U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[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
For the transition period from to
---------------- -----------------
Commission file number: 0-25846
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CCF HOLDING COMPANY
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Georgia 58-2173616
- ------------------------------ -------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification No.)
Organization)
101 North Main Street
Jonesboro, Georgia 30236
----------------------------------------
(Address of Principal Executive Offices)
(770) 478-8881
-----------------------------------------------
(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 Securities 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
--- ---
Number of shares outstanding of each of the issuer's classes of common
equity: At October 9, 1998 894,700 shares of the registrant's common stock were
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets as of
September 30, 1998 and December 31, 1997.....................1
Consolidated Statements of Income
for the three months and nine months ended
September 30, 1998 and September 30, 1997 ...................2
Consolidated Statements of Cash Flows
for the nine months ended
September 30, 1998 and September 30, 1997 ...................3
Notes to Consolidated Financial Statements ..................4
Item 2. Management's Discussion and Analysis or Plan of Operation ...6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...........................................9
Item 2. Changes in Securities and Use of Proceeds....................9
Item 3. Defaults upon Senior Securities .............................9
Item 4. Submission of Matters to a Vote
of Security Holders .......................................9
Item 5. Other Information ...........................................9
Item 6. Exhibits and Reports on Form 8-K ............................9
Signatures ............................................................10
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CCF HOLDING COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(Unaudited) (Audited)
ASSETS
------
<S> <C> <C>
Cash and due from banks $ 5,430,467 4,357,626
Federal funds sold 10,660,000 --
Interest-bearing deposits in other financial institutions 1,663,977 4,383,690
Investment securities available for sale 21,439,198 9,722,048
Mortgage-backed securities available for sale 224,970 1,837,509
Federal Home Loan Bank stock, at cost 1,013,200 1,013,200
Loans receivable 122,195,613 98,846,930
Less unearned income (675,155) (636,194)
Less allowance for loan losses (868,699) (669,505)
------------- -------------
Loans, net 120,651,759 97,541,231
------------- -------------
Accrued interest and dividends receivable 1,046,397 784,852
Premises and equipment, net 5,394,937 5,112,338
Other assets 792,800 203,550
------------- -------------
Total assets $ 168,317,705 124,956,044
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits:
Non-interest bearing $ 8,208,068 4,548,285
Interest bearing 144,027,374 86,653,055
------------- -------------
Total Deposits 152,235,442 91,201,340
Advance payments by borrowers for
property taxes and insurance 451,367 142,111
Securities sold under agreements to repurchase 2,833,435 2,392,579
Federal Home Loan Bank advances -- 18,510,000
Dividends payable 134,362 --
Other liabilities 1,224,547 1,190,409
------------- -------------
Total liabilities 156,879,153 113,436,439
------------- -------------
Stockholders' Equity:
Preferred stock, no par value; 1,000,000 shares
authorized; none issued and outstanding -- --
Common stock, $.10 par value; 4,000,000 shares
authorized; 906,710 shares issued in 1998 and 1997;
outstanding 894,700 in 1998 and 899,750 in 1997 90,114 90,671
Additional paid-in-capital 7,780,568 7,794,459
Retained earnings 4,260,145 4,443,500
Unearned ESOP shares (486,000) (540,000)
Unearned compensation (293,430) (394,195)
Treasury stock, at cost (70,822) (96,800)
Accumulated other comprehensive income 157,977 221,970
------------- -------------
Total stockholders' equity 11,438,552 11,519,605
------------- -------------
Total liabilities and stockholders' equity $ 168,317,705 124,956,044
------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements
1
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ------------------------
1998 1997 1998 1997
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans, including fees $2,856,057 1,964,770 7,814,335 5,226,307
Federal funds sold 114,106 267,017
Interest-bearing deposits in
other financial institutions 17,079 18,484 45,790 56,675
Investment securities 308,896 89,596 730,260 223,080
Mortgage-backed securities 4,283 28,797 30,419 156,594
Dividend 21,728 18,515 63,243 55,190
---------- ---------- ---------- -----------
Total interest and dividend income 3,322,149 2,120,162 8,951,064 5,717,846
Interest expense
Deposit accounts 1,783,807 910,677 4,726,220 2,437,521
Securities sold under agreement to repurchase 29,597 82,653
Federal Home Loan Bank advances -- 135,104 135,130 270,289
---------- ---------- ---------- -----------
Total interest expense 1,813,404 1,045,781 4,944,003 2,707,810
---------- ---------- ---------- -----------
Net interest income 1,508,745 1,074,381 4,007,061 3,010,036
Provision for loan losses 80,000 30,005 200,000 81,505
---------- ---------- ---------- -----------
Net interest income after provision
for loan losses 1,428,745 1,044,376 3,807,061 2,928,531
---------- ---------- ---------- -----------
Other income:
Service charges on deposit accounts 99,414 42,190 284,863 132,959
Gain on sale of loans 24,647
Gain on sale of premises and equipment 35,672 35,672
Gain(loss) on sale of investments and mortgage-backed
securities 176 136,513 355,741
Other operating income 31,082 46,033 87,416 105,563
---------- ---------- ---------- -----------
Total other income 130,496 124,071 508,792 654,582
---------- ---------- ---------- -----------
Other expenses:
Salaries and employee benefits 774,475 690,507 2,261,470 2,017,201
Occupancy 196,247 160,228 540,546 465,760
Federal insurance premiums 19,515 11,236 47,079 31,866
Other 382,653 316,125 1,133,078 1,005,130
---------- ---------- ---------- -----------
Total other expenses 1,372,890 1,178,096 3,982,173 3,519,957
---------- ---------- ---------- -----------
Income before income taxes 186,351 (9,649) 333,680 63,156
Income tax expense 65,545 (3,377) 117,535 22,105
---------- ---------- ---------- -----------
Net income $ 120,806 (6,272) 216,145 41,051
========== ========== ========== ==========
Basic Net income per share $ .14 (0.01) .26 .05
========== ========== ========== ==========
Diluted Net income per share $ .13 (0.01) .24 .05
========== ========== ========== ==========
Dividends declared per common share $ .16 -- .48 0.78
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 216,145 41,051
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Provision for loan losses 200,000 81,505
Depreciation, amortization, and accretion, net 324,943 130,044
Amortization of management stock bonus plan expense 80,570 109,109
ESOP Compensation Expense 136,916
Net gain on sale of investment securities and
mortgage-backed securities (136,513) (355,741)
Net (gain) loss on sale of loans 206 (24,647)
(Increase) decrease in accrued interest and
dividends receivable (261,545) 38,815
Net (gain)loss on sale of premises and equipment 347 (35,672)
Increase in other assets (496,937) (1,489,648)
Increase in other liabilities (41,246) 363,591
------------ -----------
Net cash provided by (used in) operating activities 22,886 (1,141,593)
------------ -----------
Cash flows from investing activities:
Proceeds from maturing investment securities-
available for sale 19,071,347 923,077
Proceeds from sales of investment securities-
available for sale 1,402,995 2,391,211
Purchases of investment securities-available for sale (32,127,695) (4,457,427)
Principal repayments on mortgage-backed securities-
available for sale 380,448 1,026,409
Proceeds from sales of mortgage-backed securities-
available for sale 1,167,169 6,291,692
Loan originations, net (30,096,983) (26,590,739)
Proceeds from sale of loans 6,786,249 1,803,570
Premises and Equipment Retired 296,922
Proceeds from sale of premises and equipment 347 99,304
Purchases of premises and equipment (999,214) (1,104,090)
------------ -----------
Net cash used in investing activities (34,118,415) (19,616,993)
------------ -----------
Cash flows from financing activities:
Net increase in savings and
demand deposit accounts 22,186,652 6,967,173
Net increase in certificates of deposits 38,847,450 12,676,819
Net increase in repos 440,856
Increase (Decrease) in Federal Home Loan Bank advances (18,510,000) 2,500,000
Net increase in advance payments by
borrowers for property taxes and insurance 309,256 241,152
Dividends paid (264,488) (639,067)
ESOP shares allocated 109,430 87,303
Cash paid in lieu of fractional shares (651) --
Common stock repurchased (51,190) (1,457,052)
------------ -----------
Net cash provided by financing activities 43,067,315 20,376,328
------------ -----------
Increase (decrease) in cash and cash equivalents 8,971,786 (382,258)
Cash and cash equivalents at beginning of period $ 8,741,316 4,747,486
------------ -----------
Cash and cash equivalents at end of period 17,713,102 $ 4,365,228
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 4,944,003 $ 2,615,915
============ ============
Income taxes paid $ 30,000 $ 71,360
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The consolidated financial statements for the three and nine month periods ended
September 30, 1998 and 1997 are unaudited and reflect all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the financial position,
operating results, and cash flows for the interim periods. Accordingly, they do
not include all information and disclosures required by generally accepted
accounting principles for complete financial statements.
The results of operations for the nine month period ended September 30, 1998 are
not necessarily indicative of the results for the entire year ending December
31, 1998.
2. Accounting Policies
Reference is made to the accounting policies of the Company described in the
notes to the consolidated financial statements contained in the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1997 filed with the
Securities and Exchange Commission.
3. Reclassifications
Certain amounts in the prior period financial statements have been reclassified
to conform to the presentation used in the current period consolidated financial
statements.
4. Cash Dividends
On March 17, 1998, the Company declared a cash dividend of $.16 per share to
stockholders of record on April 1, 1998. These dividends were paid on April 15,
1998. On June 12, 1998, the Company declared a cash dividend of $.16 per share
to stockholders of record on July 1, 1998. These dividends were paid on July 15,
1998. On September 15, 1998, the Company declared a cash dividend of $.16 per
share to stockholders of record on October 1, 1998. These dividends were paid on
October 15, 1998.
5. Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). This statement established standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. SFAS 130 requires all items that are required to be
recognized under accounting standards as components of comprehensive income to
be reported in an annual financial statement that is displayed in equal
prominence with the other annual financial statements. For interim period
financial statements, enterprises are required to disclose a total for
comprehensive income in those financial statements. The term "comprehensive
income" is used in SFAS 130 to describe the total of all components of
comprehensive income including net income. "Other comprehensive income" refers
to revenues, expenses, gains, and losses that are included in comprehensive
income but excluded from earnings under current accounting standards. Currently,
"other comprehensive income" for the Company consists solely of items previously
recorded as a component of shareholders' equity under SFAS 115, Accounting for
Certain Investments in Debt and Equity Securities. The Company has adopted the
interim-period disclosure requirements of SFAS 130 effective March 31, 1998 and
will adopt the annual financial statement reporting and disclosure requirements
of SFAS 130 effective December 31, 1998.
Total comprehensive income (loss) for the three months and nine months ending
September 30, 1998 was $(35,596) and $59,744 respectively. For the three months
and nine months ending September 30, 1997 comprehensive income was $(132,838)
and $17,585 respectively.
4
<PAGE>
6. Earnings Per Share
In February 1997, The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per
Share. SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15,
Earnings Per Share, and specifies the computation, presentation, and disclosure
requirements for earnings per share (EPS). SFAS No. 128 replaces the
presentation of primary EPS and fully diluted EPS with a presentation of basic
EPS and diluted EPS on the face of the income statement for all entities with
complex capital structures. All prior period EPS data has been restated to
conform with SFAS No. 128.
Basic EPS excludes dilution and is computed by dividing net income by weighted
average shares outstanding which includes Management Stock Bonus Plan shares
which have been awarded whether vested or not and exclude unallocated shares
under the Company's employee stock ownership plan until they are committed to be
released for allocation. Diluted EPS is computed by dividing net income by
weighted average shares outstanding plus potential common stock resulting from
dilutive stock options.
All average share and per share data in the accompanying consolidated financial
statements and all share and per share data have been restated to reflect the
10% stock dividend declared in December 1997, which was effected on January 15,
1998.
SFAS No. 128 requires the presentation on the face of the statement of income of
earnings per share with and without the dilutive effects of potential common
stock issuances from instruments such as options, convertible securities and
warrants. Additionally, the new statement requires the reconciliation of the
amounts used in the computation of both "basic earnings per share" and "diluted
earnings per share" as follows:
<TABLE>
<CAPTION>
For the three months ended September 30, 1998
---------------------------------------------
Per share
Net Earnings Common Shares Amount
------------ ------------- ------
<S> <C> <C> <C>
Basic earnings per share $120,806 861,661 $0.14
Effect of dilutive common stock issuances:
Stock Options 46,432
-----------------------------------------------
Diluted Earnings per share $120,806 908,093 $0.13
===============================================
</TABLE>
<TABLE>
<CAPTION>
For the three months ended September 30, 1997
---------------------------------------------
Per share
Net Earnings Common Shares Amount
------------ ------------- ------
<S> <C> <C> <C>
Basic earnings per share ($6,272) 836,456 ($0.01)
Effect of dilutive common stock issuances:
Stock Options 26,285
-----------------------------------------------
Diluted Earnings per share ($6,272) 865,741 ($0.01)
===============================================
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended September 30, 1998
Per share
Net Earnings Common Shares Amount
------------ ------------- ------
<S> <C> <C> <C>
Basic earnings per share $216,145 840,680 $0.26
Effect of dilutive common stock issuances:
Stock Options 49,015
----------------------------------------------
Diluted Earnings per share $216,145 889,695 $0.24
==============================================
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended September 30, 1997
--------------------------------------------
Per share
Net Earnings Common Shares Amount
------------ ------------- ------
<S> <C> <C> <C>
Basic earnings per share $41,051 860,850 $0.05
Effect of dilutive common stock issuances:
Stock Options 23,445
----------------------------------------------
Diluted Earnings per share $41,051 884,295 0.05
==============================================
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CCF Holding Company, a bank holding company as of September 1, 1998 is the
parent of the wholly owned subsidiary, Heritage Bank, a state chartered
commercial bank as of September 1, 1998. Prior to this time, CCF Holding Company
was a unitary thrift holding company, owning 100% of the outstanding shares of
Heritage Bank (formerly known as Clayton County Federal Savings & Loan
Association) a federally chartered savings institution.
CCF Holding Company (the "Company") may from time to time make written or oral
"forward-looking statements", including statements contained in the Company's
filings with the Securities and Exchange Commission (including this report on
Form 10QSB), in its reports to stockholders and in other communications by the
Company, which are made in good faith by the Company pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward looking statements involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in forward
looking statements: the strength of the United States economy in general and the
strength of the local economies in which the Company conducts operations; the
effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal
Reserve System, inflation, interest rate and market and monetary fluctuations;
the timely development of and acceptance of new products and services of the
Company and the perceived overall value of these products and services by users,
including the features, pricing and quality compared to competitors' products
and services; the willingness of users to substitute competitors' products and
services for the Company's products and services; the success of the Company in
gaining regulatory approval of its products and services, when required; the
impact of changes in financial services' laws and regulations (including laws
concerning taxes, banking, securities and insurance); technological changes,
acquisitions; changes in consumers spending and saving habits; and the success
of the Company at managing the risks involved in the foregoing.
The Company cautions that these important factors are not exclusive. The Company
does not undertake to update any forward looking statement, whether written or
oral, that may be made from time to time by or on behalf of the Company.
Comparison of Financial Condition at September 30, 1998 and December 31, 1997
Assets - The Company's assets increased by 34%, or $43.4 million, between
December 31, 1997 and September 30, 1998. Loans receivable increased 23% to
$120.4 million at September 30, 1998, up $23.1 million from $97.5 million at
December 31, 1997. The Company's loan growth is primarily centered in the
commercial real estate lending and single family construction loans. Commercial
real estate loans have increased approximately $12 million and construction
loans by approximately $6 million. Consumer loans have shown substantial growth
of 215% or $9.5 million since December 31, 1997. This is primarily due to the
establishment of an indirect lending department which totals $6.7 million in
outstandings at September 30, 1998. These loans are primarily for the financing
of home improvement, water craft and recreational vehicles. Premises and
equipment increased by $391,000 or 7% during the nine month period ended
September 30, 1998. This is due primarily to the renovation of two existing
offices in Morrow and Forest Park, Georgia.
Liabilities - Total deposits during the nine months ended September 30, 1998 had
reached $153 million, an increase of $61.2 million, or 66%, from $91.2 million
at December 31, 1997. Transaction accounts (checking, NOW and money markets)
have grown $22.9 million or 84% during the period. This growth is due to the
expansion into the new markets of Henry and Fayette Counties and the increasing
recognition of Heritage Bank as a full service community bank. Certificates have
increased from $45.9 million to $81.4 million, or 77%. This growth was the
result of a marketing campaign to increase deposits which provided the necessary
funding for the balance sheet growth and the payment of the balance due at the
Federal Home Loan Bank, $18.5 million.
Stockholders' Equity - Stockholders' equity decreased $81,053 or .7%, from
December 31, 1997 to September 30, 1998. This decrease was primarily the result
of the $63,993 decrease in unrealized gains on securities available for sale.
The Company has declared three quarterly dividends totaling $134,023; $133,331
and $134,362 respectively which partially offset the income of $216,145 provided
to stockholders equity. The ratio of stockholders' equity as a percentage of
total assets decreased to 6.8% at September 30, 1998 from 9.2% at December 31,
1997. Book value per share decreased from $12.81 at December 31, 1997 to $12.78
at September 30, 1998.
6
<PAGE>
Comparison of Operating Results for the Three Months Ended September 30, 1998
and 1997
Net Income - The Company's net income of $120,806 for the three-month period
ended September 30, 1998 increased by $127,078 from a net loss of $6,272 for the
same period in 1997. The increase in net income for the three month period ended
September 30, 1998, was primarily the result of an increase of net interest
income, generated through loan growth.
Net Interest Income - Net interest income for the three-month period ended
September 30, 1998 increased $435,000 or 40%, from $1,074,381 in 1997 to
$1,508,745 for the same period in 1998. The increase in the average balance of
loans receivable during the three-month period ended September 30, 1998,
compared to the same period in 1997, resulted in a $891,000 or 45%, increase in
interest income from loans to $2.9 million from $2.0 million, respectively.
Investment and mortgage-backed securities interest income increased $219,000
from 1997 to 1998, to $309,000 from $90,000. Interest on Federal funds sold for
the same period increased from $0 to $114,000. Interest expense increased
$873,000 to $1.8 million for the three-month period ended September 30, 1998
from $910,677 for the same period in 1997. This increase is the result of the
increase in deposits during the quarter ended September 30, 1998.
Provision for Loan Losses - The Bank's provision for loan losses increased by
$49,995 for the three month period ended September 30, 1998 compared to the same
period in 1997, increasing to $80,000 from $30,005. Management periodically
evaluates the adequacy of the allowance for loan losses, including an evaluation
of past loan loss experience, current economic conditions, volume, growth and
collateral of the loan portfolio. Management also reviews classified assets,
including those loans and assets listed as non-performing. Management currently
believes that its allowance for loan losses is adequate. However, there can be
no assurances that further additions will not be needed. Loans internally
classified as substandard for the period ending September 30, 1998 totaled $1.1
million and for the period ending December 31, 1997 substandard loans totaled
$762,000. The increase was due to the addition of one loan which was placed on
non accrual during the first quarter due to its past due status of more than 90
days. Management believes that this loan is adequately secured and no loss is
anticipated. There were no loans classified as doubtful or loss for either
period.
Other Income - Other income increased 5%, or $6,000 to $130,500 in the
three-month period ended September 30, 1998 from $124,000 for the same period in
1997. This increase was primarily due to an increase in the service charges on
deposit accounts of $57,000 in the 1998 period partially offset by a Gain on
sale of Premises of $36,000 during this period in 1997.
Other Expenses - Other expenses for the three month period ended September 30,
1998 increased 16% from $1.2 million for the three-month period ended September
30, 1997 to $1.4 million for the same period in 1998, an increase of $195,000.
Salary and benefit expense increased by $84,000 to $775,000 for the three month
period ended September 30, 1998 compared to $691,000 during the same three-month
period in 1997. In addition, occupancy expense increased $26,000 to $196,000 for
the three-month period ended September 30, 1998 from $160,000 during the same
period in 1997. This increase is due primarily to the establishment of two new
facilities during 1997. Computer processing expenses increased by $34,000 from
$59,000 during the quarter ended September 30, 1997 to $93,000 for the current
quarter. This increase is directly related to the growing number of deposit
accounts. Fees paid for legal counsel, accounting and auditing services
increased by $14,000 during the quarter ending September 30, 1998 from $23,000
in 1997 to $37,000 in 1998. This increase is primarily due to the retention of
outside consultants for Internal Audit and Credit Review. Additional expense was
also recognized during the charter conversion, from a unitary thrift to a bank
holding company.
Liquidity Resources - The Bank's liquidity ratio averaged 19.84% during the
quarter ending September 1998 compared to 15.72% during September 1997. The Bank
manages its liquidity levels in order to meet funding needs for deposit
outflows, payments of real estate taxes and escrow accounts on mortgage loans,
loan funding commitments, and repayments of borrowings, when applicable. The
primary source of funds are deposits, amortization and prepayments of loans, the
sale and maturity of investment and mortgage-backed securities, short-term
Federal Home Loan Bank advances and funds provided by operations.
Year 2000 - The Board and management of CCF Holding Company and Heritage Bank
consider the Year 2000 (Y2K) issue to be very serious and are addressing it
accordingly. The impact to our institution may and could be felt from multiple
directions; outside vendors, customers, internal systems and government
agencies. The bank has been aggressively addressing the Y2K issues as the
highest of priorities. The core processing systems of the bank are not
proprietary, we are reliant on FISERV Solutions, Inc. and for obvious reasons
the bank is monitoring their progress intently. (This topic continues on the
next page.)
7
<PAGE>
Year 2000 (continued) - FISERV Solutions, Inc. has completed testing for Year
2000 with no significant findings. The internal task force is currently
reviewing the detailed findings contained in the FISERV proxy reports. FISERV
Solutions, Inc. has also been reviewed by the Federal Financial Institutions
Examination Council. The internal task force established by the company has
completed both the Awareness and Assessment phases of the Y2K project. The
recommendations for renovation and validation have been completed. A test lab
has been established to verify the compliance of software used by the Company.
Internally identified mission critical software that can be tested has been
tested in the test lab. Testing with the Federal Reserve system is underway, no
problems have been noted. Our major correspondent banks have provided us their
proxy testing with no significant problems identified. All of the personal
computers at the Company have been tested for hardware compliance with the Year
2000 rollover. The remaining validation and implementation procedures are
expected to be completed by June 30, 1999. The Company has been reviewed by two
regulatory agencies on its Year 2000 progress. There were no significant
findings noted in either review. The Company will continue to closely monitor
the progress all of its vendors, including correspondent banks, and will
aggressively address potential problems as they arise. The Bank expects its
expenses related to the Year 2000 for 1998 to be less than $25,000. The budget
for 1999 includes Year 2000 expenses of $17,000. This amount is subject to
change as the renovation phase continues. Loan officers have completed surveys
to identify any customers that may be impacted by the Year 2000 issues. There
have been no critical issues identified to date. The Company has submitted its
Contingency Plan to the FDIC for their review and approval.
Comparison of Operating Results for the Nine Months Ended September 30, 1998 and
1997
Net Income - The Company's net income of $216,145 for the nine month period
ended September 30, 1998 reflected an increase of $175,000 or 426%, from a net
income of $41,051 for the same period in 1997. The increase in net income for
the nine month period ended September 30, 1998, was primarily due to an increase
of net interest income, generated through loan growth. Net loans outstanding
have increased by 35% or $31 million since September 1997.
Net Interest Income - Net interest income for the nine month period ended
September 30, 1998 increased $997,000 or 33%, from $3 million in 1997 to $4
million for the same period in 1998. The increase in the average balance of
loans receivable during the nine month period ended September 30, 1998, compared
to the same period in 1997, resulted in a $2.6 or 49%, increase in interest
income from loans to $7.8 million from $5.2 million, respectively. Investment
and mortgage-backed securities interest income increased $507,000 from the
quarter ending September 1997 to the quarter ending September 1998, to $730,000
from $224,000. Interest on Federal funds sold for the same period increased from
$0 to $267,000. Interest expense increased $2.2 million to $4.9 million for the
nine month period ended September 30, 1998 from $2.7 million for the same period
in 1997. This increase is the result of the growth in deposits during the nine
months ended September 30, 1998.
Provision for Loan Losses - The Bank's provision for loan losses increased by
$120,000 for the nine month period ended September 30, 1998 compared to the same
period in 1997. The provision increased from $81,505 during the nine month
period ending September 30, 1997 to $200,000 during the same period in 1998.
This increase was necessary to maintain the level of reserve to outstandings,
due to the strong growth in the loan portfolio. Management will continue to
monitor and adjust the allowance as necessary in future periods.
Other Income - Other income decreased 22%, or $146,000 to $509,000 in the nine
month period ended September 30, 1998 from $655,000 for the same period in 1997.
This decrease was primarily due to a decrease in the Gain on Sale of Securities.
The gain of sale of securities for the current period was $137,000 as compared
to $356,000 for the same period last year. This difference is offset by an
increase of $152,000 or 114% in service charge income on deposit accounts from
$133,000 in the nine months ending September 1997 to $285,000 in the nine months
ending September 1998.
Other Expenses - Other expenses for the nine month period ended September 30,
1998 increased 13% from $3.5 million for the nine month period ended September
30, 1997 to $4 million for the same period in 1998, an increase of $462,000.
Salaries and employee benefits increased by $244,000 for the nine month period
ended September 30, 1998. Occupancy expense increased by $75,000 or 18% for the
nine months ended September 1998. This is due primarily to the establishment of
two new offices in 1997. Insurance premiums have increased by $15,000 from
$32,000 in 1997 to $47,000 in September 1998. Other material increases have
occurred in computer related expenses which increased by $67,000 from $190,600
in September 1997 to $257,900 in September 1998.
Income Taxes - Effective tax rates during the two nine month periods were
comparable as there were no changes in statutory tax rates.
8
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PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings.
-----------------
NONE
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
NONE
Item 3. Defaults upon Senior Securities.
-------------------------------
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
A special meeting was held on August 4, 1998. The purpose of this
meeting was to vote on an amendment to the Articles of the Registrant to clarify
that the registrant could act as a Bank Holding Company. The following
summarizes the voting:
FOR 829,262 AGAINST 1,980 ABSTAINING 577
Accordingly, this amendment was approved.
Item 5. Other Information
-----------------
NONE
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
3(i) Restated Articles of Incorporation.
9
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARY
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CCF HOLDING COMPANY
Date: November 11, 1998 BY: /s/ David B. Turner
------------------------------------
David B. Turner
President and
Chief Executive Officer
Date: November 11, 1998 BY: /s/ Mary Jo Rogers
------------------------------------
Mary Jo Rogers
Vice President and
Chief Financial Officer
10
RESTATED ARTICLES OF INCORPORATION
OF
CCF HOLDING COMPANY
ARTICLE 1.
NAME AND ADDRESS. The name of the corporation is CCF Holding Company
(hereinafter referred to as the "Corporation") and its principal executive
office is located at 101 North Main Street, Jonesboro, Georgia.
ARTICLE 2.
REGISTERED AGENT; REGISTERED OFFICE. The name of the Corporation's
Registered Agent is David B. Turner, who is a resident of the State of Georgia
and is named herein as an initial director of the Corporation. The post office
address of the Corporation's registered office is 101 North Main Street,
Jonesboro, Georgia.
ARTICLE 3.
PURPOSE; POWERS. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the Georgia
Business Corporation Code (hereinafter referred to as the "Code"). The
Corporation shall have all the powers of a corporation organized under said
Code.
ARTICLE 4.
DURATION. The duration of the Corporation shall be perpetual.
ARTICLE 5.
CAPITAL STOCK.
A. AUTHORIZED STOCK. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is five million
(5,000,000), of which four million (4,000,000) shall be shares of
common stock, $0.10 par value per share (hereinafter referred to as the
"Common Stock"), and of which one million (1,000,000) shall be shares
of preferred stock, no par value per share (hereinafter referred to as
the "Preferred Stock"). The aggregate par value of all authorized
shares (of all classes) having a par value is $400,000.
B. COMMON STOCK. Except to the extent to which the Board of Directors
shall have specified voting power with respect to any other class of
stock and except as otherwise provided by law, the exclusive voting
power shall be vested in the Common Stock, the holders thereof being
entitled to one vote for each share of such Common Stock standing in
his or her name on the books of the Corporation. Subject to any rights
and preferences of any other class of stock, holders of Common Stock
are entitled to such dividends as may be declared by the Board of
Directors out of funds lawfully available therefor. Upon any
liquidation, dissolution, or winding
1
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up of the affairs of the Corporation, whether voluntary or involuntary,
holders of Common Stock are entitled to receive pro rata the remaining
assets of the Corporation after the holders of any class of stock
ranking prior to the Common Stock have been paid in full any sums to
which they may be entitled.
C. PREFERRED STOCK. Shares of Preferred Stock may be issued from time
to time in one or more series as may from time to time be determined by
the Board of Directors, each of said series to be distinctly
designated. All shares of any one series of Preferred Stock shall be
identical. The voting powers and the preferences and relative,
participating, optional and other special rights of each such series,
and the qualifications, limitations or restrictions thereof, if any,
may differ from those of any and all other series at any time
outstanding; and the Board of Directors of the Corporation is hereby
expressly granted authority to fix by amendment to these Articles of
Incorporation (which amendment, pursuant to Georgia law, may become
effective without stockholder action) adopted prior to the issuance of
any shares of a particular series of Preferred Stock, the voting powers
and the designations, preferences and relative, optional and other
special rights, and the qualifications, limitations and restrictions of
such series, including, but without limiting the generality of the
foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series, which
number may be increased or decreased (but not below the number
of shares then outstanding) from time to time by like action
of the Board of Directors;
(2) The rate and times at which, and the terms and conditions
on which, dividends, if any, on Preferred Stock of such series
shall be paid, the extent of the preference or relation, if
any, of such dividends to the dividends payable on any other
class or classes or series of the same or other classes of
stock and whether (and the dates from which) such dividends
shall be cumulative or noncumulative;
(3) The right, if any, of the holders of Preferred Stock of
such series to convert the same into or exchange the same for,
shares of any other class or classes or of any series of the
same or any other class or classes of stock of the Corporation
or any other corporation and the terms and conditions of such
conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and
the time or times at which, and the terms and conditions on
which, Preferred Stock or such series may be redeemed;
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation,
merger, consolidation, distribution or sale of assets,
dissolution or winding up of the Corporation;
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of
such series; and
(7) The voting powers, if any, of the holders of such series
of Preferred Stock.
D. SHARE DIVIDENDS. The Board of Directors may issue shares of one
class or series as a share dividend in respect of another class or
series.
2
<PAGE>
ARTICLE 6.
CONDUCT OF CORPORATE AFFAIRS. The following provisions are inserted for
the management of the business and the conduct of the affairs of the
Corporation, and for further definition, limitation and regulation of the powers
of the Corporation and of its directors and stockholders.
A. PREEMPTIVE RIGHTS; CUMULATIVE VOTING. The holders of the Common
Stock have no preemptive rights or other rights to subscribe to any
other shares of Common Stock or other securities of the Corporation.
Holders of the Common Stock or any other equity securities of the
Corporation have no right to cumulate votes for the election of
directors.
B. BYLAWS. The Board of Directors is expressly empowered to adopt,
amend, or repeal Bylaws of the Corporation. Any adoption, amendment, or
repeal of the Bylaws of the Corporation shall require the approval of a
majority of the total number of authorized directors (whether or not
there exist any vacancies in previously authorized directorships at the
time any resolution is presented to the Board for adoption) (the "Whole
Board"). The stockholders shall also have the power to adopt, amend, or
repeal the Bylaws of the Corporation. In addition to any vote of the
holders of any class or series of stock of this Corporation required by
law or these Articles of Incorporation, the affirmative vote of the
holders of at least 80% of all of the then-outstanding shares of the
capital stock of the Corporation entitled to vote generally in the
election of directors voting together as a single class, shall be
required in order for the stockholders to adopt, amend, or repeal any
provisions of the Bylaws of the Corporation.
C. APPLICABILITY OF STATUTES. The Corporation shall be governed by the
provisions of the Code ss.ss. 14-2-860 to 14-2-864 (directors' and
officers' conflicting interest transactions), as now or hereinafter in
effect.
D. SHAREHOLDER INSPECTION RIGHTS. The right to inspect the corporate
records granted by Section 14-2-1602 of the Code, and any successor
section thereto, to shareholders is hereby limited to shareholders of
record owning two percent or more of the outstanding shares of capital
stock of the Corporation.
ARTICLE 7.
BOARD OF DIRECTORS.
A. NUMBER; NAMES. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. The number
of directors of the Corporation (exclusive of directors to be elected
by the holders of any one or more series of any class of stock voting
separately as a class or classes) that shall constitute the initial
Board of Directors shall be six. The authorized number of directors of
the Corporation, as stated in the Corporation's Bylaws, shall be not
fewer than five nor more than fifteen. A majority of the Whole Board of
Directors may vote to increase or decrease the number of directors
constituting the Whole Board of Directors, provided however, that the
minimum number of directors shall be five and the maximum number of
directors shall be fifteen. The names and business or home addresses of
the persons who are to serve as initial directors are as follows:
3
<PAGE>
Needham B. Bateman, M.D. 2420 Emerald Drive
Jonesboro, Georgia 30236
John B. Lee, Jr. 6583 Aquila Drive
Morrow, Georgia 30260
Edwin S. Kemp, Jr. 8366 Seven Oaks Drive
Jonesboro, Georgia 30236
Joe B. Mundy 196 Cloud Street
Jonesboro, Georgia 30236
David B. Turner 198 N. McDonough Street
Jonesboro, Georgia 30236
Charles S. Tucker 545 Cynthia Lane
Forest Park, Georgia 30050
B. CLASSES. The Board of Directors shall be divided into three classes,
designated Classes I, II and III, as nearly equal in number as the then
total number of directors constituting the whole Board of Directors
permits, with the term of office of one class expiring each year. At
the first annual meeting of stockholders, directors of Class I shall be
elected to hold office for a term expiring at the next succeeding
annual meeting, directors of Class II shall be elected to hold office
for a term expiring at the second succeeding annual meeting, and
directors of Class III shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Subject to the
foregoing, at each annual meeting of stockholders, the successors to
the class of directors whose term shall then expire shall be elected to
hold office for a term expiring at the third succeeding annual meeting
and until their successors shall be elected and qualified. Any
vacancies in the Board of Directors for any reason, and any newly
created directorships resulting from any increase in the number of
directors, may be filled only by the Board of Directors, acting by vote
of a majority of the directors then in office, although less than a
quorum, and any directors so chosen shall hold office until the next
succeeding annual election of directors and until their successors
shall be elected and qualified. No decrease in the number of directors
shall shorten the term of any incumbent director.
C. REMOVAL. Notwithstanding any other provisions of these Articles of
Incorporation or the Bylaws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, these
Articles of Incorporation or the Bylaws of the Corporation), any
director or the entire Board of Directors of the Corporation may be
removed at any time with cause only by the affirmative vote, at a
meeting of the stockholders called for that purpose, by the holders of
80% or more of the shares of the class or classes entitled to vote at
that meeting and that elected the director.
D. STOCKHOLDER NOMINATIONS. In addition to the right of the Board of
Directors of the Corporation to make nominations for the election of
directors, nominations for the election of directors may be made by any
stockholder entitled to vote for the election of directors if that
stockholder complies with all the provisions of this Section 7.D.
4
<PAGE>
(1) Advance notice of such proposed nomination shall be
received by the Chairman of the Nominating Committee of the
Board of Directors of the Corporation (which notice may be
sent to such Chairman in care of the Secretary of the
Corporation) or, in the absence of such a Nominating
Committee, by the Secretary of the Corporation, not less than
14 days nor more than 60 days prior to any meeting of the
stockholders called for the election of directors; provided,
however, that if fewer than 21 days notice of the meeting is
given to stockholders, such written notice shall be received
not later than the close of the tenth day following the day on
which notice of the meeting was mailed to stockholders.
(2) Each notice under Section 7.D(1) shall set forth (i) the
name, age, business address and, if known, residence address
of each nominee proposed in such notice, (ii) the principal
occupation or employment of each such nominee, and (iii) the
number of shares of stock of the Corporation which are
beneficially owned by each such nominee. In addition, the
stockholder making such nomination shall promptly provide any
other information reasonably requested by the Corporation.
(3) The nomination made by a stockholder may be made only at a
meeting of the stockholders of the Corporation called for the
election of directors at which such stockholder is present in
person or by proxy, and can only be made by a stockholder who
has theretofore complied with the notice provisions of Section
7.D(1) and (2) above.
(4) The Chairman of the meeting may in his discretion
determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedures, and if he
should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
E. DUTIES OF DIRECTORS; LIABILITY OF DIRECTORS AND OFFICERS. The
directors of the Corporation shall discharge their duties in a manner
in which they believe in good faith to be in the best interests of the
Corporation and with the care of ordinary prudent persons in like
positions would exercise under similar circumstances. No director of
this Corporation shall be personally liable to this Corporation or any
of its stockholders for monetary damages for breach of his or her
duties as a director, including the duty of care, under the Code ss.
14-2- 202(b)(4), provided that this Article 7.E shall not eliminate
liability of a director (i) for any appropriation, in violation of the
director's duties, of any business opportunity of this Corporation,
(ii) for acts or omissions which involve intentional misconduct or a
knowing violation of law, (iii) for the types of liability set forth in
the Code ss. 14-2-832, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Code is amended
after the effective date of these Articles of Incorporation to further
eliminate or limit the personal liability of directors or officers,
then the liability of a director or officer of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Code, as
so amended.
In discharging the duties of their respective positions and
determining what is believed to be in the best interest of the
Corporation, the Board of Directors, committees of the Board of
Directors, and individual directors, in addition to considering the
effect of any action on the Corporation or its shareholders, may
consider the interests of the employees, customers, suppliers, and
creditors of the Corporation and its subsidiaries, the communities in
which offices or other establishments of the Corporation and its
subsidiaries are located, and all other factors
5
<PAGE>
such directors consider pertinent; provided however, this provision
shall be deemed solely to grant discretionary authority to the
directors and shall not be deemed to provide to any constituency any
right to be considered.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE 8.
INDEMNIFICATION, ETC. OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.
A. INDEMNIFICATION. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, including actions by
or in the right of the Corporation, whether civil, criminal,
administrative, or investigative, by reason of the fact that such
person is or was a director, officer, employee, or agent of the
Corporation, or was servings at the request of the Corporation as a
director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against
expenses (including attorneys' fees), judgments, fines, and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit, or proceeding to the full extent
permissible under Georgia law.
B. ADVANCEMENT OF EXPENSES. Reasonable expenses incurred by an officer,
director, employee, or agent of the Corporation in defending any
action, suit, or proceeding described in Section A of this Article 8
may be paid by the Corporation in advance of the final disposition of
such action, suit, or proceeding if authorized by the Board of
Directors (without regard to whether participating members thereof are
parties to such action, suit, or proceeding) or as otherwise required
and to the fullest extent permitted by the Code, upon receipt of an
undertaking by or on behalf of such person to repay such amount if it
shall ultimately be determined that the person is not entitled to be
indemnified by the Corporation.
C. OTHER RIGHTS. The indemnification and advancement of expenses
provided by or pursuant to this Article 8 shall not be deemed exclusive
of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any insurance or other
agreement, or pursuant to a vote of stockholders or directors or
otherwise, both as to actions in their official capacity and as to
actions in another capacity while holding an office, and shall continue
as to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and
administrators of such person.
D. INSURANCE. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the Corporation, or who, while a
director, officer, employee, or agent of the Corporation, is or was
serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture,
trust, employee benefit plan, or other enterprise, against any
liability asserted against him or incurred by him in that capacity, or
arising out of his status as such, whether or not the Corporation would
have the power to indemnify him against such liability under the
provisions the Code or of this Article 8.
6
<PAGE>
E. SECURITY FUND; INDEMNITY AGREEMENTS. By action of the Board of
Directors (notwithstanding their interest in the transaction), the
Corporation may create and fund a trust fund or fund of any nature, and
may enter into agreements with its officers, directors, employees, and
agents for the purpose of securing or insuring in any manner its
obligation to indemnify or advance expenses provided for in this
Article 8.
F. MODIFICATION. The duties of the Corporation to indemnify and to
advance expenses to any person as provided in this Article 8 shall be
in the nature of a contract between the Corporation and each such
person, and no amendment or repeal of any provision of this Article 8,
and no amendment or termination of any trust or other fund created
pursuant to Article 8.E hereof, shall alter to the detriment of such
person the right of such person to the advancement of expenses or
indemnification related to a claim based on an act or failure to act
which took place prior to such amendment, repeal, or termination.
G. PROCEEDINGS INITIATED BY INDEMNIFIED PERSONS. Notwithstanding any
other provision in this Article 8, the Corporation shall not indemnify
a director, officer, employee, or agent for any liability incurred in
an action, suit, or proceeding initiated by (which shall not be deemed
to include counter-claims or affirmative defenses) or participated in
as an intervenor or amicus curiae by the person seeking indemnification
unless such initiation of or participation in the action, suit, or
proceeding is authorized, either before or after its commencement, by
the affirmative vote of a majority of the directors then in office.
H. SAVINGS CLAUSE. If this Article 8 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director, officer,
employee, and agent of the Corporation as to costs, charges, and
expenses (including attorneys' fees), judgments, fines, and amounts
paid in settlement with respect to any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, including an
action by or in the right of the Corporation to the full extent
permitted by any applicable portion of this Article 8 that shall not
have been invalidated and to the full extent permitted by applicable
law.
If the Code is amended to permit further indemnification of
the directors, officers, employees, and agents of the Corporation, then
the Corporation shall indemnify such persons to the fullest extent
permitted by the Code, as so amended. Any repeal or modification of
this Article by the stockholders of the Corporation shall not adversely
affect any right or protection of a director, officer, employee, or
agent existing at the time of such repeal or modification.
ARTICLE 9.
MEETINGS OF STOCKHOLDERS AND STOCKHOLDER PROPOSALS.
A. DEFINITIONS.
(1) Acquire. The term "Acquire" includes every type of
acquisition, whether effected by purchase, exchange, operation
of law or otherwise.
(2) Affiliate. An "Affiliate" of, or a Person "affiliated
with," a specified Person, means a Person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person
specified.
7
<PAGE>
(3) Associate. The term "Associate" when used to indicate a
relationship with any Person means:
(i) Any corporation or organization (other than the
Corporation or a Subsidiary of the Corporation), or
any subsidiary or parent thereof, of which such
Person is a director, officer or partner or is,
directly or indirectly, the Beneficial Owner of 10%
or more of any class of equity securities; or
(ii) Any trust or other estate in which such Person
has a 20% or greater beneficial interest or as to
which such Person serves as trustee or in a similar
fiduciary capacity, provided, however, such term
shall not include any employee stock benefit plan of
the Corporation or a Subsidiary of the Corporation in
which such Person has a 20% or greater beneficial
interest or serves as a trustee or in a similar
fiduciary capacity; or
(iii) Any relative or spouse of such Person (or any
relative of such spouse) who has the same home as
such Person or who is a director or officer of the
Corporation or a Subsidiary of the Corporation (or
any subsidiary or parent thereof).
(4) Beneficial Owner. Any corporation, partnership, person, or
entity will be deemed to be a "beneficial owner" of or to own
beneficially any share or shares of stock of the Corporation:
(i) which it owns directly, whether or not of record;
or
(ii) which it has the right to acquire (whether such
right is exercisable immediately or only after the
passage of time) pursuant to any agreement or
arrangement or understanding or upon exercise of
conversion rights, exchange rights, warrants or
options, or otherwise, or which it has the right to
vote pursuant to any agreement, arrangement, or
understanding; or
(iii) which are beneficially owned, directly or
indirectly (including shares deemed to be owned
through application of clause (ii) above) by any
Affiliate or Associate; or
(iv) which are beneficially owned, directly or
indirectly (including shares deemed to be owned
through application of clause (ii) above) by any
other corporation, person, or entity with which it or
any of its Affiliates or Associates have any
agreement or arrangement or understanding for the
purpose of acquiring, holding, voting, or disposing
of Voting Stock (as hereinafter defined).
For the purpose only of determining the percentage of the
outstanding shares of Voting Stock which any corporation, partnership,
person, or other entity beneficially owns, directly or indirectly, the
outstanding shares of Voting Stock will be deemed to include any shares
of Voting Stock which such corporation, partnership, person or other
entity beneficially owns pursuant to the foregoing provisions of this
subsection (whether or not such shares of Voting Stock are in fact
issued or outstanding), but shall not include any other shares of
Voting Stock which may be issuable either immediately or at some future
date pursuant to any agreement, arrangement, or
8
<PAGE>
understanding or upon exercise of conversion rights, exchange rights,
warrants, options, or otherwise.
(5) Offer. The term "Offer" shall mean every written offer to
buy or acquire, solicitation of an offer to sell, tender offer
or request or invitation for tender of, a security or interest
in a security for value; provided that the term "Offer" shall
not include (i) inquiries directed solely to the management of
the Corporation and not intended to be communicated to
stockholders which are designed to elicit an indication of
management's receptivity to the basic structure of a potential
acquisition with respect to the amount of cash and or
securities, manner of acquisition and formula for determining
price, or (ii) non-binding expressions of understanding or
letters of intent with the management of the Corporation
regarding the basic structure of a potential acquisition with
respect to the amount of cash and/or securities, manner of
acquisition and formula for determining price.
(6) Person. The term "Person" shall mean any individual,
partnership, corporation, unincorporated association, or other
entity. When two or more Persons act as a partnership, limited
partnership, syndicate, association or other group for the
purpose of acquiring, holding or disposing of shares of stock,
such partnership, syndicate, associate or group shall be
deemed a "Person."
(7) Subsidiary. "Subsidiary" means any corporation of which a
majority of any class of equity security is owned, directly or
indirectly, by the Person in question.
(8) Voting Stock. "Voting Stock" shall mean shares of the
Corporation entitled to vote generally in an election of
directors.
B. DIRECTORS, OFFICERS OR EMPLOYEES. Directors, officers, or employees
of the Corporation or any subsidiary thereof shall not be deemed to be
a group with respect to their individual acquisitions of any class of
equity securities of the Corporation solely as a result of their
capacities as such.
C. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of the
stockholders of the Corporation may be called only by (i) the Board of
Directors pursuant to a resolution approved by the affirmative vote of
a majority of the directors then in office, (ii) the Chairman of the
Board, (iii) the President, (iv) stockholders, if all of the
stockholders representing eighty percent of all the votes entitled to
be cast on any issue to be considered at the proposed meeting, sign,
date, and deliver to the Corporation's secretary one or more written
demands for the meeting describing the purpose or purposes for which it
is to be held or (v) stockholders, if, in the case the Corporation has
one hundred or fewer stockholders, twenty-five percent of all the votes
entitled to be cast on any issue to be considered at the proposed
meeting, sign, date, and deliver to the Corporation's secretary one or
more written demands for the meeting describing the purpose or purposes
for which it is to be held.
D. ACTION WITHOUT A MEETING. Notwithstanding any other provision of
these Articles of Incorporation or the Bylaws of the Corporation, no
action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without
a meeting unless the action is taken by all shareholders entitled to
vote on the action.
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<PAGE>
E. STOCKHOLDER PROPOSALS. At an annual meeting of stockholders, only
such new business shall be conducted, and only such proposals shall be
acted upon, as shall have been brought before the annual meeting by, or
at the direction of, (a) the Board of Directors or (b) any stockholder
of the Corporation who complies with all the requirements set forth in
this Article.
Proposals, other than those made by or at the direction of the
Board of Directors, shall be made pursuant to timely notice in writing
to the Secretary of the Corporation as set forth in this Article. For
stockholder proposals to be included in the Corporation's proxy
materials, the stockholder must comply with all the timing and
informational requirements of Rule 14a-8 of the Exchange Act, or any
successor regulation. With respect to stockholder proposals to be
considered at the annual meeting of stockholders but not included in
the Corporation's proxy materials, the stockholder's notice shall be
delivered to, or mailed and received at, the principal executive
offices of the Corporation not less than 60 days prior to the
anniversary date of the immediately preceding annual meeting of
stockholders of the Corporation. Such stockholder's notice shall set
forth as to each matter the stockholder proposes to bring before the
annual meeting (a) a brief description of the proposal desired to be
brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (b) the name and address, as they
appear on the Corporation's books, of the stockholder proposing such
business and, to the extent known, any other stockholders known by such
stockholder to be supporting such proposal, (c) the class and number of
shares of the Corporation stock which are beneficially owned by the
stockholder on the date of such stockholder notice and, to the extent
known, by any other stockholders known by such stockholder to be
supporting such proposal on the date of such stockholder notice, and
(d) any financial interest of the stockholder in such proposal (other
than interests which all stockholders would have).
The Board of Directors may reject any stockholder proposal not
timely made in accordance with the terms of this Article. If the Board
of Directors, or a designated committee thereof, determines that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Article in any material respect, the
Secretary of the Corporation shall promptly notify such stockholder of
the deficiency in the notice. The stockholder shall have an opportunity
to cure the deficiency by providing additional information to the
Secretary within such period of time, not to exceed five days from the
date such deficiency notice is given to the stockholder, as the Board
of Directors or such committee shall reasonably determine. If the
deficiency is not cured within such period, or if the Board of
Directors or such committee determines that the additional information
provided by the stockholder, together with information previously
provided, does not satisfy the requirements of this Article in any
material respect, then the Board of Directors may reject such
stockholder's proposal. The Secretary of the Corporation shall notify a
stockholder in writing whether his proposal has been made in accordance
with the time and informational requirements of this Article.
Notwithstanding the procedures set forth in this paragraph, if neither
the Board of Directors nor such committee makes a determination as to
the validity of any stockholder proposal, the presiding officer of the
annual meeting shall determine and declare at the annual meeting
whether the stockholder proposal was made in accordance with the terms
of this Article. If the presiding officer determines that a stockholder
proposal was made in accordance with the terms of this Article, he
shall so declare at the annual meeting and ballots shall be provided
for use at the meeting with respect to any such proposal. If the
presiding officer determines that a stockholder proposal was not made
in accordance with the terms of this Article, he shall so declare at
the annual meeting and any such proposal shall not be acted upon at the
annual meeting.
10
<PAGE>
This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of report of officers,
directors and committees of the Board of Directors, but in connection
with such reports, no new business shall be acted upon at such annual
meeting unless stated, filed and received as herein provided.
ARTICLE 10.
RESTRICTIONS ON VOTING AND ACQUIRING THE CORPORATION'S COMMON STOCK.
A. VOTING RESTRICTION. Unless otherwise indicated in this Article, the
definitions and other provisions set forth in Articles 9.A, 9.B, and
9.C are also applicable to this Article 10. Notwithstanding any other
provision of these Articles of Incorporation, unless with the prior
approval of two thirds (2/3) of the Board of Directors, no record owner
of any outstanding Common Stock which is beneficially owned, directly
or indirectly, by a Person (including Associates and Affiliates of such
Person) who, as of any record date for the determination of
stockholders entitled to vote on any matter, beneficially owns in
excess of 10% of the then-outstanding shares of Common Stock (the
"Limit"), be entitled or permitted to any vote in respect of the shares
held in excess of the Limit.
B. ACQUISITION RESTRICTION. For a period of five years from the
completion of the conversion of Clayton County Federal Savings and Loan
Association from mutual to stock form, no Person shall directly or
indirectly Offer to Acquire or Acquire the beneficial ownership of more
than 10% of any class of an equity security of the Corporation. The
foregoing restriction shall not apply to (i) the purchase of shares by
underwriters in connection with a public offering, or (ii) the purchase
of shares by a tax-qualified employee stock benefit plan of the
Corporation or Clayton County Federal Savings and Loan Association.
C. BOARD DETERMINATIONS. The Board of Directors shall have the power to
construe and apply the provisions of this Article and to make all
determinations necessary or desirable to implement such provisions,
including but not limited to matters with respect to (i) the number of
shares of Common Stock Owned by any Person, (ii) whether a Person is an
Affiliate of another, (iii) whether a Person has an agreement,
arrangement, or understanding with another as to the matters referred
to in the definition of beneficial ownership, (iv) the application of
any other definition or operative provision of the Article to the given
facts, or (v) any other matter relating to the applicability or effect
of this Article. The Board of Directors shall have the right to demand
that any person who is reasonably believed to own Common Stock in
excess of the Limit (or holds of record Common Stock beneficially owned
by any person in excess of the Limit) supply the Corporation with
complete information as to (i) the record owner(s) of all shares
beneficially owned by such person who is reasonably believed to
beneficially own shares in excess of the Limit, (ii) any other factual
matter relating to the applicability or effect of this Article as may
reasonably be requested of such person. Any constructions,
applications, or determinations made by the Board of Directors,
pursuant to this Article in good faith and on the basis of such
information and assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the Corporation and its
stockholders.
D. ENFORCEABILITY. In the event any provision (or portion thereof) of
this Article shall be found to be invalid, prohibited or unenforceable
for any reason, the remaining provisions (or portions thereof) of this
Article shall remain in full force and effect, and shall be construed
11
<PAGE>
as if such invalid, prohibited or unenforceable provision had been
stricken here from or otherwise rendered inapplicable, it being the
intent of this Corporation and its stockholders that each such
remaining provision (or portion thereof) of this Article remain, to the
fullest extent permitted by law, applicable and enforceable as to all
stockholders, including stockholders owning an amount of stock over the
Limit, notwithstanding any such finding.
ARTICLE 11.
APPROVAL OF BUSINESS COMBINATIONS AND FAIR PRICE REQUIREMENTS.
A. GENERAL REQUIREMENT. The Corporation hereby elects to be governed by
the provisions set forth in the Code ss.ss. 14-2-1131 to 14-2-1133
pertaining to business combinations with interested shareholders
("Business Combinations"), or any successor law or regulation, and the
Code ss.ss. 14-2-1110 to 14-2-1113 ("Fair price requirements"), or any
successor law or regulation.
B. ADDITIONAL PROVISIONS. Nothing contained in this Article shall be
construed to relieve an interested shareholder as defined under Code
ss.ss. 14-2-1110 and 14-2-1112, or any successor law or regulation
("Interested Shareholder"), from any fiduciary obligation imposed by
law. In addition, nothing contained in this Article shall prevent any
stockholders of the Corporation from objecting to any Business
Combination and from demanding any appraisal rights which may be
available to such Interested Shareholder.
C. Notwithstanding Article 12 or any provisions of these Articles of
Incorporation or the Bylaws of the Corporation (and notwithstanding the
fact that a lesser percentage may be specified by law, these Articles
or the Bylaws of the Corporation), the affirmative vote of the holders
of at least 80% of the outstanding shares entitled to vote thereon
(and, if any class or series is entitled to vote thereon separately,
the affirmative vote of the holders of at least 80% of the outstanding
shares of each such class or series) shall be required to amend or
repeal this Article 11 or adopt any provisions inconsistent with this
Article 11.
ARTICLE 12.
AMENDMENT. The Corporation reserves the right to amend or repeal any
provision contained in these Articles of Incorporation in the manner
prescribed by the laws of the State of Georgia and all rights conferred
upon stockholders are granted subject to this reservation; provided,
however, that notwithstanding any other provision of these Articles of
Incorporation or any provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any vote of the holders of
any class or series of the stock of this Corporation required by law or
by these Articles of Incorporation, the affirmative vote of the holders
of at least 80% of the then outstanding shares of the class or classes
entitled to vote at that meeting, voting together as a single class,
shall be required to amend or repeal this Article 12, and Articles 6,
7.C, 7.E, 8, 9, 10, and 11 of these Articles of Incorporation.
12
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,430
<INT-BEARING-DEPOSITS> 1,664
<FED-FUNDS-SOLD> 10,660
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22,677
<INVESTMENTS-CARRYING> 0
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<LOANS> 121,327
<ALLOWANCE> 869
<TOTAL-ASSETS> 168,318
<DEPOSITS> 152,236
<SHORT-TERM> 2,833
<LIABILITIES-OTHER> 1,810
<LONG-TERM> 0
0
0
<COMMON> 90
<OTHER-SE> 11,349
<TOTAL-LIABILITIES-AND-EQUITY> 168,318
<INTEREST-LOAN> 7,814
<INTEREST-INVEST> 761
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<INTEREST-TOTAL> 8,951
<INTEREST-DEPOSIT> 4,726
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<EXPENSE-OTHER> 3,982
<INCOME-PRETAX> 334
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<NET-INCOME> 216
<EPS-PRIMARY> 0.26
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<YIELD-ACTUAL> 3.40
<LOANS-NON> 569
<LOANS-PAST> 0
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<LOANS-PROBLEM> 1,069
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