller promptly upon demand.
(b) In the event that a dispute arises as to the appropriate amounts to
be paid to either party on the Adjustment Payment Date, each party shall pay to
the other on such Adjustment Payment Date all amounts other than those as to
which a dispute exists. Any disputed amounts retained by a party which are later
found to be due to the other party shall be paid to such other party promptly
upon resolution with interest thereon from the Adjustment Payment Date to the
date paid at the applicable Federal Funds Rate. The parties agree to arbitrate
any disputes arising under this subsection (b). Arbitration shall be by single
arbitrator experienced in the matters at issue and selected by the Purchaser and
the Seller and in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. In the event the parties cannot agree on an
arbitrator, each party shall select an arbitrator and the two arbitrators shall
select a third. The arbitration shall be held in such place in Laurens, South
Carolina as may be specified by the arbitrator(s), and shall be conducted in
accordance with the Commercial Arbitration Rules existing at the date thereof of
the American Arbitration Association to the extent not inconsistent with this
Agreement. The decision of the
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arbitrator(s) shall be final and binding as to any matters submitted, and any
judgment thereon promptly shall be satisfied; provided, however, that if
necessary, such decision and satisfaction may be enforced by either Purchaser or
Seller in any court of record having jurisdiction over the subject matter or
over any of the parties of this Agreement. All costs and expenses incurred in
connection with any such arbitration proceeding shall be borne by the party
against which the decision is rendered, or, if no decision is rendered, or if
the decision is a compromise, equally by Purchaser as one party and Seller, as
the other party.
Section 4.4 Closing Deliveries of Seller at Closing. At the Closing,
the following shall be delivered by Seller to Purchaser:
(a) Deeds with respect to the Real Property of the same type
pursuant to which Seller acquired the Real Property ("Deeds")
and assignment of the Branch Lease (the "Assignment and
Assumption of Lease Agreement") in substantially the form as
attached hereto in Exhibit A, together with consents from all
lessors under such leases;
(b) A Bill of Sale, in substantially the form attached hereto as
Exhibit B (the "Bill of Sale").
(c) An assignment and assumption agreement, in substantially the
form attached hereto as Exhibit C (the "Assignment and
Assumption Agreement");
(d) Consents from third persons that are required to effect the
assignment set forth in the Assignment and Assumption
Agreement, including, but not limited to, the lessors under
the Branch Lease (to the extent required by such lease);
(e) A certificate of a proper officer of Seller, dated the Closing
Date, certifying to the fulfillment of all conditions which
are the obligation of Seller and that all of the
representations and warranties of Seller set forth in this
Agreement remain true and correct in all material respects on
the Closing Date;
(f) Certified copies of (A) the Articles of Incorporation and
Bylaws of Seller and (B) a resolution of the Board of Directors
of Seller, approving the transactions contemplated hereby;
(g) An opinion of counsel reasonably acceptable to Purchaser's
counsel covering matters typically included in transactions of
this type, including opinions to the effect that (A) Seller is
duly organized, validly existing and in good standing under the
laws of South Carolina, (B) this Agreement, the Deeds, the
Assignment and Assumption of Lease Agreement, the Bill of Sale
and the Assignment and Assumption Agreement have been duly
authorized, executed and delivered by Seller and are the legal,
valid and binding agreements of Seller enforceable against
Seller in accordance with their terms, except as enforcement
may be limited by bankruptcy, fraudulent conveyance, insolvency
or similar laws or equitable principles affecting the
enforcement of creditors' rights generally or depository
institutions the accounts of which are insured by the FDIC and
except as enforcement is subject to general principles of
equity, whether applied in a proceeding in equity or at law,
and (C) all proceedings or consents required by law or
regulation to be taken or obtained by Seller in connection with
the transactions provided for by this Agreement have been duly
and validly taken or obtained;
(h) Such incumbency and other certificates and other documents as
Purchaser and its counsel may reasonably require to evidence
the receipt by Seller of all necessary corporate and
regulatory authorizations and approvals for the consummation
of the transactions provided for in this Agreement;
(i) The Preliminary Closing Statement;
(j) All Assets capable of physical delivery;
(k) A letter addressed to Purchaser from a reputable heating and
air conditioning service company stating that an inspection
was made of the heating and air conditioning system
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of each Branch Office within 20 days of Closing and that at
such inspection the systems were in good working condition;
and
(l) A letter addressed to Purchaser from a reputable pest control
company stating that an inspection was made of each Branch
Office within 20 days of the Closing and that at the time of
such inspection there was no termite or other insect
infestation, no decay fungi or fungi damaged wood, no
excessive moisture conditions and no mold or sap stain fungi.
Section 4.5 Documents of Purchaser and CCC to be Delivered at Closing.
At Closing, the following documents shall be delivered by Purchaser and/or CCC
to Seller:
(a) The Assignment and Assumption of Lease Agreement;
(b) The Assignment and Assumption Agreement;
(c) A certificate and receipt acknowledging the delivery and
receipt of possession of the property and records referred
to in this Agreement.
(d) A certificate of proper officers of Purchaser and CCC, dated
the Closing Date, certifying to the fulfillment of all
conditions which are the obligation of Purchaser and that all
of the representations and warranties of Purchaser and CCC set
forth in this Agreement remain true and correct in all
material respects on the Closing Date;
(e) Certified copies of (A) the Articles of Incorporation and
Bylaws of Purchaser and (B) a resolution of the Board of
Directors of Purchaser, approving the transactions
contemplated hereby;
(f) An opinion of counsel reasonably acceptable to Seller's counsel
covering matters typically included in transactions of this
type, including opinions to the effect that (A) Purchaser and
CCC are duly organized, validly existing and in good standing
under the laws of South Carolina, (B) this Agreement, the
Assignment and Assumption of Lease Agreement, and the
Assignment and Assumption Agreement have been duly authorized,
executed and delivered by Purchaser (and in the case of this
Agreement, CCC) and are the legal, valid and binding agreements
of Purchaser and CCC enforceable against Purchaser and CCC in
accordance with their terms, except as enforcement may be
limited by bankruptcy, fraudulent conveyance, insolvency or
similar laws or equitable principles affecting the enforcement
of creditors' rights generally or depository institutions the
accounts of which are insured by the FDIC and except as
enforcement is subject to general principles of equity, whether
applied in a proceeding in equity or at law, and (C) all
proceedings or consents required by law or regulation to be
taken or obtained by Purchaser and CCC in connection with the
transactions provided for by this Agreement have been duly and
validly taken or obtained;
(g) Such certificates and other documents as Purchaser and its
counsel may reasonably require to evidence the receipt by
Purchaser of all necessary corporate and regulatory
authorizations and approvals for the consummation of the
transactions provided for in this Agreement; and
(h) The Preliminary Closing Statement.
Section 4.6 Magnetic Media Records. Seller agrees to prepare at its
expense and deliver to Purchaser magnetic media records in a format consistent
with BISYS file not later than 10 days prior to the Closing Date, and further
shall deliver to Purchaser such records updated on the Closing Date, which
records shall contain the information related to the Deposits assumed above.
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Article 5
Representations and Warranties of Purchaser
Purchaser and CCC warrant and represent to Seller as set forth below,
which representations and warranties shall survive the Closing Date for a period
equal to the greater of 12 months from Closing or 90 days after the next
succeeding fiscal year end of Purchaser following the Closing (the "Warranty
Period").
Section 5.1 Corporate Organization. CCC is a corporation duly
organized, validly existing and in good standing under the laws of the State of
South Carolina. Purchaser is a corporation in organization, which will be on the
Closing Date, duly organized, validly existing and in good standing under the
laws of the State of South Carolina.
Section 5.2 Enforceable Agreement. This Agreement has been duly and
validly authorized, executed and delivered by CCC and is a valid, binding, and
enforceable obligation of CCC. Upon Purchaser's organization and at the Closing
Date, this Agreement will have been duly and validly authorized, executed and
delivered by Purchaser and will be a valid, binding, and enforceable obligation
of Purchaser. CCC reasonably expects Purchaser to be able to perform its
obligations hereunder and is not aware of any condition to Closing which
Purchaser and CCC are not reasonably capable of satisfying.
Section 5.3 No Violation. The consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of CCC's or Purchaser's organizational documents or bylaws, nor result
in the breach of any term or provision of, nor conflict with, nor constitute a
default under, nor result in, the acceleration of any obligation under any
agreement or other instrument to which CCC or the Purchaser or their respective
property is subject, nor result in the violation of any law, rule, regulation,
order, judgment or decree to which CCC or the Purchaser is subject. There is no
action, suit or proceeding pending against either of CCC or the Purchaser, or to
the knowledge of either of them threatened against either of them, before any
court or arbitrator or any governmental body, agency or official which could
materially and adversely affect the ability of either of them to perform their
obligations under this Agreement or which in any manner questions the validity
of this Agreement.
Section 5.4 Broker or Finder. Neither CCC nor the Purchaser has
employed any broker or finder in connection with this transaction.
Section 5.5 Necessary Consents. Except for any necessary filings with,
and approvals and authorizations of the applicable bank regulatory authorities,
or except as expressly contemplated herein, no consent, approval, authorization,
registration, or filing with any governmental authority or private third party,
is required on the part of Purchaser or CCC in connection with the execution and
delivery of this Agreement or the consummation by Purchaser or CCC of the
transactions contemplated hereby (except such consents, approvals authorizations
registrations or filings as shall have been made or obtained on or before
Closing).
Section 5.6 Information for Regulatory Applications. The information
furnished or to be furnished by either of CCC or the Purchaser to Seller for the
purpose of enabling Seller to complete and file applications with any regulatory
body is or will be true and complete in all material respects as of the date so
furnished.
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Article 6
Representations and Warranties of Seller
Seller warrants and represents to Purchaser and CCC as follows, which
representations and warranties shall survive the Closing Date for the duration
of the Warranty Period:
Section 6.1 Corporate Organization. Seller is a South Carolina
corporation duly organized, validly existing, and in good standing under the
laws of the South Carolina and has the corporate power and is duly qualified to
carry on its business where and as now conducted and to own the Branch Property
and operate the Branch Offices.
Section 6.2 Enforceable Agreement. This Agreement has been duly and
validly authorized, executed and delivered by Seller and is a valid, binding,
and enforceable obligation of Seller.
Section 6.3 No Violation. The consummation of the transactions
contemplated by this Agreement will not result in the breach of any term or
provision of Seller organizational documents or its bylaws, nor result in the
breach of any term or provision of, nor conflict with, nor constitute a default
under, nor result in, the acceleration of any obligation under any agreement or
other instrument to which Seller or any of its property is subject, nor result
in the violation of any law, rule, regulation, order, judgment or decree to
which Seller is subject.
Section 6.4 Broker or Finder. Seller has not employed any broker or
finder in connection with this transaction.
Section 6.5 Marketable Title. The Assets, when transferred, shall be
sold, assigned, transferred, and conveyed free and clear of (i) all liens,
encumbrances, security interests or charges of any kind except as specifically
provided otherwise herein, and (ii) all liabilities and obligations of Seller,
except as provided herein.
Section 6.6 Branch Premises and Branch Property. The following
representations are made with respect to the Branch Premises and the Branch
Property.
(a) Seller has not utilized, discharged, dispersed, released,
stored, generated, disposed of, or allowed to escape on the
Branch Premises, any pollutants or other toxic or hazardous
substances except for cleaning supplies used in reasonable
amounts and for their ordinary purpose. Seller has not
installed, used, incorporated into, or disposed of any asbestos
or asbestos-containing materials in or on the Branch Premises.
Seller has not used or disposed of any polychlorinated
biphenyls on or in the Branch Premises or the Branch Property
in any form. To the best of Seller's knowledge, no underground
storage tanks are located on the Branch Premises or were
located on the Branch Premises and were subsequently removed or
filled. To the best of Seller's knowledge, no investigation,
administrative order, consent order and agreement, litigation,
or settlement with respect to any hazardous or toxic substances
is proposed, threatened, anticipated or in existence with
respect to the Branch Premises. Seller has no knowledge of
information concerning (i) pollutants or other toxic or
hazardous substances which may be on the Branch Premises as a
result of any acts, or failures to act by third parties, or
(ii) any condition of the Branch Premises or Branch Property
which may reasonably be expected to result in environmental
liability to Purchaser.
(b) Except as expressly provided herein, no other representations
are made with respect to the Branch Premises or the Branch
Property and Purchaser agrees that such Branch Premises and
Branch Property are being acquired "as is."
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(c) Seller does hereby grant to Purchaser, its agents, engineers,
surveyors, appraisers, auditors and other representatives the
right to enter upon the Branch Offices to inspect, examine and
survey, obtain engineering inspections, appraise and otherwise
do that which, in the reasonable opinion of Purchaser is
necessary to determine the boundaries, acreage and condition of
the Branch Offices and Branch Property, to determine the
suitability of the Branch Offices and Branch Property for the
uses intended by Purchaser, its topographical conditions, the
presence or absence of subsurface water and rock, and to make
all necessary tests to determine the physical condition of the
Branch Offices and Branch Property. Purchaser agrees to
indemnify and hold Seller harmless from and against all losses,
damages, costs and expenses incurred by Seller arising out of
Purchaser's performance of such surveys, studies and tests.
Seller agrees to cooperate fully with Purchaser and Purchaser's
agents and representatives in the conduct and performance of
the various surveys, reviews, investigations, audits,
inspections and other examinations contemplated herein. If
Purchaser objects to the condition of one or more Branch
Offices or any other portion thereof, Purchaser shall give
Seller written notice of the items of repair or replacement
necessary to place such portion of the Branch Offices
(including but not limited to electric system, plumbing, and
roof) in good repair and in structurally sound operating
conditions ("Repair Items"). In the event that such Repair
Items will cost $50,000 or less to repair, Seller shall repair
such Repair Items on or before Closing. In the event that such
Repair Items will cost more than $50,000 to repair, Seller
shall not have the obligation to repair such Repair Items, and
in the event that Seller elects not to repair, Purchaser may
terminate this Agreement (although, in the event that such
Repair Items exceed $50,000, Purchaser may require Seller to
pay the $50,000 and proceed to Closing).
Section 6.7 Legal Action. There is no action, suit, proceeding or
investigation pending, nor to the knowledge of Seller, threatened against Seller
before any court, arbitrator or administrative or governmental body which may
result in any materially adverse change in the Assets or Branch Deposits or
which could materially and adversely affect the ability of Seller to perform its
obligations under this Agreement or which in any manner questions the validity
of this Agreement. Seller is not subject to any injunction, order or decree of
any court or administrative agency (directed only at Seller) which relates to or
affects the Branch Offices.
Section 6.8 Accuracy of Records. As of the Closing Date, all records
related to the Branch Deposits and the Assets, which will be transferred to
Purchaser by Seller hereunder are true and correct in all material respects,
including genuineness of signatures.
Section 6.9 Information for Regulatory Applications. The information
furnished or to be furnished by Seller to Purchaser for the purpose of enabling
Purchaser to complete and file applications with any regulatory body is or will
be true and complete in all material respects as of the date so furnished.
Section 6.10 Branch Loans. The following representations are made with
respect to the Branch Loans:
(a) None of the Branch Loans were made or administered in
violation of any law, regulation or ordinance, including
without limitation, the South Carolina Consumer Protection
Code, the Federal Truth-in-Lending Act and all regulations
promulgated thereunder, and all applicable consumer credit or
usury laws of any applicable jurisdiction, such that its
enforceability or the benefits inuring to the Purchaser
thereunder would be impaired in any material respect.
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(b) Each of the Loans (i) is a valid and binding obligation of each
obligor, maker, co-maker, guarantor, endorser or debtor (such
persons hereinafter collectively referred to as "Obligors")
thereof or thereunder and is evidenced by valid and binding
promissory notes and, as the case may be, instruments of
security executed by the respective Obligors, each of whom at
the time of such execution had capacity to contract and each of
whose signatures on such instruments is such person's true
signature, (ii) is enforceable in accordance with its terms
(except for applicable bankruptcy or similar laws affecting the
enforcement of creditors rights generally), and no Obligor with
respect to any of the Loans has or will have any right of
defense, setoff or counterclaim against Seller, and (iii) is
free from any events of default thereunder by Seller which
impair collectibility.
Section 6.11 Compliance with Laws. Seller is in material compliance
with all laws, ordinances, and regulations that govern such Seller's ownership
and present use of the Assets, Branch Premises, Branch Offices and Branch
Property, the violation of which would have a material adverse effect on the
Assets, the Branch Premises, Branch Offices, or Branch Property. To Seller's
actual knowledge, all of the Assets, Branch Offices, Branch Premises, and Branch
Property sold hereunder, materially comply with applicable environmental,
zoning, health, OSHA, consumer products, and fire safety regulations.
Section 6.12 Necessary Consents. Except for any necessary filings with,
and approvals and authorizations of the applicable bank regulatory authorities,
or except as expressly contemplated herein, no consent, approval, authorization,
registration, or filing with any governmental authority or private third party,
is required on the part of Purchaser or CCC in connection with the execution and
delivery of this Agreement or the consummation by Purchaser or CCC of the
transactions contemplated hereby (except such consents, approvals authorizations
registrations or filings as shall have been made or obtained on or before
Closing).
Section 6.13 Worker's Compensation. There are no worker compensation or
similar claims or actions pending or, to Seller's knowledge threatened, and
Seller does not know of acts which would make such claims timely, by employees
of Seller currently employed at the Branch Offices.
Section 6.14 Payables. Except for specific liabilities expressly
assumed hereunder, Seller will pay all accounts payable, taxes, assessments, and
charges respecting the Assets or the Branch Offices incurred prior to the
Effective Time within a reasonable amount of time following Closing, except for
any such accounts payable, taxes, assessments or charges which are being
reasonably contested in good faith.
Section 6.15 Zoning. To the best of the knowledge of Seller's officer
executing this Agreement, each Branch Premises is in compliance with applicable
zoning laws and ordinances and such officer is not aware that the status of such
zoning is in question or subject to change by the appropriate governmental
authorities.
Section 6.16 Disclosure. To the best of Seller's knowledge, all
information and data furnished by Seller to Purchaser or CCC with respect to the
Assets, Branch Offices, Branch Premises, and Branch Property is materially true,
correct, and complete, and not materially misleading.
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Article 7
Covenants of the Parties
Section 7.1 Access. Seller shall afford to the officers and authorized
representatives of the Purchaser, upon prior notice, access to the properties,
books, and records pertaining to the Branch Offices in order that Purchaser may
have full opportunity to make reasonable investigations, at reasonable times
without interfering with Seller's normal business and operations, of the affairs
of the Seller which relate to the Branch Offices and the condition of each
Branch Office. The officers of Seller shall furnish Purchaser with such
additional financial and operating data and other information as to its business
and properties as Purchaser may, from time to time, reasonably request and as
shall be available, including, without limitation, information required for
inclusion in all governmental applications and filings necessary to effect this
transaction. In the event an audit is required by any governmental agency on the
Branch Offices and/or Seller's operations conducted thereat, Seller shall timely
cooperate and assist Purchaser, at Purchaser's expense, with all reasonable
requests for information and documentation submitted to Seller by Purchaser or
Purchaser's accountants. Nothing in this paragraph shall be deemed to require
Seller to breach any obligation of confidentiality or to reveal any proprietary
information, trade secrets or marketing or strategic plans. Without limiting the
foregoing, as of the date hereof, Seller will provide Purchaser with access to
Seller's environmental records and such rights of investigation as are possessed
by Seller with respect to the Branch Premises for purposes of conducting
environmental investigations. The cost of any such investigation shall be borne
entirely by Purchaser.
Section 7.2 Fees and Expenses. Purchaser shall be responsible for the
payment of all regulatory fees related to this transaction. Purchaser shall not
be responsible for any income tax liability of Seller arising from the business
or operations of Seller on or before the Closing Date, and Seller shall not be
responsible for any tax liabilities of Purchaser arising from the business or
operations of the Branch Offices after the Closing Date. Utility payments,
telephone charges, real property taxes, personal property taxes, rent, salaries,
deposit insurance premiums, other ordinary operating expenses of Seller and
other standard expenses related to the liabilities assumed or assets purchased
hereunder shall be prorated between the parties as of the Closing Date.
Purchaser shall be responsible for the costs of all title examinations, title
insurance fees, surveys, its own attorneys' and accountants' fees and expenses,
recording costs, transfer fees, and other expenses arising in connection
therewith. Seller shall be responsible for its own attorneys' and accountants'
fees and expenses related to this transaction and documentary stamps and deed
recording fees relating to the Real Property. Any items which are required to be
prorated hereunder which cannot be prorated, because of a lack of sufficient
information, by the Closing Date shall be prorated as soon as the requisite
information is available. The post closing adjustments necessitated by any such
proration shall be effected on the Adjustment Payment Date.
Section 7.3 Regulatory Approvals. Each party shall use its respective
best efforts to obtain all necessary regulatory approvals. Within 30 days
following the execution of this Agreement, Purchaser and CCC shall prepare and
file applications required by law with the appropriate regulatory authorities
for approval to consummate the transactions contemplated herein. Purchaser and
CCC agrees to proceed with the preparation of such applications in a diligent
manner and to provide Seller with a copy of all such applications filed (except
for any confidential portions thereof).
Section 7.4 Conduct of Business Pending Closing. From the date hereof
to Closing, Seller covenants and agrees to the following:
(a) Seller shall conduct its business only in the ordinary course;
maintain a pricing structure of deposit liabilities consistent
with local market conditions and good business
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practice, and not increase interest rates paid on deposit
liabilities above those generally offered in the Branch
Offices' markets; use its best efforts to preserve its
business operation as conducted, and to preserve for the
Purchaser the good will of its customers; exercise reasonable
efforts to cooperate with and assist Purchaser in assuring the
orderly transition of such business from the Seller to
Purchaser; provided, however, that nothing in this paragraph
shall be construed as requiring Seller to engage in activities
or efforts outside the ordinary course of business as
presently conducted;
(b) Except as disclosed in Schedule 7.4(b), Seller shall not enter
into any contracts on behalf of or affecting the Assets or the
Branch Offices in excess of $5,000 without prior consent of
Purchaser.
(c) Seller shall maintain (i) insurance sufficient to replace the
Assets in the event of their destruction, and (ii) all other
insurance policies in existence on the date hereof at their
current levels.
(d) Seller shall maintain the Branch Premises and Branch Property
in its current condition and in a manner conducive to normal
business operations, ordinary wear and tear excepted.
Section 7.5 Removal of Signs and ATMs. Seller agrees to repair any
damage caused by the removal of the signs or ATMs which are not being
transferred to Purchaser hereunder.
Section 7.6 Transfer of Records. Seller shall assign, transfer and
deliver to Purchaser such of the following records pertaining to the Deposits as
exist and are available in whatever form or medium is maintained by Seller: (A)
signature cards, orders and contracts between the Seller and depositors, and
records of similar character, (B) deposit slips and canceled checks or
withdrawal orders representing charges to depositors, and (C) records of account
maintained at the Branch Offices. Seller shall retain all books and records of
account relating to the Branch Deposits which are not ordinarily maintained at
the Branch Offices, shall maintain such books and records of account for as long
as may be required by applicable law for the joint benefit of itself and the
Purchaser, and will permit the Purchaser or its representatives, at any
reasonable time and at the Purchaser's expense, to inspect, make extracts from
or copies of, any such files, books of account, or records as Purchaser shall
deem reasonably necessary.
Section 7.7 Maintenance of Records by Purchaser. On and after the
Closing Date, Purchaser shall become responsible for maintaining the files,
documents and records delivered to Purchaser pursuant to this Agreement.
Purchaser will preserve and safekeep them as required by applicable law and
sound banking practice for the joint benefit of Seller and Purchaser. After the
Closing Date, Purchaser will permit Seller and its representatives, for
reasonable cause (and for no other purpose, it being acknowledged that
competitive reasons shall not be reasonable), at reasonable times and upon
reasonable notice and at Seller's expense, to examine, inspect, copy and
reproduce any such files, documents or records as Seller deems reasonably
necessary.
Section 7.8 Fiduciary Relationships. Purchaser agrees to assume all of
the fiduciary relationships of Seller arising out of any IRA deposits assumed by
Purchaser pursuant to Section 2.4 hereof, to the same extent as if Purchaser had
originally acquired, incurred or entered into such fiduciary relationships.
Notwithstanding anything in this Agreement to the contrary, however, Purchaser
will not assume or be responsible for any act or failure to act of Seller in
connection with such IRA deposits prior to the Closing Date.
Section 7.9 Performance of Liabilities. Purchaser agrees to honor, to
the extent that such depositor has funds on deposit with Purchaser, all properly
payable checks, drafts, and non-negotiable
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withdrawal orders on forms previously provided by Seller with respect to the
Branch Deposits to the same extent as if the checks, drafts, or orders were
drawn on forms provided by Purchaser with respect to similar deposits or
accounts for a period of 120 days following the Closing Date, and shall hold
Seller harmless with respect to any wrongful dishonor by Purchaser thereof
within such period. Purchaser agrees to honor all previously authorized ACH
transfers with respect to the Branch Deposits to the same extent as if the ACH
transfer were made with respect to similar deposits or accounts at Purchaser for
a period of ninety (90) calendar days following the Closing Date, and shall hold
Seller harmless with respect to any wrongful dishonor by Purchaser thereof
within such period.
Section 7.10 Further Assurances of Purchaser. On and after the Closing
Date, Purchaser shall give such further assurances to Seller and upon Seller's
request shall execute, acknowledge and deliver all such acknowledgments and
other instruments and take such further action as may be necessary and
appropriate to effectively relieve and discharge Seller from any obligations
remaining under the Branch Deposits; provided, however, that Purchaser need not
incur any material costs or expenses in connection with the undertakings
contained in this sentence unless Seller agrees to bear such costs or expenses.
In particular, and without limiting the foregoing:
(a) Purchaser will remit to Seller promptly after receipt by
Purchaser after the Closing Date at any of its offices all
amounts intended for deposit to accounts at Seller which were
not transferred to Purchaser pursuant to the Agreement; and
(b) With respect to checks or drafts drawn against accounts of
Seller which were not transferred to Purchaser pursuant to
this Agreement, Purchaser will cooperate with Seller and take
all reasonable steps requested by Seller to ensure that, on
and after the Closing Date, each such item which is coded for
presentment to Purchaser or to any bank for the account of
Purchaser is delivered to Seller in a timely manner and in
accordance with applicable law and clearing house rules or
agreement.
Section 7.11 Further Assurances of Seller. On and after the Closing
Date, Seller shall (i) give such further assistance to Purchaser and shall
execute, acknowledge and deliver all such bills of sale, deeds, acknowledgments
and other instruments and take such further action as may be necessary and
appropriate effectively to vest in Purchaser full, legal and equitable title to
the Assets, and (ii) use its best efforts to assist Purchaser in the orderly
transition of the liabilities being acquired by Purchaser; provided, however,
that Seller need not incur any material costs or expenses in connection with the
undertakings contained in this sentence unless such costs or expenses are paid
by Purchaser. In particular, and without limiting the foregoing:
(a) Seller will remit to Purchaser promptly after receipt by
Seller after the Closing Date at any of its other offices all
amounts intended for deposit to the accounts which are part of
the Branch Deposits or otherwise relating to the Branch
Deposits; and
(b) With respect to checks or drafts drawn against accounts which
are Branch Deposits, Seller will cooperate with Purchaser and
take all reasonable steps requested by Purchaser to ensure
that, on and after the Closing Date, each such item which is
coded for presentment to Seller or to any bank for the account
of Seller is delivered to Purchaser in a timely manner and in
accordance with applicable law and clearing house rules or
agreement; and
(c) After Closing, Seller shall assist Purchaser for a period of
30 days in any research reasonably requested by Purchaser with
respect to Branch Loans and Branch Deposits.
Section 7.12 Interest Reporting. Seller shall report from January 1,
1997 through the Closing Date all interest credited to, interest withheld from,
and early withdrawal penalties charged to the Branch Deposits which are assumed
by Purchaser under this Agreement. Purchaser shall report from the day after the
Closing Date through the end of the calendar year all interest credited to,
interest
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withheld from, and early withdrawal penalties charged to the Branch Deposits
assumed by Purchaser. Said reports shall be made to the holders of these
accounts and to the applicable Federal and State regulatory agencies.
Section 7.13 Training Sessions. All training sessions and other staff
meetings and other staff communications shall be coordinated with a designated
Seller representative prior to any such sessions, meetings or communications.
Section 7.14 Conditions to Closing. CCC shall take all such reasonable
action as may be reasonably necessary to cause the organization of Purchaser and
the performance by Purchaser of its obligations hereunder. CCC and Purchaser
shall take all reasonable efforts necessary to cause the conditions to closing
set forth in Article 8 to be met. Seller shall take all reasonable efforts
necessary to cause the conditions to closing set forth in Article 9 to be met.
Section 7.15 Noncompetition of Seller. For a period of two years
following the Closing Date, Purchaser agrees not to establish branch locations
within 12 miles of any of the Branch Offices (the "Designated Area").
Notwithstanding the foregoing, the acquisition of a financial institution or of
substantially all of the branch locations of a financial institution
headquartered outside of the Designated Area, which has banking locations in the
Designated Area shall not constitute a violation of this Section.
Article 8
Conditions to Seller's Obligations
The obligation of Seller to complete the transactions contemplated in
this Agreement are conditioned upon fulfillment (or waiver by Seller), on or
before the Closing Date, of each of the following conditions:
Section 8.1 Representations and Warranties True. The representations
and warranties made by Purchaser and CCC in this Agreement shall be true in all
material respects at and as of the Closing Date as though such representations
and warranties were made at and as of such time, except for any changes
permitted by the terms hereof or consented to by Seller.
Section 8.2 Obligations Performed. Purchaser and CCC shall (a) deliver
to Seller those items required by Section 4.5 hereof and (b) perform and comply
in all material respects with all obligations and agreements required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
Section 8.3 Regulatory Approval. The parties hereto shall have received
from the appropriate regulatory authorities approval of the transactions
contemplated herein and approval for Purchaser to operate the Branch Offices,
and all notice and waiting periods required by law to pass shall have passed and
no proceeding to enjoin, restrain, prohibit or invalidate such transactions
shall have been instituted or threatened, and any conditions of any regulatory
approval shall have been met.
Section 8.4 No Adverse Litigation. On the Closing Date, no action, suit
or proceeding shall be pending or threatened against Purchaser or CCC which is
reasonably likely to materially and adversely affect the transaction
contemplated herein.
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Article 9
Conditions to Purchaser and CCC's Obligations
The obligation of Purchaser and CCC to complete the transactions
contemplated in this Agreement are conditioned upon fulfillment (or waiver by
Purchaser), on or before the Closing Date, of each of the following conditions:
Section 9.1 Representations and Warranties True. The representations
and warranties made by Seller in this Agreement shall be true in all material
respects at and as of the Closing Date as though such representations and
warranties were made at and as of such time, except for any changes permitted by
the terms hereof or consented to by Purchaser.
Section 9.2 Obligations Performed. Seller shall (a) deliver to
Purchaser those items required by Section 4.4 hereof and (b) perform and comply
in all material respects with all obligations and agreements required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
Section 9.3 No Adverse Litigation or Change. On the Closing Date, no
action, suit or proceeding shall be pending or threatened against Seller which
is reasonably likely to (a) materially and adversely affect the Assets or the
Branch Deposits or (b) materially and adversely affect the transactions
contemplated herein. There shall have been no material adverse change in the
Assets, Branch Deposits or the operations of the Branch Offices.
Section 9.4 Regulatory Approval. The parties hereto shall have received
from the appropriate regulatory authorities approval of the transactions
contemplated herein, and all notice and waiting periods required by law to pass
shall have passed and no proceeding to enjoin, restrain, prohibit or invalidate
such transactions shall have been instituted or threatened, and any conditions
of any regulatory approval shall have been met. Purchaser and CCC shall have
completed the organization of Purchaser.
Article 10
Indemnification
Section 10.1 Indemnification of Purchaser and CCC. Seller agrees to
indemnify and hold Purchaser and CCC harmless from and against any claim, loss,
liability, damage or expense that Purchaser or CCC sustains or becomes subject
to as a result of (a) the operation by Seller of the Branch Offices prior to the
Effective Time (except for the Assumed Liabilities), (b) the breach or
non-fulfillment by Seller of any warranty, representation or covenant of Seller
set forth herein, and (c) any claim against, or liability or obligation of,
Seller which (i) is asserted against or sustained by Purchaser, CCC, their
agents or employees and (ii) has not been expressly assumed by Purchaser or CCC
pursuant to this Agreement. Any such indemnification shall include any costs,
including reasonable attorneys' fees incurred by Purchaser or CCC, whether or
not suit is brought, subject to Section 10.3. Further, subject to Section 10.3,
in the event Seller breaches any warranty or representation made in this
Agreement or fails to perform any requirement or obligation undertaken in this
Agreement, Seller agrees to pay all costs, including attorneys' fees (including
at the appellate level), incurred by Purchaser or CCC in the enforcement hereof,
whether or not suit is brought. Any such demands or claims arising out of breach
of warranties, covenants, or indemnities must be made prior to the expiration of
the Warranty Period.
18
<PAGE>
Section 10.2 Indemnification of Seller. Purchaser and CCC agree to
indemnify and hold Seller harmless from and against any claim, loss, liability,
damage or expense that Seller sustains or becomes subject to as a result of (a)
the operation by Purchaser or CCC of the Branch Offices from and after the
Effective Time, (b) as a result of the breach or non-fulfillment by Purchaser or
CCC of any warranty, representation or covenant of such parties set forth
herein, and (c) any claim against, or liability or obligation of, Seller which
(i) is asserted against or sustained by Seller, its agents or employees and (ii)
has been assumed by Purchaser or CCC pursuant to this Agreement. Any such
indemnification shall include any costs, including attorneys' fees incurred by
Seller, whether or not suit is brought, subject to Section 10.3. Further,
subject to Section 10.3, in the event Purchaser or CCC breaches any warranty or
representation made in this Agreement or fails to perform any requirement or
obligation undertaken in this Agreement, Purchaser and CCC agree to pay all
costs, including reasonable attorneys' fees (including at the appellate level),
incurred by Seller in the enforcement hereof, whether or not suit is brought.
Any such demands or claims arising out of breach of warranties, covenants, or
indemnities must be made prior to the expiration of the Warranty Period.
Section 10.3 Defense and Settlement. A party seeking indemnification
pursuant to this Article 10 (an "indemnified party") shall give prompt notice to
the party from whom such indemnification is sought (the "indemnifying party") of
the assertion of any claim, or the commencement of any action or proceeding, in
respect of which indemnity may be sought hereunder. The indemnified party shall
assist the indemnifying party in the defense of any such action or proceeding.
The indemnifying party shall have the right to, and shall at the request of the
indemnified party, assume the defense of any such action or proceeding at its
own expense. In any such action or proceeding, the indemnified party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at its own expense unless:
(a) The indemnifying party and the indemnified party shall have
mutually agreed to the
retention of such counsel; or
(b) The named parties to any such suit, action or proceeding
(including any impleaded parties) include both the
indemnifying party and the indemnified party and, in the
reasonable judgment of the indemnified party, representation
of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them.
An indemnifying party shall not be liable under this Section 10.3 for
any settlement effected without its consent of any claim, litigation or
proceeding in respect of which indemnity may be sought hereunder. The
indemnifying party may settle any claim without the consent of the indemnified
party, but only if the sole relief awarded is monetary damages that are paid in
full by the indemnifying party. An indemnified party shall, subject to its
reasonable business needs, use reasonable efforts to minimize the
indemnification sought from the indemnifying party hereunder. Notwithstanding
the foregoing, no investigation by an indemnified party at or prior to the
Closing shall relieve an indemnifying party of any liability hereunder, unless
the indemnified party seeks indemnity in respect of a representation or warranty
which it actually had reason to believe to be incorrect as a result of its
investigation prior to the Closing and the indemnified party intentionally
failed to bring such belief to the attention of the indemnifying party prior to
the Closing.
Section 10.4 Limitations on Indemnification. Notwithstanding anything
to the contrary contained in this Article 10, no indemnification shall be
required to be made by either party until the aggregate amount of all such
claims by a party exceeds $50,000. Once such aggregate amounts exceed $50,000,
such party shall thereupon be entitled to indemnification for all amounts,
including the initial $50,000. In addition, the parties shall have no obligation
under this Article 10 for any consequential liability, damage or loss the
indemnified party may suffer as the result of any demand, claim or lawsuit.
19
<PAGE>
Article 11
Personnel
Section 11.1 Responsibilities of Purchaser. Purchaser will offer to
hire on an "at will" basis all the Employees who are actively performing their
job duties on the Closing Date (and Seller will make all such employees
available for hire by Purchaser, without restriction). All personnel hired by
Purchaser will be given credit for the same number of years of service for
benefit purposes as Seller now gives in accordance with Purchaser's employee
benefit plans. Schedule 11.1 attached hereto and updated to the Closing Date
sets forth a true, correct and complete list showing all such employees, their
respective dates of hire and salary levels. Purchaser shall be liable for any
salaries, wages, bonuses, or commissions earned or accrued by all such Branch
personnel on and after the Closing Date.
Section 11.2 Benefit Plans. Prior to Closing, each of Seller and
Purchaser shall have provided to the other copies of the summary plan
descriptions of all employee benefit plans. Except as set forth on Schedule
11.2, Seller has no pension benefit, welfare benefit or other compensation plan
of any sort (including any employment contract) with respect to its employees.
Seller shall pay to all employees listed on Schedule 11.1 all amounts due them
under Seller's pension plan, under the terms of such plan as of the Closing
Date.
Section 11.3 Representations with Respect to Employees. Seller
represents and warrants to Purchaser that Seller is not a party to any employee
contracts or compensation arrangements with respect to its employees, and Seller
will indemnify Purchaser with respect to any and all liabilities arising under
any such contract or arrangement. During the period of time from the date hereof
through the Closing Date, Seller agrees not to increase the number of employees,
employee compensation or employee benefits, other than employee compensation
increases which would have otherwise occurred in the ordinary course of
business. Seller's employees are not represented by a labor union nor are they
parties to a collective bargaining agreement. No request for such representation
is pending.
Article 12
Miscellaneous
Section 12.1 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be duly addressed as
follows:
(a) If to Seller, to: Carolina First Bank
102 S. Main Street
Greenville, SC 29601
Attn: William S. Hummers III
with a copy to: Wyche, Burgess, Freeman & Parham, P.A.
Post Office Box 728
Greenville, SC 29602
Attn: William P. Crawford, Jr
(b) If to Purchaser or CCC, to: Community Capital Corporation
109 Montague Street
20
<PAGE>
Greenwood, South Carolina 29646
Attn: William G. Stevens
with a copy to: Nexsen, Pruet, Jacobs & Pollard
P.O. Drawer 2426
Columbia, South Carolina 29202
Attn: Julian Hennig III
Any such notice sent by registered or certified mail, return receipt
requested, or by overnight courier, such as Federal Express, shall be deemed to
have been duly given and received forty-eight (48) hours after the same is so
addressed and mailed with postage prepaid. Notice sent by any other manner shall
be effective only upon actual receipt thereof.
Section 12.2 Conditions for Termination. In addition to the provisions
for termination as provided elsewhere in this Agreement, this Agreement shall
terminate and be of no further force or effect as between the parties, except as
to liability for breach of any duty or obligation arising prior to the date of
termination, upon the occurrence of any of the following:
(a) The expiration of thirty (30) calendar days after any
governmental agency shall have denied or refused to grant the
approvals or consents required to be obtained pursuant to this
Agreement, unless within said thirty (30) day period Purchaser
and Seller agree to submit or resubmit an application to, or
appeal the decision of, the regulatory authority which denied
or refused to grant approval thereof;
(b) The expiration of thirty (30) Business Days from the date that
either party has given notice to the other party of such other
party's material breach of any covenant or failure to fulfill
any condition to such party's performance under this
Agreement; provided, however, that no such termination shall
take effect if within said thirty (30) day period the party so
notified shall have fully and completely corrected the grounds
for termination as specified in such notice;
(c) Upon the failure to consummate the transaction on or before
April 30, 1997, unless such date is extended in writing
agreed to by both parties; and
(d) Upon mutual consent of the parties to terminate.
Notwithstanding anything to the contrary contained in this Agreement,
no party hereto shall have the right to terminate this Agreement on account of
its own breach, a breach by its affiliate, or any immaterial breach by another
party.
Section 12.3 Effect of Termination. No termination of this Agreement
pursuant to this Article 12 or for any reason or in any manner shall release, or
be construed to release, either party hereto from liability or damage to the
other party arising out of, in connection with, or otherwise relating to,
directly or indirectly, such party's breach, default or failure in performance
of any material covenants, agreements, duties or obligations arising hereunder.
Section 12.4 Rights Upon Default. The parties hereto each acknowledge
that the rights of the other to consummate the transactions contemplated by this
Agreement are special, unique and of extraordinary character, and that, in the
event that any party violates or fails or refuses to perform any covenant or
agreement made in this Agreement, then the other party may be without adequate
remedy at law. The parties each agree, therefore, that in the event that any of
them violates or fails or refuses to perform any covenant or agreement made in
this Agreement, any other party may, in addition to any remedies at law for
damages or other relief, institute and prosecute an action in any court of
competent jurisdiction to enforce specific performance of such covenant or
agreement or seek any other equitable relief.
21
<PAGE>
Section 12.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the undersigned parties and their respective
successors and permitted assigns (and to or for the benefit of no other person
or entity whatsoever). Except for such assignments as may be necessary to effect
the transactions through wholly-owned subsidiaries of the parties hereto, no
assignment of this Agreement shall be made by the parties prior to the Closing
without the prior written consent of all parties.
Section 12.6 Governing Law. Except as required by federal law, this
Agreement shall be controlled, construed and enforced in accordance with the
laws of South Carolina.
Section 12.7 Announcements. The parties agree that the terms and
conditions of the transactions contemplated in this Agreement are to remain
confidential, except and only to the extent that applicable law requires
disclosure (and then notice of such disclosure shall be given to the other). Any
announcement or notice to third parties or to the public concerning the
transactions contemplated by this Agreement shall be jointly planned and
coordinated between the parties hereto.
Section 12.8 Confidentiality. The parties agree that all information
provided to the other parties hereunder (other than information which is a
matter of public knowledge or which has heretofore been published in any
publication for public distribution or filed as public information with any
governmental authority) is confidential and shall be used by the other parties
only for the purposes hereof. Should this Agreement be terminated for any
reason, each party shall return all such information, including all copies, to
the other party or parties.
Section 12.9 Integration. This Agreement and other agreements,
documents, and instruments to be delivered pursuant hereto supersedes all prior
negotiations, agreements and understandings between the parties and shall
constitute the entire agreement of the parties with respect to the subject
matter hereof, and may not be altered or amended except in a writing signed by
the parties.
Section 12.10 Waiver. The failure of any party at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same; and no waiver by a party of any provision (or breach of a
provision) hereof, whether by conduct or otherwise, in any one or more instances
shall be denied or construed either as a further or continuing waiver of any
such provision or breach or as a waiver of any other provision or breach hereof.
Section 12.11 Headings. The headings of the Sections and Articles of
this Agreement are inserted for convenience only and shall not constitute a part
hereof.
Section 12.12 Expenses. Except as otherwise provided in this Agreement,
all legal, accounting and other costs and expenses incurred in connection with
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby shall be borne and paid by the party incurring such costs
and expenses, and neither party shall be obligated for any cost or expense
incurred by the other party.
Section 12.13 Severability. In the event that any court of competent
jurisdiction shall determine that any provision of this Agreement is invalid,
such determination shall not affect the validity of the other provisions of this
Agreement, which shall remain in full force and effect and which shall be
construed as to be valid under applicable law.
22
<PAGE>
Section 12.14 Time of the Essence. Due to the sensitive nature of this
transaction, it understood and agreed that time is of the essence of this
Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day first above written.
Attest: CAROLINA FIRST BANK
/s/ CATHERINE W. BATSON By: /S/ WILLIAM S. HUMMERS III
____________________________ ____________________________
(Assistant Secretary) William S. Hummers III
Attest: THE BANK OF BARNWELL COUNTY (In Organization)
N/A By: /S/ MARSHALL L. MARTIN, JR.
____________________________ ____________________________
(Secretary) Marshall L. Martin, Jr.
Attest: COMMUNITY CAPITAL CORPORATION
/S/ JAMES H. STARK By: /S/ WILLIAM G. STEVENS
____________________________ ____________________________
(Secretary) William G. Stevens
23
<PAGE>
<PAGE>
EXHIBIT 11.1
COMMUNITY CAPITAL CORPORATION
Statement of Computation of Per Share Earnings
<TABLE>
<CAPTION>
Year Ended December 31,
Primary and Fully Diluted Earnings Per Share 1994 1995 1996
<S> <C> <C> <C>
Net income............................................................................ $584,856 $ 533,868 $ 705,820
Add: Interest income from assumed purchase of government securities,
net of tax.......................................................................... 55,866 52,666 27,629
Adjusted net income for fully diluted shares.......................................... $640,722 $ 586,534 $ 733,449
Weighted average number of common shares outstanding (2).............................. 624,087 929,561 1,218,031
Dilutive stock equivalents (1) (2).................................................... 180,735 140,574 138,595
Total common stock and equivalents............................................. 804,822 1,070,135 1,356,626
Primary and fully diluted net income per share........................................ 0.80 0.55 0.54
</TABLE>
(1) Computed using the treasury stock method.
(2) Restated for the effects of the 5% stock dividend in May 1996.
<PAGE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF COMMUNITY CAPITAL CORPORATION
Greenwood Bank & Trust
Clemson Bank & Trust
GNB Mortgage Company (inactive)
Community Financial Services, Inc. (subsidiary of Greenwood Bank & Trust)
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in this registration statement of Community Capital
Corporation on Form S-2 of our report dated January 10, 1997 (except for Note 12
therein which is dated January 23, 1997), on our audits of the consolidated
financial statements as of December 31, 1995 and 1996, and for the years ended
December 31, 1994, 1995, and 1996. We also consent to the reference to our firm
under the caption "Experts".
TOURVILLE, SIMPSON & HENDERSON
Columbia, South Carolina
January 24, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,927
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 700
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,280
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 80,546
<ALLOWANCE> 837
<TOTAL-ASSETS> 115,959
<DEPOSITS> 89,862
<SHORT-TERM> 11,672
<LIABILITIES-OTHER> 869
<LONG-TERM> 0
0
0
<COMMON> 1,219
<OTHER-SE> 12,337
<TOTAL-LIABILITIES-AND-EQUITY> 115,959
<INTEREST-LOAN> 6,622
<INTEREST-INVEST> 1,402
<INTEREST-OTHER> 90
<INTEREST-TOTAL> 8,114
<INTEREST-DEPOSIT> 3,425
<INTEREST-EXPENSE> 4,006
<INTEREST-INCOME-NET> 4,108
<LOAN-LOSSES> 187
<SECURITIES-GAINS> 17
<EXPENSE-OTHER> 4,141
<INCOME-PRETAX> 1,006
<INCOME-PRE-EXTRAORDINARY> 1,006
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 706
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
<YIELD-ACTUAL> 4.28
<LOANS-NON> 186
<LOANS-PAST> 54
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,600
<ALLOWANCE-OPEN> 671
<CHARGE-OFFS> 21
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 837
<ALLOWANCE-DOMESTIC> 837
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
