<PAGE>
U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
- SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
| | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
COMMISSION FILE NUMBER 0-19030
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
(Exact name of small business issuer as specified in its charter)
Georgia 58-1856582
(State of incorporation) (I.R.S.Employer Identification No.)
3844 ATLANTA HIGHWAY, HIRAM, GEORGIA 30141
(Address of principal executive offices)
(770) 445-1014
(Issuer's telephone number including area code)
--------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: There were 1,148,078 shares of
Common Stock outstanding as of November 5, 1998.
Transitional Small Business Disclosure Format (check one): Yes ; No X
--- ---
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ITEM PAGE
NUMBER NUMBER
------ ------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
1. Consolidated Balance Sheets at September 30, 1998 (unaudited)
and December 31, 1997 (audited).......................................... 1
2. Consolidated Statements of Earnings for the three months
ended September 30, 1998 and September 30, 1997, and the nine months
ended September 30, 1998 and September 30, 1997 (unaudited).............. 2
3. Consolidated Statements of Comprehensive Income for the three months
ended September 30, 1998 and September 30, 1997, and the nine months
ended September 30, 1998 and September 30, 1997 (unaudited).............. 3
4. Consolidated Statements of Cash Flows for the nine months
ended September 30, 1998 and September 30, 1997 (unaudited).............. 4
5. Notes to Consolidated Financial Statements............................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation............... 8
PART II - OTHER INFORMATION..................................................... 13
Item 1. Legal Proceedings....................................................... 13
Item 2. Changes in Securities and Use of Proceeds............................... 13
Item 3. Defaults upon Senior Securities......................................... 13
Item 4. Submission of Matters to a Vote of Security Holders..................... 13
Item 5. Other Information....................................................... 13
Item 6. Exhibits and Reports on Form 8-K........................................ 13
Signatures.............................................................. 14
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Consolidated Balance Sheets
September 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Assets
September 30, December 31,
1998 1997
------------- -----------
(Unaudited) (Audited)
<S> <C> <C>
Cash and due from banks 4,254,681 4,022,304
Federal funds sold and securities purchased under resell agreements 920,000 4,510,000
----------- ----------
Cash and cash equivalents 5,174,681 8,532,304
U. S. Treasury and other U. S. Government agency securities 17,280,402 17,826,801
available for sale
State, county, and municipal securities available for sale 7,048,447 5,194,210
Other investments 919,400 301,100
Loans 70,224,248 57,188,857
Less: Allowance for loan losses (992,135) (829,232)
----------- ----------
Loans, net 69,232,113 56,359,625
Premises and equipment 2,143,932 2,141,654
Accrued interest receivable 1,059,350 901,296
Other real estate and repossessions 137,870 1,500
Other assets 553,176 646,291
----------- ----------
103,549,371 91,904,781
=========== ==========
Liabilities and Stockholders' Equity
Deposits:
Demand 12,064,781 12,105,179
Interest-bearing demand 20,673,313 18,644,247
Savings 12,013,065 14,808,283
Time 23,002,197 21,589,280
Time, in excess of $100,000 15,708,500 14,834,114
----------- ----------
Total deposits 83,461,856 81,981,103
Accrued interest payable 795,179 870,090
Accrued expenses and other liabilities 280,232 383,756
Federal Home Loan Bank advances and notes payable 5,500,000 800,000
----------- ----------
Total liabilities 90,037,267 84,034,949
Minority interest 3,483 0
Stockholders' equity:
Common stock, $2.50 par value; 5,000,000 shares 2,870,195 2,103,310
authorized; 1,148,078 and 841,324 issued and outstanding
Additional paid-in capital 6,232,855 2,109,602
Retained earnings 4,138,371 3,511,989
Accumulated other comprehensive income 267,200 144,931
----------- ----------
Total stockholders' equity 13,508,621 7,869,832
----------- ----------
103,549,371 91,904,781
=========== ==========
</TABLE>
The consolidated balance sheet at December 31, 1997 has been taken from the
audited financial statements.
See accompanying notes to consolidated financial statements.
Page 1 of 14
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COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $1,866,018 $1,564,958 $5,257,377 $4,474,467
Interest on federal funds sold 78,289 40,115 196,924 148,330
Interest on investment securities:
U.S. Treasury and U.S. Government agencies 260,603 269,039 709,432 828,621
Other 83,873 59,232 256,573 159,064
----------- ----------- ----------- -----------
Total interest income 2,288,783 1,933,344 6,420,306 5,610,482
Interest expense:
Interest on deposits
Demand 106,433 100,555 309,513 288,995
Savings 89,067 88,360 281,229 292,916
Time 335,262 323,743 982,224 954,857
Time, in excess of $100,000 245,311 206,379 697,919 598,320
Interest expense - other 93,729 6,689 187,288 19,266
----------- ----------- ----------- -----------
Total interest expense 869,802 725,726 2,458,173 2,154,354
----------- ----------- ----------- -----------
Net interest income 1,418,981 1,207,618 3,962,133 3,456,128
Provision for loan losses 93,307 36,633 263,481 164,071
----------- ----------- ----------- -----------
Net interest income after
provision for loan losses 1,325,674 1,170,985 3,698,652 3,292,057
----------- ----------- ----------- -----------
Other income:
Service charges and fees 232,836 232,233 704,463 698,233
Insurance commissions 72,866 61,497 214,184 182,315
Gain (loss) on sales of investment securities 0 (3,219) 30,265 (3,219)
Appraisal fees 39,245 27,051 115,595 69,902
Equity in loss of CashTrans (11,640) (27,048) (56,891) (56,371)
Miscellaneous 51,721 11,890 136,424 33,950
----------- ----------- ----------- -----------
Total other income 385,028 302,404 1,144,040 924,810
Other expenses:
Salaries and employee benefits 680,642 586,144 1,966,171 1,671,414
Occupancy 184,209 160,285 541,153 491,167
Other operating 375,942 351,116 1,156,165 989,741
----------- ----------- ----------- -----------
Total other expenses 1,240,793 1,097,545 3,663,489 3,152,322
----------- ----------- ----------- -----------
Earnings before income taxes 469,909 375,844 1,179,203 1,064,545
Income taxes 135,882 158,292 336,843 397,816
Minority interest in earnings (loss) of consolidated subsidiary 5,136 (7,213) 5,476 (5,586)
----------- ----------- ----------- -----------
Net earnings $328,891 $224,765 $836,884 $672,315
=========== =========== =========== ===========
Net earnings per common share $0.32 $0.27 $0.93 $0.80
=========== =========== =========== ===========
Net earnings per common share - assuming dilution $0.31 $0.26 $0.89 $0.76
=========== =========== =========== ===========
Dividends per common share $0.00 $0.00 $0.25 $0.25
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 2 of 14
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COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Consolidated Statements of Comprehensive Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Earnings $328,891 $224,765 $836,884 $672,315
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) arising during the period, net
of tax of $67,721, $29,876, $86,301, and $29,606, respectively 110,680 44,834 141,045 44,473
Less: Reclassification adjustment for gains included in net
earnings, net of tax of $1,222, $11,489, and $1,222, respectively 0 1,997 (18,776) 1,997
--------- --------- -------- --------
Other comprehensive income 110,680 46,831 122,269 46,470
--------- --------- -------- --------
Comprehensive income $439,571 $271,596 $959,153 $718,785
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 3 of 14
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COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 836,884 $ 672,315
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, amortization, and accretion 311,144 261,157
Provision for loan losses 263,481 164,071
Net loss (gain) on sale of investment securities (30,265) 3,219
Net gain on sale of fixed asset 0 (1,000)
Net change in:
Interest receivable (158,054) (29,763)
Interest payable (74,911) (68,246)
Other assets (70,550) (79,201)
Accrued expenses and other liabilities (100,041) (68,539)
------------ -----------
Net cash provided by operating activities 977,688 854,013
------------ -----------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 1,640,000 3,045,000
Proceeds from sales, calls, and paydowns
of securities available for sale 5,935,033 2,821,777
Purchase of securities available for sale (8,663,606) (4,845,782)
Purchase of other investments (618,300) (46,100)
Net increase in loans (13,363,702) (3,560,499)
Purchase of premises and equipment (214,988) (100,078)
Proceeds from sale of other real estate 90,670 0
Improvements to other real estate (807) 0
Proceeds from sale of fixed asset 0 1,000
------------ -----------
Net cash used in investing activities (15,195,700) (2,684,682)
------------ -----------
Cash flows from financing activities:
Net change in demand and savings deposits (806,550) (367,109)
Net change in time deposits 2,287,303 1,967,452
Net proceeds from Federal Home Loan Bank advances 5,500,000 0
Net proceeds from sale of common stock 4,821,963 0
Net change in notes payable (800,000) 0
Cash dividends paid (210,502) (209,816)
Proceeds from exercise of stock options 68,175 788
------------ -----------
Net cash provided by financing activities 10,860,389 1,391,315
------------ -----------
Net change in cash and cash equivalents (3,357,623) (439,354)
Cash and cash equivalents at beginning of period 8,532,304 10,031,164
------------ -----------
Cash and cash equivalents at end of period $ 5,174,681 $ 9,591,810
============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
Page 4 of 14
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COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Consolidated Statements of Cash Flows, continued
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 2,533,084 2,222,600
Income taxes 332,000 210,000
Noncash investing activities:
Transfers of loans to other real estate 227,733 37,365
Change in other comprehensive income, net of tax 122,269 46,470
See accompanying notes to consolidated financial statements.
</TABLE>
Page 5 of 14
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Notes to Consolidated Financial Statements
1. Basis of Presentation
---------------------
The consolidated financial statements include the accounts of Community
Trust Financial Services Corporation (the Company), its wholly-owned
subsidiaries, Community Trust Bank (the Bank) and Metroplex Appraisals, Inc.
(Metroplex), and its majority-owned subsidiary Community Loan Company (CLC).
All significant intercompany accounts and transactions have been eliminated in
consolidation. Effective September 1, 1995, the Company established CLC as a
non-bank subsidiary engaged in the consumer finance business. The Company owns
75% of CLC's outstanding capital stock. The remaining 25% of CLC's outstanding
capital stock is owned by an individual who is employed as President of CLC.
The Company has helped finance the operations of CLC through a revolving line of
credit which, at September 30, 1998, had a maximum availability of $2,750,000,
of which CLC had borrowed $2,070,050. Effective May 16, 1997, the Company
entered into a joint venture with JRH Diversified, Inc. to establish a non-bank
subsidiary that engages in the business of providing retail establishments with
automated teller machines that dispense cash or cash equivalents. The Company
owns 49% of the equity in Cash Transactions, LLC (CashTrans), therefore, the
Company's ownership in CashTrans is considered an investment in an
unconsolidated subsidiary. The Company has helped finance the operations of
CashTrans through a revolving line of credit which, at September 30, 1998, had a
maximum availability of $750,000, of which CashTrans had borrowed $706,300. The
financial data of the Company is not significantly affected by the operations of
CashTrans.
The consolidated financial information furnished herein reflects all
adjustments which are, in the opinion of management, necessary to present a fair
statement of the Company's financial position as of September 30, 1998 and the
results of its operations and cash flows for the periods covered herein. All
such adjustments are of a normal recurring nature.
2. Recent Accounting Pronouncements
--------------------------------
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 130, "Reporting Comprehensive Income". This statement
establishes standards for the reporting and display of comprehensive income and
its components in the financial statements. Comprehensive income is defined as
the change in equity of a business enterprise during a period from transactions
and other events and circumstances from nonowner sources. For the Company,
comprehensive income includes net income reported in the statements of earnings
and changes in the fair value of securities available for sale reported as a
component of stockholders' equity.
In February 1998, the Financial Accounting Standards Board issued Statement
No. 132, "Employer's Disclosures about Pensions and Other Postretirement
Benefits". The new statement revises employers' disclosures about pension and
other postretirement benefit plans but does not change the measurement or
recognition provisions of those plans. Statement No. 132 provides additional
information to facilitate financial analysis and eliminates certain disclosures
which are no longer useful. The statement is effective for fiscal years
beginning after December 15, 1997. The statement is not expected to have a
material impact on the consolidated financial statements of the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which
standardizes the accounting for derivative instruments by requiring that all
derivatives be recognized as assets and liabilities and measured at fair value.
This statement is effective for fiscal years beginning after June 15, 1999. The
Company does not believe the provisions of SFAS No.133 will have an impact on
the consolidated financial statements upon adoption.
Page 6 of 14
<PAGE>
3. Earnings Per Share
------------------
SFAS No. 128 "Earnings Per Share" became effective for the Company for the
year ended December 31, 1997. This new standard specifies the computation,
presentation, and disclosure requirements for earnings per share and is designed
to simplify previous earnings per share standards and to make domestic and
international practices more compatible. Net earnings per share is based on the
weighted average number of shares outstanding during the period while the
effects of potential common shares outstanding during the period are included in
diluted earnings per share. All net earnings per share amounts have been
restated to conform to the provisions of SFAS No. 128. Net earnings per share
amounts for the three months ended September 30, 1998 and September 30, 1997,
and for the nine months ended September 30, 1998 and September 30, 1997 are as
follows:
<TABLE>
<CAPTION>
Net Earnings Common Shares Per Share
For the three months ended September 30, 1998 (Numerator) (Denominator) Amount
- --------------------------------------------- ----------- ------------- ------
<S> <C> <C> <C>
Net earnings per share $ 328,891 1,016,375 $ .32
====
Effect of dilutive securities:
Stock options - 43,070
-------- ---------
Net earnings per share - assuming dilution $ 328,891 1,059,445 $ .31
======== ========= ====
Net Earnings Common Shares Per Share
For the three months ended September 30, 1997 (Numerator) (Denominator) Amount
- --------------------------------------------- ----------- ------------- ------
<S> <C> <C> <C>
Net earnings per share $ 224,765 839,264 $ .27
====
Effect of dilutive securities:
Stock options - 41,793
-------- -------
Net earnings per share - assuming dilution $224,765 881,057 $ .26
======== ======= ====
Net Earnings Common Shares Per Share
For the nine months ended September 30, 1998 (Numerator) (Denominator) Amount
- -------------------------------------------- ----------- ------------- ------
<S> <C> <C> <C>
Net earnings per share $ 836,884 901,095 $ .93
====
Effect of dilutive securities:
Stock options - 43,475
-------- -------
Net earnings per share - assuming dilution $ 836,884 944,570 $ .89
======== ======= ====
Net Earnings Common Shares Per Share
For the nine months ended September 30, 1997 (Numerator) (Denominator) Amount
- -------------------------------------------- ----------- ------------- ------
<S> <C> <C> <C>
Net earnings per share $ 672,315 839,250 $ .80
====
Effect of dilutive securities:
Stock options - 40,403
-------- -------
Net earnings per share - assuming dilution $ 672,315 879,653 $ .76
======== ======= ====
</TABLE>
Page 7 of 14
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
For the Nine Month Period Ended September 30, 1998
Management's discussion and analysis of financial condition and results of
operations analyzes the material changes in the consolidated balance sheets and
statements of earnings presented herein for Community Trust Financial Services
Corporation (the Company). The consolidated financial information herein
include the financial condition and results of operations, for all periods
presented, of the Company and its wholly-owned subsidiaries, Community Trust
Bank (the Bank), and Metroplex Appraisals, Inc. (Metroplex), and the Company's
75%-owned subsidiary, Community Loan Company (CLC). In May 1997, the Company
entered into a joint venture with JRH Diversified, Inc. to establish Cash
Transactions, LLC (CashTrans) as another non-bank subsidiary. The Company's 49%
interest in CashTrans is treated as an unconsolidated subsidiary for financial
reporting purposes, and, accordingly, the Company's interest is reflected in the
consolidated financial statements at its proportionate share.
Financial Condition
- -------------------
Gross loans during the first nine months of 1998 increased $13,035,391 or
22.79% over the total gross loans at December 31, 1997, as compared to an
increase of $3,452,200, or 6.98%, for the same nine month period ended September
30, 1997. Management believes that the increase in loan growth was due
primarily to an increase in lending personnel, and to the Bank's establishment
of a loan production office in Cobb County, Georgia in April 1998.
Additionally, management believes that the relatively small increase in loan
growth during the first nine months of 1997 was due primarily to an increase in
competition from other financial institutions which had moved into the Bank's
market area. During the quarter ended September 30, 1998, CLC operated from
four relatively small offices. Consequently, its gross loans, totaling
approximately $1,855,030 at September 30, 1998, or 2.64% of the Company's gross
loans, do not significantly affect the financial data analyzed. Although
management anticipates growth in CLC's total loans, management anticipates that
CLC will have only a minimal impact on the Company's balance sheet. Management
anticipates some continued increase in the Bank's loan growth for the remainder
of 1998 primarily due to its increased marketing efforts which are designed to
attract new borrowers in its primary lending area and to its planned
establishment of a full service branch in Cobb County in the fourth quarter of
1998. Management continues to strive for increased loan volume while meeting
the criteria set by its loan policy.
The Bank's increase in gross loans for the first nine months of 1998 was
funded primarily through an increase in the Bank's borrowings on its line of
credit with the Federal Home Loan Bank. As of September 30, 1998, funds
borrowed on this line totaled $5,500,000 at interest rates ranging from 5.51% to
5.55%. At December 31, 1997 the Company had no borrowings on its line of credit
with the Federal Home Loan Bank. Additionally, the Bank's increase in gross
loans for the first nine months of 1998 was funded through an increase in
capital due to a contribution of $2,468,538 by the Company. Total deposits
during the first nine months of 1998 increased approximately $1,480,753 or
1.81%, from $81,981,103 at December 31, 1997 to $83,461,856 at September 30,
1998. A factor which has contributed to the relatively moderate deposit growth
is the increased competition from other financial institutions which have moved
into Paulding County. Management is monitoring core deposits and customer
relationships in an effort to maintain overall deposit growth. Stockholders'
equity increased approximately 71.65% to $13,508,621, or $11.77 per share at
September 30, 1998, as compared to stockholders' equity of $7,869,832 or $9.35
per share at December 31, 1997. Stockholders' equity increased primarily as a
result of the Company's recent public offering of up to 294,118 shares of its
$2.50 par value common stock at a price of $17.00 per share. On August 10,
1998, the offering was completed,
Page 8 of 14
<PAGE>
with all 294,118 shares having been sold. Net proceeds to the Company from the
offering, after payment of placement agent commissions and deducting the
expenses of the offering, were $4,821,963.
Results of Operations
- ---------------------
Interest Income
- ---------------
Interest income for the first nine months of 1998 was $6,420,306,
representing an increase of $809,824, or 14.43% over the same period in 1997.
This increase in interest income occurred primarily due to a $11,394,856, or
14.62%, increase in average interest-earning assets for the nine months ended
September 30, 1998 as compared to the same period in 1997. The Company's yield
on interest-earning assets was 9.61% for the period ended September 30, 1998, as
compared to 9.60% for the same period in 1997.
Additionally, the Company holds approximately $3,543,123 or 14.56% of its
investment portfolio in mortgage-backed securities. These mortgage-backed
securities are subject to being prepaid in part or in whole. Because a premium
was paid for the purchase of some of these mortgage-backed securities, an
accelerated payback can decrease earnings through faster amortization of the
premium. Mortgage-backed securities also may be subject to a slowdown in
repayments, especially in a rising rate environment. This type of risk is
called extension risk. Management monitors the pre-payment risk and extension
risk associated with the Company's investments in mortgage-backed securities in
an effort to maintain an overall acceptable level of risk.
Although the Company loses some interest income due to non-performing
assets, defined as loans placed on non-accrual status, real estate acquired
through foreclosure, and property acquired through repossession, management
considers the Company's level of non-performing assets to be at an acceptable
level. The Company's non-performing assets totaled approximately $600,406, or
0.58% of the Company's total assets as of September 30, 1998, as compared to
$393,835, or 0.47% of the Company's total assets as of December 31, 1997. The
Company's non-performing assets as of September 30, 1998 are comprised of
$462,536 in loans placed on non-accrual status and $137,870 in real estate
acquired through foreclosure, as compared to its non-performing assets as of
December 31, 1997, which were comprised of $392,335 in loans placed on non-
accrual status and $1,500 in property acquired through repossession. No
material loss is anticipated on non-accrual or restructured loans, therefore no
specific reserves or writedowns were considered necessary by management as of
September 30, 1998. While there are no specific reserves for the loans
designated as non-accrual and restructured by the Bank, those loans were rated
as either substandard or doubtful by the Bank's internal rating system. A
reserve is carried in the Bank's general allowance for loan loss in an amount
equal to 15% of the balance of any loans classified as substandard and 50% of
the balance of any loans classified as doubtful.
The Bank had $114,594 in accruing loans which were contractually past due
ninety days or more as of September 30, 1998, as compared to $24,364 in such
delinquent loans as of December 31, 1997. The Bank had restructured loans
totaling $87,787 as of September 30, 1998, as compared to $9,890 as of December
31, 1997. At September 30, 1998, CLC had delinquent loans which were
contractually past due ninety days or more totaling $136,781, as compared to
$97,196 as of December 31, 1997. Management considers the totals of delinquent
loans at the Bank and CLC to be at acceptable levels at this time; however,
factors such as a downturn in the local economy could cause levels of delinquent
and non-performing assets to rise.
Page 9 of 14
<PAGE>
Interest Expense
- ----------------
Interest expense for the first nine months of 1998 increased $303,819, or
14.10% as compared to the same period in 1997. This increase in interest
expense occurred primarily due to a $8,521,811, or 13.13%, increase in average
interest-bearing deposits and other interest-bearing liabilities for the nine
months ended September 30, 1998 as compared to the same period in 1997. The
Company's cost of interest-bearing deposits and other interest-bearing
liabilities was 4.48% for the period ended September 30, 1998, as compared to
4.40% for the same period in 1997. The Company continues to seek opportunities
to maintain its net interest margin (net interest income divided by average
interest-earning assets). The Company's net interest margin as of September 30,
1998 was 5.93%, as compared to 5.96% as of September 30, 1997.
Other Income
- ------------
Other income increased approximately $219,230, or 23.71%, during the first
nine months of 1998 as compared to the same period in 1997 primarily due to
gains collected on sales of investment securities and increased miscellaneous
income earned by the Bank. The Company's miscellaneous income increased
approximately $102,474, or 301.84%, during the first nine months of 1998 as
compared to the same period in 1997, primarily due to income derived from
mortgage loans originated by the Bank and from gains collected on the sale of
other real estate and property acquired through repossession. The Bank began
originating residential mortgage loans through a single mortgage originator in
January 1998.
Other Expenses
- --------------
Other expenses for the first nine months of 1998 increased $511,167, or
16.22%, as compared to the first nine months of 1997. This increase is
attributable primarily to an increase in salaries and employee benefits caused
by the (i) Bank's need for additional human resources due to the growing
customer base of the Bank, (ii) salary and benefit costs of the Company, and
(iii) routine salary increases. Occupancy expense increased by approximately
$49,986, or 10.18% for the first nine months of 1998 as compared to the same
period for 1997, primarily due to increased furniture and equipment expenses at
the Bank. Other operating expenses for the first nine months of 1998 increased
$166,424, or 16.81% as compared to the first nine months of 1997, primarily due
to increased operating costs of the Bank caused by general cost increases.
Capital
- -------
The Company is subject to regulatory capital requirements imposed by the
Georgia Department of Banking and Finance (the Department). The Department has
established a minimum level of capital to total assets of 5%, with certain
adjustments, on a consolidated basis for bank holding companies. At September
30, 1998, the Company's ratio of capital to total average assets was 14.19%,
using the Department's guidelines. Under federal law, the Company and the Bank
are required to maintain a ratio of total capital to risk weighted assets of at
least 8.0%, of which at least one-half must be so-called Tier 1 capital. Under
applicable federal regulations and interpretations thereof, the Bank's ratio of
total capital to risk weighted assets at September 30, 1998 was 14.47%, and its
ratio of Tier 1 capital to risk weighted assets was 13.22%. Under applicable
federal regulations and interpretations thereof, the Company's ratio of total
capital to risk weighted assets at September 30, 1998 was 18.83%, and its ratio
of Tier 1 capital to risk weighted assets was 17.57%. Additionally, under
federal law, all but the most highly rated banks and bank holding companies are
required to maintain a minimum ratio of Tier 1 capital to total average assets
(Tier 1 leverage ratio) of 4.0% to 5.0%, including the most highly-rated banks
and bank holding companies that are anticipating or experiencing significant
growth. Three percent is the minimum Tier 1 leverage ratio required for the
most highly-rated banks and bank holding companies with no plans to expand. The
Bank substantially exceeds its
Page 10 of 14
<PAGE>
Tier 1 leverage ratio requirement with a Tier 1 leverage ratio of 9.45% as of
September 30, 1998. The Company also substantially exceeds its Tier 1 leverage
ratio requirement with a Tier 1 leverage ratio of 12.94% as of September 30,
1998. Through its policy of controlled growth, the Company intends to maintain
capital in excess of the required minimum in order to support future growth.
Liquidity
- ---------
Liquidity represents the Company's ability to meet both loan commitments
and deposit withdrawals. As of September 30, 1998, the Bank's liquidity ratio
(defined as net cash, short term assets, and marketable assets divided by net
deposits and short term liabilities) was 35.18%, as compared to 33.22% at
September 30, 1997. The Bank maintains two lines of credit to borrow fed funds
that total $3,000,000 in order to enhance liquidity. At September 30, 1998, the
Bank had no borrowed funds on either of these lines of credit. The Bank is a
member of the Federal Home Loan Bank of Atlanta and borrowings are also
available through that relationship. The amount of that credit opportunity
fluctuates based on criteria set by the Federal Home Loan Bank. As of September
30, 1998, $5,500,000 was outstanding under this credit facility, and
approximately $1,500,000 remained available to be borrowed. Additionally, the
Company has a $2,500,000 revolving credit facility with The Bankers Bank,
Atlanta, Georgia, which is intended to enhance the Company's liquidity. As of
September 30, 1998, the Company had no borrowed funds outstanding under this
facility.
Year 2000
- ----------
The Company has a Year 2000 plan in place. This plan is necessary because
many existing computer programs use only two digits, rather than four digits, to
identify a year. Such programs were designed and developed without considering
the impact of the upcoming change in the century. Since many computer
applications could fail or create erroneous results by or at Year 2000 if these
problems are not corrected, management has implemented a plan to ensure that the
Company and each of its subsidiaries is prepared to continue operations without
interruption through the upcoming change in the century. Year 2000 issues
relating to the Company's businesses, its operations, and its relationships with
customers, suppliers, and other constituents are reviewed by a committee
consisting of management and operations and technical staff. A committee of the
Board of Directors reviews management's progress in execution of its plan. All
levels of the Company's management and its Board of Directors are aware of the
issues presented by the Year 2000 century change and the serious effects it
could have on the Company and its customers. Goals of the Company's plan
include evaluation of systems, prioritization of necessary updates or
replacements, responsibility assignments, and establishment of a timeline for
review, implementation, and testing. The plan includes steps to be taken by the
Company to (i) identify, assess, evaluate, test, and validate its own date
sensitive systems, (ii) amend its loan underwriting policies to include
assessments, as appropriate, regarding Year 2000 readiness by commercial loan
applicants, (iii) offer education to business customers regarding Year 2000
issues in their own businesses, and (iv) inform the Company's customers as to
the Company's Year 2000 compliance process.
Management believes that, to date, the goals of the plan have been met, and
the testing phase is in process. It is the Company's goal to have the systems
it has identified as "critical" to conducting its businesses in compliance and
tested by the end of 1998. The Bank, its third-party data processor, and its
correspondent bank, are participating at this time in testing of the Bank's core
processing system, and the correspondent's system, with the Federal Reserve Bank
of Atlanta, to ensure that communications between those entities concerning
transaction processing will not be affected by any dates that have been
determined to be Year 2000 sensitive. The Company estimates that its total costs
of Year 2000 compliance will be $70,000 to $105,000, of
Page 11 of 14
<PAGE>
which approximately $9,000 has been capitalized, an estimated $49,000 will be
capitalized, and an estimated $30,000 will be charged to operations in 1998 and
1999. Management does not anticipate that the implementation of the Company's
Year 2000 plan will materially impact future operating results.
Contingency plans are being developed to mitigate the potential effects of
a disruption in normal business operations. Contingency planning includes
developing alternative solutions should a vendor not become compliant, as well
as plans for the resumption of business if, despite the Company's best efforts,
a business operation disruption occurs. The Year 2000 risks arising from
relationships with borrowers and depositors are under review by management.
Appropriate risk controls are being put in place to manage and mitigate Year
2000 customer risks, and contingency plans are being developed to address these
risks.
Management does not believe that Year 2000 will have a significant impact
on the Company. However, there can be no assurances that the Company's Year 2000
plans will be able to successfully address each of the ways in which the Year
2000 problem may impact the Company, since the Company has limited ability to
monitor or influence the Year 2000 preparedness of its customers, borrowers,
vendors, and others upon whom it relies in transacting business.
Page 12 of 14
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-------------------------
Not applicable
Item 2. Changes in Securities and Use of Proceeds
-------------------------------------------------
Not applicable
Item 3. Defaults upon Senior Securities
---------------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
Not applicable
Item 5. Other Information
-------------------------
On May 12, 1998, the Company commenced a public offering of up to 294,118
shares of its $2.50 par value common stock at a price of $17.00 per share.
On August 10, 1998, the offering was completed, with all 294,118 shares
having been sold. Net proceeds to the Company from the offering, after
payment of placement agent commissions and deducting the expenses of the
offering, were $4,821,963.
Item 6.a Exhibits
-----------------
Exhibit
Number Description
------ -----------
3.2 Bylaws of the Company
3.4 Bylaws of the Bank
27 Financial Data Schedule, which is submitted electronically to the
Securities and Exchange Commission for information only and not
filed.
Item 6.b Reports on Form 8-K
----------------------------
A Form 8-K was filed with the SEC on July 29, 1998. The Form 8-K reported
information under Item 5 concerning a Standby Placement Agent Agreement and
Financial Advisor Agreement entered into by the Company with Morgan Keegan
& Company, Inc. The Form 8-K also reported information under Item 5
concerning a First Amendment to Escrow Agreement entered into by the
Company with The Bankers Bank. Exhibits of both agreements were filed
under Item 7 of the Form 8-K.
Page 13 of 14
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Community Trust Financial Services Corporation
----------------------------------------------
(Registrant)
DATE: November 6, 1998 /s/Ronnie L. Austin
-------------------
Ronnie L. Austin, President
and Chief Executive Officer
(Duly Authorized Officer)
DATE: November 6, 1998 /s/Angel J. Byrd
----------------
Angel J. Byrd
(Principal Accounting Officer)
Page 14 of 14
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
ARTICLE ONE
-----------
SHARE CERTIFICATES
1.1 Each shareholder shall be entitled to a certificate certifying the
number of shares of the corporation owned by him. Share certificates shall be
issued in consecutive order and shall be numbered in the order in which they are
issued. They shall be signed by the President or a Vice President and the
Secretary or an Assistant Secretary, and the seal of the corporation shall be
affixed thereto. A record of each share certificate shall be kept in the books
of the corporation, and on such record shall be entered the name of the person
owning the shares represented by that certificate, the number of shares
represented by that certificate, and the date of issue. In addition, the
corporation shall maintain at its principal place of business or registered
office a record of the names and addresses of its shareholders and the total
number of shares held by each.
1.2 Transfers of shares of the corporation shall be made only upon the
books of the corporation, which transfer shall be made only at the direction of
the shareholder designated on the certificate or at the direction of his
attorney, lawfully constituted in writing, and upon surrender of the properly
endorsed certificate or certificates for such shares. Each share certificate
exchanged or returned to the corporation shall be canceled by the Secretary or
by an Assistant Secretary and shall be placed with its stub in the books of the
corporation.
1.3 The Board of Directors shall fix a record date as of which the
corporation shall determine the shareholders who are entitled to notice of or to
vote at any meeting of stockholders, to consent to corporation action in writing
without a meeting, to receive payment of any dividend or other distribution or
allotment of any rights, or to exercise any other lawful right of stockholders.
1.4 In the event that a share certificate is lost, stolen or destroyed,
another certificate may be issued in its place pursuant to such regulations as
the Board of Directors may establish concerning proof of such loss, theft, or
destruction and concerning the giving of satisfactory bond or bonds of
indemnity.
1.5 The issue, transfer, conversion, and registration of stock
certificates shall be governed by such other regulations as the Board of
Directors may establish.
<PAGE>
ARTICLE TWO
-----------
SHAREHOLDERS' MEETINGS
2.1 The annual meeting of shareholders of the corporation shall be held
during the first four (4) months after the end of each fiscal year of the
corporation at such time and place, within or without the State of Georgia, as
the Board of Directors may from time to time determine.
2.2 Special meetings of the shareholders may be called at any time by the
Board of Directors, the President, or any holder or holders of twenty-five
percent (25%) or more of the outstanding shares of the corporation. Special
meetings of the shareholders shall be held at such time and place, within or
without the State of Georgia, as may be designated by the person or persons
calling the meeting.
2.3 The Secretary or an Assistant Secretary shall deliver, either
personally or by first class mail, a written notice of the place, day, and time
of all meetings of shareholders, not less than ten (10) nor more than fifty (50)
days before the date of the meeting to each shareholder of record entitled to
vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the shareholder at his
address as it appears on the share transfer records of the corporation, with
first class postage thereon prepaid. The notice of any special meeting of
shareholders shall state the purpose or purposes for which the meeting is
called. Notice of any meeting of shareholders need not be given to any
shareholder who signs a waiver of notice, either before or after the meeting.
No such waiver of notice of a shareholder's meeting with respect to a plan of
merger or a plan of consolidation shall be effective unless the provisions of
Paragraph (1) of subsection (d) of Section 14-2-113 of the Official Code of
Georgia Annotated are followed. Attendance of a shareholder at a meeting,
either in person or by proxy, shall constitute waiver of notice of such meeting
and a waiver of any and all objections to the place of the meeting, the time of
the meeting, and the manner in which the meeting has been called or convened
unless a shareholder states at the beginning of the meeting any such objection
or objections to the transaction of business at the meeting.
2.4 At all meetings of the shareholders, each holder of shares of the
corporation shall be entitled to cast one vote, either in person or by written
proxy, for each share standing in his name on the books of the corporation as of
the record date determined under Section 1.3 of these bylaws.
2.5 At all meetings of shareholders, a majority of the outstanding shares
of the corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum for the transaction of business. Except as otherwise
required by law or by Article Seven of these bylaws, all resolutions adopted and
all business transacted shall require the favorable vote of a majority of the
shares represented at the meeting and entitled to vote. The holders of a
majority of the shares represented at a meeting, whether or not a quorum is
present, may adjourn such meeting from time to time.
<PAGE>
ARTICLE THREE
-------------
BOARD OF DIRECTORS
3.1 Subject to these bylaws and any lawful agreement between the
shareholders, the full and entire management of the affairs and business of the
corporation shall be vested in the Board of Directors, which shall have and may
exercise all of the powers that the corporation may exercise.
3.2 The Board of Directors shall consist of at least three (3), but not
more than ten (10) members, the precise number to be fixed by resolution of the
Directors from time to time. The Board of Directors shall be divided into three
classes as nearly equal in number as possible. The members of each class shall
be elected for a term of three years and until their successors are elected and
qualified with one class of directors being elected by ballot annually, except
that at the first election of directors following the effectiveness of this
Section 3.2: one class shall be elected for terms of one year and until their
successors are elected and qualified; another class shall be elected for terms
of two years and until their successors are elected and qualified; and the third
class shall be elected for terms of three years and until their successors are
elected and qualified. A majority of the members of the Board of Directors
shall constitute a quorum for the transaction of business. Except as otherwise
provided in these Bylaws, all resolutions adopted and all business transacted by
the Board of Directors shall require the affirmative vote of a majority of the
directors present at the meeting.
3.3 Any vacancy occurring in the Board of Directors may be filled by a
person selected by the affirmative vote of a majority of the remaining directors
or if the vacancy is not so filled or if only one (1) director remains, by the
shareholders. A director selected to fill a vacancy shall serve for the
unexpired term of such director's predecessor; provided, however, that when the
number of directors is increased, the directorships to be filled by reason of
such increase shall be filled by persons whose terms shall expire at the next
election of directors by the shareholders.
3.4 The directors shall meet annually, without notice, immediately
following the annual meeting of the shareholders. The President or any director
may call a special meeting of the directors at any time by giving each director
forty-eight hours notice. Such notice may be given personally or by first class
mail, telegram, or cablegram and shall be deemed given twenty-four hours after
it is mailed or at the time the telegram or cablegram is sent, addressed to the
director at his address as it appears on the share records of the corporation
or, if he is not a shareholder, addressed to his business address. A director
may waive notice of any such meeting by a written instrument, either before or
after the meeting. Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting and a waiver of any and all objections to the
place of the meeting, the time of the meeting, and the manner in which it has
been called or convened unless a director states at the beginning of the meeting
any such objection or objections to the transaction of business at that meeting.
Any meeting of the Board of Directors may be
<PAGE>
held within or without the State of Georgia at any place the person or persons
calling the meeting designates.
3.5 Any action required to be taken at a meeting of the directors or any
action that may be taken at a meeting of the directors may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all the directors, which consent shall be filed with the minutes of
the proceedings of the directors.
3.6 Any one or more directors may be removed from office, with or without
cause, at any meeting of shareholders by the affirmative vote of the holder or
holders of a majority of the shares of the corporation.
3.7
(a) RETIREMENT
On the date a Director of the corporation attains the age of 70, retirement from
the Board is mandatory and automatic.
(b) DIRECTOR EMERITUS STATUS
On the date a `Charter Outside Director' attains the age of 70 or otherwise
ceases to be a member of the Board of Directors of the corporation and all
Boards of the Company's subsidiaries, such Director shall automatically become a
Director Emeritus for a period of five years. A Director Emeritus shall not
attend Board meetings except by request of the Board and for a specific purpose,
but the Director Emeritus shall be entitled to receive compensation in an amount
as may be set by the Board of Directors.
The Board may request the Director Emeritus to provide consultation on specific
matters; however, a Director Emeritus shall have no voting privileges, shall not
be counted in determining the presence of a quorum as provided in Section 3.2,
shall not have any responsibility or be subject to any liability which may be
imposed upon a Director, and shall not otherwise be deemed a Director.
For purposes of this section, the term `Charter Outside Director' shall mean any
Director of the corporation who was elected to the Board of Directors of
Community Trust Bank prior to 1989, and who is not serving on the Board of the
corporation by virtue of or as a condition of his or her employment by the
corporation or any of its subsidiaries as of August 19, 1998.
(c) Any Director not meeting the qualifications of Director Emeritus shall
be deemed a retired Director upon attaining the age of 70 or otherwise ceasing
to be a member of the Board of Directors of the corporation.
<PAGE>
ARTICLE FOUR
------------
OFFICERS
4.1 The Board of Directors shall elect a President, a Secretary, and a
Treasurer and may elect a Chairman of the Board and one or more Vice Presidents
or assistant officers. Any person may hold two or more offices, except that no
person may hold both the offices of President and Secretary.
4.2 The President shall be the chief executive officer of the corporation
and shall be responsible for the administration of the corporation, including
general supervision of the policies of the corporation and general and active
management of the financial affairs of the corporation. He shall execute bonds,
mortgages, or other contracts under the seal of the corporation. The President
shall have the authority to institute or defend legal proceedings when the
directors are deadlocked.
4.3 The Secretary shall keep minutes of all meetings of the shareholders
and directors and shall have charge of the minute books, share books, and seal
of the corporation and shall perform such other duties and exercise such other
powers as the President or a majority of the Board of Directors may from time to
time designate.
4.4 The Treasurer shall be charged with the management of the financial
affairs of the corporation. He shall perform such duties as treasurers usually
perform and shall perform such other duties and shall exercise such other powers
as the President or a majority of the Board of Directors may from time to time
designate.
4.5 The Vice Presidents, if any, shall perform such duties as vice
presidents usually perform and shall perform such other duties and shall
exercise such other powers as the President or a majority of the Board of
Directors may from time to time designate. In the absence of the President or
in the event of his death or inability to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the President
and, when so acting, shall have all the powers of and be subject to all the
restrictions upon the President.
4.6 The Board of Directors or the President may appoint one or more Vice
Presidents and such other officers, assistant officers, and agents as, in the
judgment of the Board of Directors or the President, will be in the best
interests of the corporation. Any Vice President so appointed shall perform the
duties described in Section 4.5 of these bylaws. Any other officers or
assistant officers so appointed shall perform such duties as elected officers or
assistant officers having the same title usually perform and shall perform such
other duties and shall exercise such other powers as the President or majority
of the Board of Directors may from time to time designate.
<PAGE>
4.7 The Board of Directors may remove any officer, assistant officer, or
agent elected or appointed by it whenever in the Board's judgment the best
interests of the corporation will be served thereby. The President or the Board
of Directors may remove any officer, assistant officer, or agent appointed by
the President whenever in his or its judgment the best interests of the
corporation will be served thereby.
ARTICLE FIVE
------------
SEAL
The seal of the corporation shall be in such form as the Board of Directors
may from time to time determine. In the event that use of the seal is at any
time inconvenient, the signature of the corporation followed by the word "SEAL"
enclosed in parenthesis or scroll shall be deemed the seal of the corporation.
The seal of the corporation shall remain in the custody of the Secretary, and he
shall affix it on the share certificates and such other papers as the law, these
bylaws, or the Board of Directors may direct.
ARTICLE SIX
-----------
INDEMNIFICATION, INSURANCE, AND REIMBURSEMENT
6.1 Each person who is or was a director, officer, employee, or agent of
the corporation (including the heirs, executors, administrators, or estate of
such person) or who is or was serving, at the request of the corporation, as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise shall by right be indemnified by the
corporation, to the full extent permitted or authorized by the present and
future laws of the State of Georgia, against any liability, cost, payment, or
expense asserted against him or paid or incurred by him in his capacity as such
a director, officer, employee, or agent, whether asserted, paid, or incurred
during or after his service as such a director, officer, employer, or agent.
The corporation may purchase and maintain, at its expense, insurance to protect
itself and any such person against any such liability, cost, payment, or
expense. The foregoing right of indemnification shall not be deemed exclusive
of any other right to which those indemnified or seeking indemnification may be
entitled both as to action in their official capacities and as to action in
another capacity while holding such offices, and the corporation may provide
such additional rights to its directors, officers, employees, and agents.
6.2 Any payments made to any director, officer, employees or shareholder
of the corporation, including, without limitation, payments as salaries,
commissions, bonuses, fees, interest, rents, or entertainment expenses, which
payments, after having been deducted for income tax purposes by the corporation,
shall have been disallowed in whole or in part as a deductible expense by the
Internal Revenue Service or the Georgia Department of Revenue, shall be
reimbursed by such director, officer, employee, or shareholder to the
corporation to the full extent of such disallowance. It shall be the duty of
the Board of Directors to enforce the reimbursement of all such amounts so
disallowed. In the event any such director, officer, employee, or shareholder
fails or refuses to reimburse such amounts upon demand made by the
<PAGE>
corporation, the corporation may, without limiting any other remedies it may
have, withhold from future payments due and owing to such director, officer,
employee, or shareholder, an amount or amounts sufficient to reimburse the
corporation to the full extent of such disallowance. All directors, officers,
employees, and shareholders receiving any such payment as aforesaid shall, upon
demand made by the corporation and as a condition to receiving any such payment,
acknowledge and agree in writing that in the event such payment or any portion
thereof is disallowed by the Internal Revenue Service or the Georgia Department
of Revenue as a deductible expense, the amount of all such payments, to the
extent of such disallowance, shall be returned to the corporation.
ARTICLE SEVEN
-------------
AMENDMENT
These bylaws may be amended at any meeting of the shareholders by the
affirmative vote of a majority of the issued and outstanding shares of the
corporation, or at any meeting of the directors of the corporation by an
affirmative vote of a majority of all directors then holding office, provided,
that the shareholders may provide by resolution that any bylaw provision
repealed, amended, adopted or altered by them may not be repealed, amended,
adopted or altered by the Board of Directors.
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED BYLAWS OF
COMMUNITY TRUST BANK
ARTICLE ONE
Offices
1.1 Registered Office. The bank shall maintain a registered office in the
-----------------
county in the State of Georgia where the bank is authorized to conduct its
general business. Unless the Board of Directors designates otherwise, the
bank's main office shall be the registered office.
1.2 Other Offices. In addition to its registered office, the bank also may
-------------
have offices at such other place or places as the Board of Directors may from
time to time select, or as the business of the bank may require or make
desirable, subject to the banking laws of this State.
ARTICLE TWO
Shareholders' Meetings
2.1 Place of Meetings. Meetings of the shareholders of the bank may be held
-----------------
at any place within the State of Georgia, as set forth in the notice thereof,
or, in the event of a meeting held pursuant to waiver of notice, as set forth in
the waiver, or, if no place is so specified, at the registered office of the
bank.
2.2 Annual Meetings. The annual meeting of shareholders of the bank shall be
---------------
held within the initial 120 days of each calendar year for the purpose of
electing directors and transacting any and all business that may properly come
before the meeting. The Board of Directors may postpone any annual meeting, for
not more than seven (7) days, for cause upon not less than ten (10) days written
notice to all shareholders.
2.3 Substitute Annual Meeting. If the annual meeting is not held on the day
-------------------------
designated in Section 2.2, any business, including the election of directors,
which might properly have been acted upon at that meeting, may be transacted at
any subsequent shareholders' meeting held pursuant to these bylaws or held
pursuant to a court order requiring a substitute annual meeting.
2.4 Special Meetings. Special meetings of shareholders or a special meeting
----------------
in lieu of the annual meeting of shareholders shall be called by the bank upon
the written request of the holders of twenty-five percent (25%) or more of all
the outstanding shares of capital stock of the bank entitled to vote in an
election of directors. Special meetings of the shareholders or a special
meeting in lieu of the annual meeting of shareholders may be called at any time
by the President, Chairman of the Board, or the Board of Directors.
<PAGE>
2.5 Notice of Meetings. Unless waived as contemplated in Section 5.2, or by
------------------
attendance at the meeting, either in person or by proxy, for any purpose other
than to object to the transaction of business, a written or printed notice of
each shareholders' meeting stating the place, day and hour of the meeting shall
be delivered not less than ten (10) days, nor more than fifty (50) days before
the date thereof, either personally, by mail, or by telegram, charges prepaid by
or at the direction of the President, the Secretary, or the officer or persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting. In the case of an annual or substitute annual meeting, the notice of
the meeting need not state the purpose or purposes of the meeting unless the
purpose or purposes constitute a matter which the Financial Institutions Code of
Georgia requires to be stated in the notice of the meeting. In the case of a
special meeting, the notice of the meeting shall state the specific topics of
the business to be transacted.
2.6 Quorum. At all meetings of the shareholders, the presence in person or by
------
proxy of the holders of more than one-half of the shares outstanding and
entitled to vote shall constitute a quorum. If a quorum is present, a majority
of the shares represented at the meeting and entitled to vote on the subject
matter shall determine any matter coming before the meeting unless a different
vote is required by the Financial Institutions Code of Georgia, by the Articles
of Incorporation of the bank or by these bylaws. The shareholders at a meeting
at which a quorum is once present may continue to transact business at the
meeting or at any adjournment thereof, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum. If a meeting cannot be organized for
lack of a quorum, those shareholders present may adjourn the meeting to such
time and place as they may determine. It shall not be necessary to give any
notice of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken. If,
however, after the adjournment the Board of Directors fixes a new record date
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record on the new record date entitled to vote at such
meeting. In the case of a meeting for the election of directors which is twice
adjourned for lack of a quorum, those present at the second of such adjourned
meetings, of which notice has been given in writing to shareholders, shall
constitute a quorum for the election of directors without regard to the other
quorum requirements of the Financial Institutions Code of Georgia, the Articles
of Incorporation of the bank, or these bylaws.
2.7 Voting of Shares. Each outstanding share having voting rights shall be
----------------
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. Voting on all matters shall be by voice vote or by show of hands
unless any qualified voter, prior to the voting on any matter, demands a vote by
ballot, in which case each ballot shall state the name of the shareholder voting
and the number of shares voted by him, and if such ballot is cast by proxy, it
shall also state the name of such proxy.
2.8 Proxies. A shareholder entitled to vote pursuant to Section 2.7 may vote
-------
in person or by proxy executed in writing by the shareholder or by his attorney
in fact. A proxy shall not be valid after eleven (11) months from the date of
its execution, unless a longer period is expressly stated therein. If the
validity of any proxy is questioned, it must be submitted to the secretary of
the shareholders' meeting for examination or to a proxy officer or committee
appointed by the person presiding at the meeting. The secretary of the meeting
or, if appointed, the proxy officer
<PAGE>
or committee, shall determine the validity or invalidity of any proxy submitted
and referenced by the secretary in the minutes of the meeting as to the
regularity of a proxy which shall be received as prima facie evidence of the
facts stated for the purpose of establishing the presence of a quorum at such
meeting and for all other purposes.
2.9 Presiding Officer. The Chairman of the Board of Directors or, in his
-----------------
absence the Vice-Chairman of Board of Directors, or in his absence, the
President, shall serve as chairman of every shareholders' meeting. The chairman
shall appoint such persons as he deems required to assist with the meeting.
2.10 Adjournments. Any meeting of the shareholders, whether or not a quorum
------------
is present, may be adjourned by the holders of a majority of the voting shares
represented at the meeting to reconvene at a specific time and place. Except as
otherwise provided by Section 2.6, it shall not be necessary to give any notice
of the reconvened meeting or of the business to be transacted, if the time and
place of the reconvened meeting are announced at the meeting which was
adjourned. At any such reconvened meeting, any business may be transacted which
could have been transacted at the meeting which was adjourned.
2.11 Action of Shareholders Without a Meeting. Any action required by the
----------------------------------------
Financial Institution Code of Georgia to be taken at a meeting of the
shareholders, or any action which may be taken at a meeting of the shareholders,
may be taken without a meeting if a written consent, setting forth the action so
taken, shall be signed by each of the shareholders entitled to vote with respect
to the subject matter thereof. Upon filing with the officer of the bank having
custody of its books and records, such consent shall have the same force and
effect as a unanimous vote of the shareholders at a special meeting called for
the purpose of considering the action authorized.
ARTICLE THREE
The Board of Directors
3.1 General Powers. The business and affairs of the bank shall be managed by
--------------
the Board of Directors. In addition to the powers and authority expressly
conferred upon it by these bylaws, the Board of Directors may exercise all such
powers of the bank and do all such lawful acts and things as are not by law, any
legal agreement among shareholders, the Articles of Incorporation, or these
bylaws directed or required to be exercised or done by the shareholders.
3.2 Requirements. Each director of the bank shall be a United States citizen,
------------
and at least eighty percent (80%) of the directors shall reside in the State of
Georgia and in the county in which the registered office of the bank is located,
or within forty (40) miles of any office of the bank authorized to offer a
complete banking service. Each director shall maintain on file with the Chief
Executive Officer of the bank a financial statement on forms prescribed by the
Department of Banking and Finance. Such financial statements shall be revised
annually, but in no event shall the statement on file be more than eighteen
months old. At the discretion of the Board of Directors, such financial
statements may be maintained in sealed envelopes available for inspection only
by State or Federal examiners.
<PAGE>
3.3 Number, Election and Term of Office. The Board of Directors of the bank
-----------------------------------
shall consist of not less than five (5), nor more than twelve (12) persons, with
the exact number within such minimum and maximum to be fixed and determined from
time to time by resolution of the Board of Directors, or by resolution of the
shareholders at any annual or special meeting of shareholders. The Board of
Directors may increase or decrease the number of directors by not more than two
(2) in any one year, so long as such increase or decrease does not place the
number of directors at less than five (5), nor more than twelve (12). Except as
provided in Section 3.6, the directors shall be elected by the affirmative vote
of a majority of the shares represented at the annual meeting of shareholders.
Each director, except in the case of his earlier death, resignation, retirement,
disqualification, or removal, shall serve until the next succeeding annual
meeting and thereafter until his successor shall have been elected and
qualified. The Board of Directors shall consist of a maximum of two (2) bank
officers.
3.4 Oath of Directors. Before assuming office, each director shall take an
-----------------
oath or affirmation that he shall diligently and honestly perform his duties in
the administration of the bank, that he will not permit a willful violation of
laws by the bank and that he meets the eligibility requirements of the Financial
Institutions Code of Georgia, the bank's Articles of Incorporation and these
bylaws. Such oath or affirmation shall be signed by the director and shall be
placed into the minutes of the meetings of the Board of Directors.
3.5 Removal. The entire Board of Directors or any individual director may be
-------
removed from office with or without cause by the affirmative vote of the holders
of a majority of the shares entitled to vote at an election of directors. In
addition, the Board of Directors may remove a director from office if such
director is adjudicated an incompetent by a court, if he is convicted of a
felony, if he files for protection from creditors under bankruptcy laws, if he
does not, within sixty (60) days of his election, accept the office in writing
or by attendance at a meeting of the Board of Directors and fulfill any other
requirements for holding the office of director, or if he fails to attend
regular meetings of the Board of Directors for two (2) consecutive meetings
without having been excused by the Board of Directors.
3.6 Vacancies. A vacancy occurring in the Board of Directors, whether caused
---------
by removal or otherwise and including vacancies resulting from an increase in
number of directors, may be filled for the unexpired term, and until the
shareholders shall have elected a successor, by the affirmative vote of a
majority of the directors remaining in office though less than a quorum of the
Board of Directors.
3.7 Compensation. Directors may receive such compensation for their services
-------------
as directors as may from time to time be fixed by vote of the Board of
Directors. A director may also serve the bank in a capacity other than that of
director and receive compensation, as determined by the Board of Directors, for
services rendered in such other capacity. Provided, however, no director shall
be compensated from commissions derived from the sale of credit related
insurance (credit life, disability, accident and health insurance, etc.) where
premiums paid by a bank customer for
<PAGE>
such insurance are financed by the bank as a part of the credit extended, or
where purchase of the insurance is a condition precedent to the granting of
credit.
3.8 Committees of the Board of Directors. The Board of Directors, by
------------------------------------
resolution adopted by a majority of the full Board of Directors, may designate
from among its members one or more committees, each consisting of three or more
directors. Each committee shall have the authority of the Board of Directors in
regard to the business of the bank to the extent set forth in the resolution
establishing such committee, subject to the limitations set forth in State and
Federal laws and regulations.
3.9 Retirement of Directors. When a Director of the bank attains the age of
------------------------
seventy (70), he must retire.
ARTICLE FOUR
Meetings of the Board of Directors
4.1 Regular Meetings. An annual organizational meeting of the Board of
----------------
Directors shall be held on the day of and after the annual meeting of the
shareholders of the bank. In the event the annual shareholders' meeting is not
held as provided by Sections 2.4 or 2.11, such organizational meeting shall be
held as herein provided for regular meetings. In addition, regular meetings of
the Board of Directors shall be held on the third Wednesday of every month once
a month during the calendar year except during the month in which the
organizational meeting of the Board of Directors is held. The Board of
Directors and the President are authorized to cancel not more than two of such
regular meetings, excluding the organizational meeting, during each calendar
year.
4.2 Special Meetings. Special meetings of the Board of Directors may be
----------------
called by or at the request of the President, Chairman of the Board, Vice-
Chairman of the board, or by any two directors in office at that time.
4.3 Place of Meetings. Directors may hold their meetings at any place within
-----------------
(or without) the State of Georgia as the Board of Directors may from time to
time establish for regular meetings, or as set forth in the notice of special
meetings, or in the event of a meeting held pursuant to waiver of notice, as set
forth in the waiver.
4.4 Notice of Meetings. No notice shall be required for any regularly
------------------
scheduled meeting of the directors of the bank. Unless waived as contemplated in
Section 5.2, the President or Secretary of the bank, or any director thereof
shall give notice to each director of each special meeting stating the time,
place, and purposes of the meeting. Such notice shall be given by mailing notice
of the meeting at least five (5) days before the date of the meeting, or by
telephone, telegram, or personal delivery at least three (3) days before the
date of the meeting. Notice shall be deemed to have been given by telegram or
cablegram at the time notice is filed with the transmitting agency. Attendance
by a director at a meeting shall constitute a waiver of
<PAGE>
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of business because the meeting
is not lawfully called.
4.5 Quorum. At meetings of the Board of Directors, more than one-half of the
------
directors then in office shall be necessary to constitute a quorum for the
transaction of business.
4.6 Vote Required for Action. Except as otherwise provided in these bylaws,
------------------------
by the bank's Articles of Incorporation, or by law, the act of a majority of the
directors present at a meeting at which a quorum is present at the time shall be
the act of the Board of Directors.
4.7 Action by Directors Without a Meeting. Any action which may be taken at
-------------------------------------
any meeting of the Board of Directors, or at any meeting of a committee of
directors may be taken without a meeting if a written consent thereto shall be
signed by all directors, or all the members of the committee, as the case may
be, and if such written consent is filed with the minutes of the proceedings of
the Board or the committee. Such consent shall have the same force and effect
as a unanimous vote of the Board of Directors or the committee.
ARTICLE FIVE
Notice and Waiver
5.1 Procedure. Whenever these bylaws require notice to be given to any
---------
shareholder or director, the notice shall be given as prescribed in Sections 2.5
or 4.4, whichever is applicable. Whenever notice is given to a shareholder or
director by mail, the notice shall be sent by first class mail by depositing the
same in a post office or letter box in a postage prepaid, sealed envelope,
addressed to the shareholder or director at his known address, and such notice
shall be deemed to have been given at the time the same is deposited in the
United States mail.
5.2 Waiver. Except as limited by the Financial Institutions Code of Georgia,
------
whenever any notice is required to be given to any shareholder or director by
law, by the Articles of Incorporation, or these bylaws, a waiver thereof in
writing, signed by the director or shareholder entitled to such notice, or by
the proxy of such shareholder, whether before or after the meeting to which the
waiver pertains, shall be deemed equivalent thereto; provided, however, that no
such waiver shall apply by its terms to more than one required notice.
ARTICLE SIX
Officers
6.1 Number. The officers of the bank shall consist of a President and a
------
Secretary. In addition, the Board of Directors may from time to time elect or
provide for the appointment of such other officers or assistant officers as it
deems necessary for the efficient management of the bank, or as shall otherwise
be required by law or regulation. Any two or more offices may be held by the
same person, except the offices of President and Secretary. The Board of
Directors shall have the power to establish and specify the duties for all
officers of the bank.
<PAGE>
6.2 Election and Term. All officers shall be elected by the Board of
-----------------
Directors and shall serve at the will of the Board of Directors and until their
successors have been elected and have qualified, or until their earlier death,
resignation, removal, retirement or disqualification. The bank shall immediately
inform the Georgia Department of Banking and Finance in writing of the election
of any new chief executive officer.
6.3 Compensation. The compensation of all officers of the bank shall be fixed
------------
by the Board of Directors, considering the recommendation of the Compensation
Committee of the Board of Directors, if such Committee is designated as provided
in section 3.8. Provided, however, no salaried officer may be compensated as a
director even though serving on the Board of Directors.
6.4 Removal. Any officer or agent elected by the Board of Directors may be
-------
removed by the Board of Directors with or without any cause whenever in its
judgment the best interests of the bank will be served thereby without prejudice
to any contract right to such officer. The bank shall immediately inform the
Georgia Department of Banking and Finance in writing of the names of any
officers removed and the reasons for such removal.
6.5 Chairman of the Board. The Board of Directors, in its discretion, may
---------------------
elect a Chairman of the Board of Directors who shall preside at all meetings of
the Board of Directors and act as chairman at all meetings of the shareholders
and perform such other duties as the Board of Directors may from time to time
direct.
6.6 Vice-Chairman of the Board. The Board of Directors, in its discretion may
--------------------------
also elect a vice-chairman of the Board of Directors, who shall act in the
absence of the chairman in the capacity of chairman.
6.7 President. The President shall be the chief executive officer of the bank
---------
and shall have general control and supervision over the business and affairs of
the bank. He shall see that all orders and resolutions of the Board of Directors
are carried into effect. In the absence of the chairman and vice-chairman of the
Board of Directors, the President shall preside and act as chairman of all
meetings of the shareholders and the Board of Directors. He also shall perform
such other duties as may be delegated to him from time to time by the Board of
Directors.
6.8 Officer in Place of President. The Board of Directors may designate an
-----------------------------
officer who shall, in the absence of a chairman and vice-chairman or disability
of the President, or at the direction of the President, perform the duties and
exercise the powers of the President.
6.9 Secretary. The Secretary shall keep accurate records of the acts and
---------
proceedings of all meetings of shareholders, directors and committees of
directors. He shall have authority to give all notices required by law or these
bylaws. He shall be custodian of the corporate books, records, contracts and
other documents. The Secretary may affix the bank's seal to any lawfully
executed documents requiring it and shall sign such instruments as may require
his signature.
<PAGE>
6.10 Bonds. Any director who is authorized to handle money or negotiable
-----
assets on behalf of the bank and all officers and employees of the bank shall be
bonded by a regularly incorporated surety company authorized to do business in
the State of Georgia, and the bank may pay the cost of such bonds. The form,
amount and surety of such bonds shall be approved by the Board of Directors and
shall be subject to any additional requirements of the Georgia Department of
Banking and Finance.
6.11 Reimbursement of Officers. Any payments made to an officer of the bank
-------------------------
such as salary, commission, bonus, interest or rent, or reimbursement of
entertainment expenses incurred by him, which shall be disallowed in whole or in
part as a deductible expense by the Internal Revenue Service, shall be
reimbursed by such officer to the bank to the full extent of such disallowance.
It shall be the duty of the Board of Directors to enforce payment of each such
amount disallowed. In lieu of payment by the officer, subject to the
determination of the Board of Directors, proportionate amounts may be withheld
from his future compensation payments until the amount owed to the bank has been
recovered.
ARTICLE SEVEN
Dividends
7.1 Time and Conditions of Declaration. Dividends upon the outstanding shares
----------------------------------
of the bank may be declared by the Board of Directors at any regular or special
meeting and paid in cash or property only out of the retained earnings of the
bank. Dividends can be paid without the approval of the Department of Banking
and Finance when the bank meets the paid-in capital and/or appropriated net
earnings requirements of the Financial Institutions Code of Georgia, and only in
compliance with the regulations of the Georgia Department of Banking and Finance
regarding payment of dividends.
7.2 Share Dividends-Treasury Shares. Dividends may be declared by the Board
-------------------------------
of Directors and paid out of any lawfully held treasury shares.
7.3 Share Dividends-Unissued Shares. Dividends may be declared by the Board
-------------------------------
of Directors and paid in the authorized but unissued shares of the bank out of
any retained earnings of the bank; provided that such shares shall be issued at
not less than the par value thereof, there shall be transferred to capital stock
at the time such dividend is paid an amount of retained earnings at least equal
to the aggregate par value of the shares to be issued as a dividend, and after
payment of the dividend the bank shall continue to maintain the paid-in capital
and/or appropriated retained earnings requirements of the Financial Institutions
Code of Georgia.
7.4 Share Splits. A split or division of the issued shares of any class into
------------
a greater number of shares of the same class without increasing the capital
stock of the bank shall not be construed to be a share dividend within the
meaning of this Article.
<PAGE>
ARTICLE EIGHT
Shares
8.1 Authorization and Issuance of Shares. The par value and the maximum
------------------------------------
number of shares of any class of the bank which may be issued and outstanding
shall be set forth from time to time in the Articles of Incorporation of the
bank. The Board of Directors may increase or decrease the number of issued and
outstanding shares of the bank within the maximum number of shares authorized by
the Articles of Incorporation and the minimum capitalization requirements of the
Articles of Incorporation or Georgia law.
8.2 Share Certificates. The interest of each shareholder in the bank shall be
------------------
evidenced by a certificate or certificates representing shares of the bank which
shall be in such form as the Board of Directors may from time to time adopt in
accordance with Georgia law. Share certificates shall be consecutively
numbered, shall be in registered form, and shall indicate the date of issue and
all such information shall be entered on the bank's books. Each certificate
shall be signed by the President or a Vice President and the Secretary or an
Assistant Secretary and shall be sealed with the seal of the bank or a facsimile
thereof; provided, however, that where such certificate is signed by a transfer
agent, or registered by a registrar, other than the bank itself, or any employee
of the bank, the signature of such officers may be facsimiles. In case any
officer or officers who shall have signed or whose facsimile signature shall
have been placed upon a share certificate shall have ceased for any reason to be
such officer or officers of the bank before such certificate is issued, such
certificate may be issued by the bank with the same effect as if the person or
persons who signed such certificate or whose facsimile signatures shall have
been used thereon had not ceased to be such officer or officers.
8.3 Rights of Bank with Respect to Registered Owners. Prior to due
------------------------------------------------
presentation for transfer of registration of its shares, the bank may treat the
registered owner of the shares as the person exclusively entitled to vote such
shares, to receive any dividend or other distribution with respect to such
shares, and for all other purposes; and the bank shall not be bound to recognize
any equitable or other claim to or interest in such shares on the part of any
other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
8.4 Transfer of Shares. Transfers of shares shall be made upon the stock
------------------
transfer books of the bank only upon direction of the person named in the share
certificate representing the shares to be transferred, or by an attorney of such
person lawfully constituted in writing; and before a new certificate is issued,
the old certificate shall be surrendered for cancellation or, in the case of a
certificate alleged to have been lost, stolen, or destroyed, the provisions of
Section 8.6 of these bylaws shall have been satisfied.
<PAGE>
8.5 Duty of Bank to Register Transfer. Notwithstanding any of the provisions
---------------------------------
of Section 8.4 of these bylaws, the bank is under a duty to register the
transfers of its shares only if:
(a) the share certificate is endorsed by the appropriate person or
persons; and
(b) reasonable assurance is given that these endorsements are genuine and
effective; and
(c) the bank has no duty to inquire into adverse claims or has discharged
any such duty; and
(d) any applicable law relating to the collection of taxes has been
complied with; and
(e) the transfer is in fact rightful or is to a bona fide purchaser.
8.6 Lost, Stolen, or Destroyed Certificates. Any person claiming a share
---------------------------------------
certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board of Directors so requires,
give the bank a bond of indemnity in form and amount, and with one or more
sureties satisfactory to the Board of Directors, as the Board of Directors may
require, whereupon an appropriate new certificate may be issued in lieu of the
one alleged to have been lost, stolen, or destroyed.
8.7 Fixing of Record Date. For the purpose of determining shareholders
---------------------
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the Board
of Directors may fix in advance a date as the record date, such date to be not
more than 50 days (and, in the case of a shareholders' meeting, not less than 10
days) prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken.
8.8 Record Date if None Fixed. If no record date is fixed as provided in
-------------------------
Section 8.7 of these bylaws, the record date for any determination of
shareholders which may be proper or required by law shall be the date on which
notice is mailed in the case of a shareholders' meeting, or the date on which
the Board of Directors adopts a resolution declaring a dividend in the case of a
payment of a dividend.
ARTICLE NINE
Indemnification
9.1 Indemnification. Any person, his heirs, executors, or administrators, may
---------------
be indemnified or reimbursed by the bank for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he shall be made a party by reason of the fact that he is or was a
director, trustee, officer, employee, or agent of the bank, or that he is or was
serving, at the request of the bank, as a director, trustee, officer, employee,
or agent of another firm, corporation, trust, or other organization or
enterprise; provided, however, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceedings as to
which he shall finally be adjudged to have been guilty of or liable for gross
<PAGE>
negligence, willful misconduct or criminal acts in the performance of his duties
to the bank, or to such other firm, corporation, trust, organization, or
enterprise; and provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been the subject of a compromise settlement, except with the approval of (i)
a court of competent jurisdiction, (ii) the holders of record of a majority of
the outstanding shares of capital stock of the bank, or (iii) a majority of the
members of the Board of Directors then holding office, excluding the votes of
any directors who are parties to the same or substantially the same action,
suit, or proceeding.
9.2 Payment of Expenses in Advance. Expenses incurred in defending any
------------------------------
action, suit, or proceeding referred to above may be paid by the bank in advance
of the final disposition of such action, suit, or proceeding as authorized by
the Board of Directors in the specific case upon receipt of an undertaking by or
on behalf of the director, trustee, officer, employee, or agent to repay such
amount unless it shall ultimately be determined that he is entitled to be
indemnified by the bank as provided above.
9.3 Insurance. The bank, upon the affirmative vote of a majority of its Board
---------
of Directors, may purchase and maintain insurance on behalf of any person who is
or was a director, trustee, officer, employee, or agent of the bank, or is or
was serving, at the request of the bank, as a director, trustee, officer,
employee, or agent of another firm, corporation, trust, or other organization or
enterprise against liability asserted against him and incurred by him in any
such capacity or arising out of his status as such, whether or not the bank
would have the power to indemnify him against such liability under the foregoing
provisions of these bylaws.
9.4 Rights Not Exclusive. The foregoing rights of indemnification or
--------------------
reimbursement shall not be exclusive of other rights to which the persons
referred to above, or their heirs, executors, or administrators, may be entitled
as a matter of law, and the bank may indemnify such persons to the extent
permitted by the Financial Institutions Code of Georgia and the Georgia Business
Corporation Code, as such laws may be amended from time to time.
ARTICLE TEN
Emergency Operations
10.1 General. In the event of an emergency declared by the President of the
-------
United States or the person performing his functions, or an emergency declared
by the Governor of the State of Georgia or the person performing his functions,
the officers and employees of this bank shall continue to conduct the affairs of
the bank under such guidance from the directors as may be available except as
the matters which by statute or regulation require specific approval of the
Board of Directors and subject to conformance with any governmental directives
during the emergency. In the absence of a plan of operation formulated by the
Board of Directors providing for conducting the business of the bank during the
time emergencies exist, the following provisions shall govern the operations of
the bank notwithstanding any other provisions of these bylaws to the contrary.
Provided, further, that all operations shall be consistent with all State and
Federal laws governing emergency operations.
<PAGE>
10.2 Meeting of Board of Directors. The Board of Directors shall meet as soon
-----------------------------
as practicable at the time and place within the State of Georgia, or, if no
place within the State of Georgia can be utilized promptly, without the State of
Georgia, as designated by the Chairman of the Board of Directors, the President,
the officer designated pursuant to Section 6.7, or any two directors. Any
director may waive notice of such meeting in writing before, at, or after such
meeting.
If it shall be determined at such meeting that there are less than five
(5) directors then capable of serving, the directors present at such meeting,
shall, by majority vote, appoint a sufficient number of persons to fill the
vacancies existing in the Board of Directors to bring the total number of
directors to not less than five (5).
As soon as a majority of such Board of Directors, consisting of not less
than five (5) members, can be assembled at the meeting required by this Section
10.2, or any adjournment thereof, which adjournment can be effected at any time
by a majority vote of those in attendance, the Board of Directors as then
constituted shall (i) appoint such officers as may be required to transact the
business of the bank to succeed the then appointed or acting officers who have
been incapacitated as a result of the emergency, and (ii) designate and
authorize temporary relocation and establishment of the main banking office and
any branch, branch bank or bank office of the bank which may have become wholly
or partially unusable as a result of the emergency conditions at any other
office, branch, branch bank or bank office of the bank, or other location in the
State of Georgia, and (iii) at its discretion, authorize the entry of the bank
into an agreement with any Federal Reserve Bank, Federal Home Loan Bank, banking
institution or branch (the "other bank") whereby the bank shall act as agent for
the other bank or the other bank shall act as agent for the bank and perform
temporarily any and all operations and functions thereof.
10.3 Interim Administration. Until such time as the meeting of the Board of
-----------------------
Directors required by Section 10.2 can be held and action taken by it, and in
the event either the President or the officer of the bank designated pursuant to
Section 6.7 cannot be located or is unable to continue normal executive duties,
all perfunctory matters ordinarily performed by the President may be performed
by any Vice President if such officer or officers have been designated, and if
not, by the Secretary of the bank.
10.4 Interim Office. Until such time as the meeting required by Section 10.2
--------------
can be held and action taken by the Board of Directors as then constituted, and
in the event that because of damage or disaster the main office or any branch,
branch bank or bank office of the bank office shall be relocated at any other
branch or location designated by the Acting President.
The Acting President shall notify the State and Federal Regulatory
Authorities of any such relocation of its main office, branches, branch banks,
or bank offices as promptly as possible.
<PAGE>
ARTICLE ELEVEN
Miscellaneous
11.1 Inspection of Books and Records. The Board of Directors shall have power
-------------------------------
to determine which accounts, books and records of the bank shall be open to the
inspection of shareholders, except such accounts, books, and records that are
specifically open to inspection by law, and the Board of Directors shall have
power to fix reasonable rules and regulations not in conflict with the
applicable law for the inspection of accounts, books and records which by law or
by determination of the Board of Directors shall be open to inspection.
11.2 Fiscal Year. The fiscal year of the bank shall be the calendar year.
-----------
11.3 Seal. The corporate seal shall be in such form as the Board of Directors
----
may from time to time determine.
11.4 Annual Statements. The bank shall prepare such financial statements
-----------------
showing the results of its operations during its fiscal year as shall be
required by Regulations of the Department of Banking and Finance. Upon receipt
of written request, the bank promptly shall mail to any shareholder of record a
copy of the most recent such financial statement.
11.5 Contracts, Checks, Drafts, Reports, etc. Such of the officers or
---------------------------------------
employees of the bank as may from time to time be designated by the Board of
Directors or by the Executive Committee shall have power and authority to sign
contracts, checks, drafts and like instruments and to endorse checks, bills of
exchange, orders, drafts and vouchers made payable or endorsed to the bank,
whether in its own right or in any fiduciary capacity. No officer or employee,
however, may on behalf of the bank, execute or deliver any check, draft or other
like instrument in favor of himself. Provided, further, any officer elected by
the Board of Directors may sign reports to the Department of Banking and Finance
and such other State and Federal agencies as may be filed, unless otherwise
required by law or regulation.
11.6 Legal Restrictions. All matters covered in these bylaws shall be subject
------------------
to such restrictions as shall be imposed on this bank by State and Federal laws
and regulations.
ARTICLE TWELVE
Amendments
12.1 Power to Amend Bylaws. The Board of Directors shall have power to alter,
---------------------
amend or repeal these bylaws or adopt new bylaws, but any bylaws adopted by the
Board of Directors may be altered, amended or repealed, and new bylaws adopted,
by the shareholders. The shareholders may prescribe that any bylaw or bylaws
adopted by them shall not be altered, amended or repealed, by the Board of
Directors.
<PAGE>
12.2 Conditions. Action taken by the shareholders with respect to bylaws
----------
shall be taken by an affirmative vote of a majority of all shares entitled to
elect directors, and action by the Board of Directors with respect to bylaws
shall be taken by an affirmative vote of a majority of all directors then
holding office.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,254,681
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 920,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 24,328,849
<INVESTMENTS-CARRYING> 24,328,849
<INVESTMENTS-MARKET> 24,328,849
<LOANS> 70,224,248
<ALLOWANCE> 992,135
<TOTAL-ASSETS> 103,549,371
<DEPOSITS> 83,461,856
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,075,411
<LONG-TERM> 5,500,000
0
0
<COMMON> 2,870,195
<OTHER-SE> 10,638,426
<TOTAL-LIABILITIES-AND-EQUITY> 103,549,371
<INTEREST-LOAN> 5,257,377
<INTEREST-INVEST> 966,005
<INTEREST-OTHER> 196,924
<INTEREST-TOTAL> 6,420,306
<INTEREST-DEPOSIT> 2,270,885
<INTEREST-EXPENSE> 2,458,173
<INTEREST-INCOME-NET> 3,962,133
<LOAN-LOSSES> 263,481
<SECURITIES-GAINS> 30,265
<EXPENSE-OTHER> 3,663,489
<INCOME-PRETAX> 1,179,203
<INCOME-PRE-EXTRAORDINARY> 836,884
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 836,884
<EPS-PRIMARY> .93
<EPS-DILUTED> .89
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
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<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
