Attached files
file | filename |
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EX-5.1 - EX-5.1 - MOUNTAIN NATIONAL BANCSHARES INC | g24060exv5w1.htm |
EX-3.1 - EX-3.1 - MOUNTAIN NATIONAL BANCSHARES INC | g24060exv3w1.htm |
EX-23.1 - EX-23.1 - MOUNTAIN NATIONAL BANCSHARES INC | g24060exv23w1.htm |
Table of Contents
As
filed with the Securities and Exchange Commission on July 22, 2010
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNDER
THE SECURITIES ACT OF 1933
Mountain National Bancshares, Inc.
(Exact name of
registrant as specified in its charter)
Tennessee | 6021 | 75-3036312 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
300 East Main Street
Sevierville, Tennessee 37862
(865) 428-7990
(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)
Sevierville, Tennessee 37862
(865) 428-7990
(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)
Dwight Grizzell
300 East Main Street
Sevierville, Tennessee 37862
(865) 428-7990
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
300 East Main Street
Sevierville, Tennessee 37862
(865) 428-7990
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Bob F. Thompson
Bass, Berry & Sims PLC
150 Third Avenue South, Suite 2800
Nashville, Tennessee 37201-2017
(615) 742-6200
Bass, Berry & Sims PLC
150 Third Avenue South, Suite 2800
Nashville, Tennessee 37201-2017
(615) 742-6200
Approximate date of commencement of proposed sale to the public: As soon as practicable after
this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o
If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
CALCULATION OF REGISTRATION FEE
Title of Each Class | Proposed Maximum | |||||||||||||
of Securities | Proposed Maximum Offering | Aggregate Offering | Amount of | |||||||||||
to be Registered | Amount to be Registered | Price Per Unit | Price(1) | Registration Fee | ||||||||||
Common Stock, par value $1.00 per
share |
265,000 | $10.00 | $2,650,000 | $189 | ||||||||||
(1) | Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. |
The registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration
Statement shall become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Table of Contents
The information in this prospectus is not complete and may be changed. We may not sell these
securities until the registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
SUBJECT
TO COMPLETION, DATED JULY 22, 2010
265,000 Shares
MOUNTAIN NATIONAL BANCSHARES, INC.
Mountain National Bancshares, Inc. is offering a maximum of 265,000 shares and a minimum of
10,000 shares of its common stock. Mountain National is first making the offering to shareholders
of record as of the close of business on July , 2010, and will thereafter offer the shares to
other prospective purchasers if the existing shareholders do not purchase all of the shares prior
to September 30, 2010, which date may be extended by an additional thirty days by Mountain
Nationals board of directors. This offering will expire upon the earlier of the sale of all
265,000 shares of common stock or 5:00 p.m. Sevierville time on September 30, 2010, unless extended
for up to an additional thirty days by our board of directors. Subscriptions will be accepted
beginning at 8.00 a.m. eastern daylight time on , August , 2010 and the shares are being
offered on a first-come first-served basis. We will reject any subscriptions tendered after all
265,000 shares have been subscribed for.
The shares being offered will be quoted on the over-the-counter, or OTC, bulletin board under
the symbol MNBT.OB. On July 21, 2010, the bid and asked prices of the shares as reported on the
OTC bulletin board were $5.00 and $6.00 per share.
Shares offered in this offering will be sold directly by us through the efforts of our
employees, officers and directors. While this offering is open, we intend to invest the proceeds
we receive in short-term, interest bearing accounts. Investing in our common stock involves risks.
See Risk Factors beginning on page 7 of this prospectus.
Total | Total | |||||||||||
Per share | Minimum (1) | Maximum (1) | ||||||||||
Public offering price |
$ | 10.00 | $ | 100,000 | $ | 2,650,000 | ||||||
Net Proceeds, before
expenses, to Mountain
National |
$ | 10.00 | $ | 100,000 | $ | 2,650,000 |
(1) | We expect the offering expenses to be approximately $62,689, including filing fees, legal and accounting fees, printing fees and other miscellaneous fees and costs. |
Neither the Securities and Exchange Commission nor any state securities commission or
regulatory body has approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The securities are not savings accounts, deposits or obligations of any bank and are not
insured by the FDIC or any other governmental agency.
The date of this prospectus is , 2010
TABLE OF CONTENTS
You should rely only on the information contained in this prospectus or in any free writing
prospectus that we authorize be delivered to you. We have not authorized anyone to provide you with
additional or different information. If anyone provides you with additional, different or
inconsistent information, you should not rely on it. We are not making an offer to sell these
securities in any jurisdiction where an offer or sale is not permitted. You should assume that the
information in this prospectus is accurate only as of the date on the front cover, regardless of
the time of delivery of this prospectus or of any sale of our common stock. Our business,
prospects, financial condition and results of operations may have changed since that date.
i
Table of Contents
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus. Because
it is a summary, it does not contain all of the information that you should consider before
investing in our common stock. You should read the entire prospectus carefully, including the risk
factors and our financial statements and related notes appearing elsewhere in this prospectus, to
understand this offering fully.
Unless this prospectus indicates otherwise or the context otherwise requires, the terms we,
our, us, Mountain National Bancshares, Inc. or Mountain National as used in this prospectus
refer to Mountain National Bancshares, Inc. and its subsidiaries including Mountain National Bank,
which we sometimes refer to as the bank, our bank subsidiary or our bank.
Mountain National Bancshares and Mountain National Bank
History
Mountain National Bancshares, Inc., a Tennessee corporation, is a bank holding company
registered with the Board of Governors of the Federal Reserve System under the Bank Holding Company
Act of 1956, as amended. Mountain National Bancshares, Inc. was incorporated in March 2002 to
serve as the holding company for Mountain National Bank. The reorganization of Mountain National
Bank into a holding company structure was consummated on July 1, 2002.
Mountain National Bank is organized as a national banking association. It applied to the
Office of the Comptroller of the Currency, or the OCC, and the Federal Deposit Insurance
Corporation, or the FDIC, on February 16, 1998 to become an insured national banking association.
It received approval from the OCC to organize as a national banking association on June 16, 1998
and commenced business on November 23, 1998. Mountain National Banks principal business is to
accept demand and savings deposits from the general public and to make residential mortgage,
commercial and consumer loans.
Operations
We conduct our banking activities from our main office located in Sevierville, Tennessee and
through eight additional branch offices in Sevier County, Tennessee, as well as a regional
headquarters and two branch offices in Blount County, Tennessee. We operate two branch offices in
Gatlinburg, two branch offices in Pigeon Forge, a branch office in Seymour, a branch office in
Kodak, two branch offices in Sevierville, all in Sevier County, and two branch offices and our
Blount County regional headquarters in Maryville, Blount County, Tennessee. The retail nature of
our commercial banking operations allows for diversification in the number of our depositors and
borrowers, and we do not believe that we are dependent on a single or a few customers.
Our banking operations primarily target individuals and small businesses in Sevier County and
Blount County and the surrounding area. We offer a variety of retail banking services. We seek
savings and other time and demand deposits from consumers and businesses
1
Table of Contents
in our primary market area by offering a full range of deposit accounts, including savings, demand
deposit, retirement, including individual retirement accounts, or IRAs, and professional and
checking accounts, as well as certificates of deposit. Our primary sources of funding for lending
activities include savings and demand deposits, income from investments, loan principal payments
and borrowings. We use the deposit funds we receive to originate mortgage, commercial, and
consumer loans, and to make other authorized investments. In addition, we currently maintain 20
full-service ATMs throughout our market area. Because the Bank is a member of a number of payment
systems networks, Bank customers may also access banking services through ATMs and point of sale
terminals throughout the world. In addition to traditional deposit-taking and lending services, we
also provide a variety of checking accounts, savings programs, night depository services, safe
deposit facilities and credit card plans.
Recent Developments
Beginning in 2008, declining real estate market conditions have adversely affected the Banks
loan portfolio particularly its construction and development loans and commercial real estate
loans. As a result, the Bank has experienced increased loan charge-offs and provisions for loan
losses, and significantly higher levels of non-accrual loans, other real estate and other real
estate expense. In 2009, the Company had a loss of $4,228,395, or $1.61 per share.
On June 2, 2009, the Banks board of directors entered into a formal written agreement with
the OCC in which the Bank agreed to make a variety of operational improvements, including action
plans to reduce its credit risk, level of criticized assets, concentration of commercial real
estate loans and dependency on wholesale funding sources, and to improve its loan and loan
concentration risk management, allowance for loan loss process, loan review problem loan
identification and its loan workout procedures and staffing. The Bank has been actively addressing
the issues reflected in the agreement and continuing to implement new enhanced processes and
practices to achieve compliance. The Banks Board of Directors believes that actions it is taking
under the agreement are positive responses to existing economic uncertainties.
In addition to the written agreement, the OCC has required the Bank to meet and maintain a
minimum Tier 1 leverage ratio of 9% and a minimum total risk-based capital ratio of 13%. These
ratios are significantly higher than those required to be considered well-capitalized under OCC
regulations. At March 31, 2010, the Banks Tier 1 leverage ratio was 9.01% and its total risk-based
capital ratio was 14.45%. The additional capital that the Company would receive from the proceeds
of this offering will be available to support the maintenance of the Banks capital requirements.
The Bank is also required to obtain OCC or FDIC approval before making severance payments to
departing executives, adding new directors or senior officers or making any change in the
responsibility of any current senior officer who is proposing to assume a different senior officer
position.
Management
We believe that the banking experience and extensive business experience of our officers and
directors in our market area allow us to take advantage of the opportunities that our market
affords. Our management team includes the following senior officers:
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Table of Contents
Dwight Grizzell, our Chief Executive Officer, has over 38 years of
banking experience. He served as Regional President of BankFirst for Sevier County from
1997 to 1998. Prior to that, he was the President/CEO and director of First National Bank
of Gatlinburg. Mr. Grizzell began his career with Third National Bank in Nashville,
Tennessee in 1972.
Michael L. Brown serves as Executive Vice President Chief
Operating Officer of Mountain National and the bank. Mr. Brown has been with Mountain
National since its inception in 2002 and with the bank since 1998. Prior to joining the
bank, Mr. Brown served as a Senior Vice President of First National Bank of Gatlinburg from
1995 to 1997, which later was purchased by BankFirst where he continued to serve in that
capacity until joining Mountain National Bank in 1998. Mr. Brown has a combined banking
career spanning 28 years, beginning with First Federal Savings Bank in Maryville, Tennessee
in 1981.
Grace D. McKinzie serves as Executive Vice President Chief Lending
Officer of Mountain National and the bank. Ms. McKinzie has been with Mountain National
since its inception in 2002 and with the bank since 1998. Ms. McKinzie began her banking
career with The First National Bank of Gatlinburg in 1974 where she served as Vice President
and was a commercial lender in the Gatlinburg market.
Location of Executive Offices
The address and phone number of our executive offices are:
300 East Main Street
Sevierville, Tennessee 37862
(865) 428-7990
Sevierville, Tennessee 37862
(865) 428-7990
3
Table of Contents
The Offering
Common stock offered
|
A maximum of 265,000 shares and a minimum of 10,000 shares of common stock, $1.00 par value per share. | |
Offering price
|
$10.00 per share. | |
Minimum/Maximum
|
Investors must purchase at least 100 shares to participate in this offering but are not limited in the maximum number of shares they can purchase. | |
Common stock outstanding after this
offering
|
2,641,611 shares of common stock will be outstanding if we sell the minimum number of shares being offered, and 2,896,611 shares will be outstanding if we sell the maximum number of shares. | |
Net proceeds
|
We anticipate that our net proceeds from the offering of our common stock will be approximately $2,587,000 assuming we sell 265,000 shares. | |
Use of proceeds
|
We intend to use the net proceeds to support the Banks capital position and as working capital to fund future internal growth and for general corporate purposes. | |
Risk Factors |
See Risk Factors on page 7 for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock. | |
OTC bulletin board symbol
|
MNBT.OB |
The number of shares outstanding after the offering is based upon our shares outstanding as of
July 15, 2010 and excludes a total of 125,086 shares issuable under outstanding options granted
under our stock option plan at that date. Of these options 69,821 are exercisable as of July 15,
2010, at a weighted average exercise price of $19.06 per share.
4
Table of Contents
Summary Consolidated Financial Data
The following table sets forth summary historical consolidated financial data from our
consolidated financial statements and should be read in conjunction with our consolidated financial
statements including the related notes and Managements Discussion and Analysis of Financial
Condition and Results of Operations set forth in our annual report on Form 10-K for the year ended
December 31, 2009 and our quarterly report on Form 10-Q for the quarter ended March 31, 2010, and
incorporated by reference herein. Except for the data under Performance Ratios and Asset Quality
Ratios, the summary historical consolidated financial data as
of December 31, 2009, 2008, 2007,
2006 and 2005, and for the years ended December 31, 2009, 2008,
2007, 2006 and 2005 is derived from our audited
consolidated financial statements and related notes, which are incorporated by reference into this
prospectus and the summary historical consolidated financial data as of and for the three months
ended March 31, 2010, and March 31, 2009, is derived from unaudited consolidated financial
statements for those periods, which are also incorporated by reference into this prospectus. The
unaudited consolidated financial statements include all adjustments, consisting only of normal
recurring items, which our management considers necessary for a fair presentation of our financial
position and results of operations for these periods. The financial condition and results of
operations as of and for the three months ended March 31, 2010, do not purport to be indicative of
the financial condition or results of operations to be expected as of or for the fiscal year ending
December 31, 2010.
At or for the Year Ended | At or for the Three Months Ended | |||||||||||||||||||||||||||
December 31, | March 31, | |||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | 2010 | 2009 | ||||||||||||||||||||||
Statement of Financial Condition
Data: |
||||||||||||||||||||||||||||
Total assets |
$ | 636,784,316 | $ | 621,373,199 | $ | 541,496,026 | $ | 469,982,016 | $ | 352,648,901 | $ | 647,045,292 | $ | 691,942,647 | ||||||||||||||
Loans, net |
396,351,008 | 415,137,230 | 393,699,847 | 341,184,441 | 246,229,914 | 393,050,275 | 406,905,102 | |||||||||||||||||||||
Securities |
146,534,371 | 126,695,403 | 82,986,839 | 75,993,695 | 58,427,583 | 158,734,519 | 160,728,514 | |||||||||||||||||||||
Deposits |
510,614,141 | 454,665,946 | 404,374,211 | 361,729,293 | 283,123,790 | 517,636,849 | 556,568,718 | |||||||||||||||||||||
Shareholders equity |
47,369,155 | 50,993,753 | 48,948,453 | 34,410,863 | 29,633,008 | 47,426,967 | 51,499,080 | |||||||||||||||||||||
Income Statement Data: |
||||||||||||||||||||||||||||
Interest income |
31,369,369 | 35,192,991 | 36,713,617 | 29,000,845 | 19,224,089 | 6,030,824 | 8,388,738 | |||||||||||||||||||||
Interest expense |
13,358,633 | 16,934,190 | 19,027,933 | 13,117,142 | 6,749,535 | 2,903,308 | 3,570,082 | |||||||||||||||||||||
Net interest income |
18,010,736 | 18,258,801 | 17,685,684 | 15,883,703 | 12,474,554 | 3,127,516 | 4,818,656 | |||||||||||||||||||||
Provision for possible loan losses |
11,672,802 | 2,275,000 | 981,900 | 915,000 | 446,000 | 212,300 | 2,810,008 | |||||||||||||||||||||
Net interest income after provision
for possible loan losses |
6,337,934 | 15,983,801 | 16,703,784 | 14,968,703 | 12,028,554 | 2,915,216 | 2,008,648 | |||||||||||||||||||||
Non-interest income |
4,863,386 | 4,325,438 | 3,742,143 | 3,246,399 | 2,676,084 | 1,975,466 | 1,058,356 | |||||||||||||||||||||
Non-interest expense |
19,217,742 | 16,202,244 | 15,239,497 | 13,022,392 | 10,127,555 | 4,583,353 | 4,464,522 | |||||||||||||||||||||
Income (loss) before income taxes |
(8,016,422 | ) | 4,106,995 | 5,206,430 | 5,192,710 | 4,577,083 | 307,329 | (1,397,518 | ) | |||||||||||||||||||
Income tax expense (benefit) |
(3,788,027 | ) | 826,787 | 1,294,336 | 1,295,337 | 1,453,581 | (21,785 | ) | (723,884 | ) | ||||||||||||||||||
Net income (loss) |
$ | (4,228,395 | ) | $ | 3,280,208 | $ | 3,912,094 | $ | 3,897,373 | $ | 3,123,502 | $ | 329,114 | $ | (673,634 | ) | ||||||||||||
Per Share Data: (2) |
||||||||||||||||||||||||||||
Basic earnings (loss) per common
share |
$ | (1.61 | ) | $ | 1.24 | $ | 1.68 | $ | 1.93 | $ | 1.72 | $ | 0.13 | $ | (0.26 | ) | ||||||||||||
Weighted average shares outstanding
basic |
2,631,611 | 2,634,750 | 2,331,396 | 2,019,783 | 1,811,816 | 2,631,611 | 2,631,611 | |||||||||||||||||||||
Diluted earnings (loss) per common
share |
$ | (1.61 | ) | $ | 1.24 | $ | 1.61 | $ | 1.79 | $ | 1.61 | $ | 0.13 | $ | (0.26 | ) | ||||||||||||
Weighted average shares
outstanding-diluted |
2,631,611 | 2,641,945 | 2,435,960 | 2,181,068 | 1,935,075 | 2,631,611 | 2,631,611 | |||||||||||||||||||||
Book value |
$ | 18.00 | $ | 19.38 | $ | 19.58 | $ | 17.71 | $ | 16.45 | $ | 18.02 | $ | 19.57 |
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At or for the Year Ended | At or for the Three Months Ended | |||||||||||||||||||||||||||
December 31, | March 31, | |||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | 2010 | 2009 | ||||||||||||||||||||||
Common shares outstanding at end of
period |
2,631,611 | 2,631,611 | 2,499,629 | 1,943,428 | 1,801,748 | 2,631,611 | 2,631,611 | |||||||||||||||||||||
Performance Ratios: |
||||||||||||||||||||||||||||
Return on average shareholders
equity |
-8.14 | % | 6.48 | % | 9.81 | % | 11.26 | % | 16.87 | % | 2.81 | % | -5.21 | % | ||||||||||||||
Return on average assets |
-0.64 | % | 0.56 | % | 0.77 | % | 0.95 | % | 0.98 | % | 0.20 | % | -0.43 | % | ||||||||||||||
Average equity as a percentage of
average assets |
7.88 | % | 8.68 | % | 7.83 | % | 8.48 | % | 5.79 | % | 7.24 | % | 8.18 | % | ||||||||||||||
Net interest margin (1) |
3.07 | % | 3.47 | % | 3.81 | % | 4.29 | % | 4.29 | % | 2.18 | % | 3.40 | % | ||||||||||||||
Net interest spread (2) |
2.96 | % | 3.17 | % | 3.32 | % | 3.74 | % | 3.92 | % | 2.11 | % | 3.26 | % | ||||||||||||||
Asset Quality Ratios: |
||||||||||||||||||||||||||||
Allowance for loan losses to
nonaccrual loans |
28.00 | % | 45.19 | % | 2,225.54 | % | 0.00 | % | 2,862.27 | % | 19.14 | % | 31.28 | % | ||||||||||||||
Allowance for loan losses to total
loans, net of unearned income |
2.78 | % | 1.26 | % | 1.00 | % | 1.02 | % | 1.06 | % | 2.72 | % | 1.67 | % | ||||||||||||||
Nonperforming assets to total loans
plus other real estate owned |
13.07 | % | 4.95 | % | 0.38 | % | 0.14 | % | 0.27 | % | 17.80 | % | 9.40 | % | ||||||||||||||
Nonaccrual loans to total loans, net
of unearned income |
9.95 | % | 2.79 | % | 0.04 | % | 0.00 | % | 0.04 | % | 14.19 | % | 5.34 | % | ||||||||||||||
Net loan charge-offs to average loans |
1.35 | % | 0.23 | % | 0.15 | % | 0.01 | % | 0.04 | % | 0.59 | % | 1.15 | % | ||||||||||||||
Net charge-offs as a percentage of: |
||||||||||||||||||||||||||||
Provision for loan losses |
48.08 | % | 42.07 | % | 54.18 | % | 2.73 | % | 20.85 | % | 1,127.07 | % | 172.61 | % | ||||||||||||||
Allowance for loan losses |
49.43 | % | 18.08 | % | 13.39 | % | 0.71 | % | 3.53 | % | 21.80 | % | 70.24 | % | ||||||||||||||
Capital
Ratios (3): |
||||||||||||||||||||||||||||
Leverage (4) |
9.23 | % | 10.51 | % | N/A | N/A | 10.44 | % | 9.10 | % | 9.90 | % | ||||||||||||||||
Tier 1 risked-based capital |
12.89 | % | 13.34 | % | N/A | N/A | 13.15 | % | 13.31 | % | 13.00 | % | ||||||||||||||||
Total risk-based capital |
14.16 | % | 14.44 | % | N/A | N/A | 14.11 | % | 14.57 | % | 14.25 | % |
(1) | Net interest margin is the result of net interest income for the period divided by average interest-earning assets. | |
(2) | Net interest spread is the result of the difference between interest yield earned on interest-earning assets less the average rate paid on interest-bearing liabilities. | |
(3) | During 2006 and 2007, the Company was not required to file the FR Y-9C with the Federal Reserve. | |
(4) | Leverage ratio is defined as Tier 1 capital (pursuant to risk-based capital guidelines) as a percentage of adjusted average assets. |
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Table of Contents
RISK FACTORS
You should carefully consider the following risk factors and all other information contained
in this prospectus before purchasing our common stock in this offering. Investing in our common
stock involves a high degree of risk. If any of the following risks actually occurs, we may not be
able to conduct our business as currently planned and our financial condition or operating results
could be materially harmed, the trading price of our common stock could decline and you could lose
all or part of your investment.
Negative developments in the U.S. and local economy and in local real estate markets have adversely
impacted our operations and results and may continue to adversely impact our results in the future.
Economic conditions in the markets in which we operate have deteriorated significantly since
early 2008. As a result, we have experienced a loss in our most recently completed fiscal year,
resulting primarily from provisions for loan losses related to declining collateral values in our
construction and development loan portfolio. We believe that this difficult economic environment
will continue at least into 2011, and we expect that our results of operations will continue to be
negatively impacted as a result. There can be no assurance that the economic conditions that have
adversely affected the financial services industry, and the capital, credit and real estate markets
generally or us in particular, will improve, in which case we could continue to experience reduced
earnings or losses, write-downs of assets, capital and liquidity constraints or other business
challenges.
We have a concentration of credit exposure to borrowers dependent on the tourism industry.
Due to the predominance of the tourism industry in Sevier County, Tennessee, which is adjacent
to the Great Smoky Mountains National Park and the home of the Dollywood theme park, a significant
portion of the Banks commercial loan portfolio is concentrated within that industry. The
predominance of the tourism industry also makes our business more seasonal in nature than may be
the case with banks in other market areas. The Bank maintains eleven primary concentrations of
credit by industry, of which seven are directly related to the tourism industry. At March 31, 2010,
approximately $201 million in loans, representing approximately 49.71% of our total loans, were to
businesses and individuals whose ability to repay depends to a significant extent on the tourism
industry in the markets we serve. We also have additional loans that would be considered related to
the tourism industry in addition to the seven categories included in the industry concentration
amounts noted above. The tourism industry in Sevier County has remained relatively stable during
recent years and we do not anticipate any significant changes in this trend; however, if the
tourism industry does experience an economic slowdown and, as a result, the borrowers in this
industry are unable to perform their obligations under their existing loan agreements, our earnings
could be negatively impacted, causing the value of our common stock to decline.
A portion of our loan portfolio is secured by homes that are being built for sale as vacation homes
or as second homes for out of market investors or homes that are used to generate rental income.
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A significant portion of our borrowers rely to some extent upon rental income to service real
estate loans secured by rental properties, or they rely upon sales of the property for construction
and development loans secured by homes that have been built for sale to investors living outside of
our market area as investment properties, second homes or as vacation homes. If tourism levels in
our market area or the rates that visitors are willing to pay for lodging were to decline
significantly, the rental income that some of our borrowers utilize to service their obligations to
us may decline as well and these borrowers may have difficulty meeting their obligations to us
which could adversely impact our results of operations. In addition, sales of vacation homes and
second homes to investors living outside of our market area have slowed and are expected to remain
at reduced levels throughout 2010. Borrowers that are developers or builders whose loans are
secured by these vacation and second homes and whose ability to repay their obligations to us is
dependent on the sale of these properties may have difficulty meeting their obligations to us if
these properties are not sold timely or at values in excess of their loan amount which could
adversely impact our results of operations.
Our business is subject to local real estate market and other local economic conditions.
Adverse market or economic conditions in East Tennessee have disproportionately increased the
risk our borrowers will be unable to timely make their loan payments. The market value of the real
estate securing loans as collateral has been adversely affected by unfavorable changes in market
and economic conditions. As of March 31, 2010, approximately 91% of our loans were secured by real
estate. Of this amount, approximately 37% were commercial real estate loans, 35% were residential
real estate loans and 28% were construction and development loans. Any sustained period of
increased payment delinquencies, foreclosures or losses caused by adverse market or economic
conditions in the markets we serve, like those we are currently experiencing, will continue to
adversely affect the value of our assets, our revenues, results of operations and financial
condition. In addition, construction and development lending is generally considered to have high
credit risks because the principal is concentrated in a limited number of loans with repayment
dependent on the successful operation of the related real estate project. Consequently, these loans
are more sensitive to adverse conditions in the real estate market or the general economy.
Throughout 2009, the number of newly constructed homes or lots sold in our market areas continued
to decline, negatively affecting collateral values and contributing to increased provision expense
and higher levels of non-performing assets. A continued reduction in residential real estate market
prices and demand, including prices and demand for vacation homes, could result in further price
reductions in home and land values adversely affecting the value of collateral securing the
construction and development loans that we hold. These adverse economic and real estate market
conditions may lead to further increases in non-performing loans and other real estate owned,
increased charge offs from the disposition of non-performing assets, and increases in provision for
loan losses, all of which would negatively impact our financial condition and results of
operations.
We are geographically concentrated in Sevier County and Blount County, Tennessee, and changes in
local economic conditions impact our profitability.
We operate primarily in Sevier County and Blount County, Tennessee, and substantially all of
our loan customers and most of our deposit and other customers live or have operations in
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Sevier
and Blount Counties. Accordingly, our success significantly depends upon the growth in population,
income levels, deposits and housing starts in both counties, along with the continued attraction of
business ventures to the area. Our profitability is impacted by the changes in general economic
conditions in this market. Economic conditions in our area weakened during 2009 and remained weak
throughout the first half of 2010, negatively affecting our operations, particularly the real
estate construction and development segment of our loan portfolio. We cannot assure you that
economic conditions in our market will improve during the remainder of 2010 or thereafter, and
continued weak economic conditions could reduce our growth rate, affect the ability of our
customers to repay their loans to us and generally affect our financial condition and results of
operations.
We are less able than a larger institution to spread the risks of unfavorable local economic
conditions across a large number of diversified economies. Moreover, we cannot give any assurance
that we will benefit from any market growth or return of more favorable economic conditions in our
primary market areas if they do occur.
We could sustain further losses if our asset quality declines further.
Our earnings are significantly affected by our ability to properly originate, underwrite and
service loans. A significant portion of our loans are real estate based or made to real estate
based borrowers, and the credit quality of such loans has deteriorated and could deteriorate
further if real estate market conditions continue to decline or fail to stabilize nationally or,
more importantly, in our market areas. We have sustained losses, and could continue to sustain
losses if we incorrectly assess the creditworthiness of our borrowers or fail to detect or respond
to further deterioration in asset quality in a timely manner. Problems with asset quality could
cause our interest income and net interest margin to decrease and our provisions for loan losses to
increase, which could adversely affect our results of operations and financial condition.
We have entered into a written agreement with, and are subject to a capital requirement from, the
OCC.
On June 2, 2009, the Banks board of directors entered into a formal written agreement with
the OCC. The agreement requires the Bank to take certain actions and implement action plans with
respect to, among other things, a compliance committee, strategic and liquidity planning, loan
review and problem loan identification, loan workout management and procedures, credit and
collateral exceptions, other real estate owned, the allowance for loan and lease losses, criticized
assets, credit concentrations risk management and liquidity risk management.
In addition to the agreement, the OCC has required the Bank to meet and maintain a minimum
Tier 1 leverage ratio of 9% and a minimum total risk-based capital ratio of 13%. These ratios are
significantly higher than those required to be considered well-capitalized under OCC regulations.
At March 31, 2010, the Banks Tier 1 leverage ratio was 9.01% and its Total risk-based capital
ratio was 14.45%.
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If the Bank fails to comply with the terms of the agreement or the capital requirement, it
could be subject to further supervisory enforcement actions, such as a capital directive (in the
case of the capital requirement), cease and desist order or civil money penalty.
If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings will
decrease.
If loan customers with significant loan balances fail to repay their loans according to the
terms of these loans, our earnings would suffer. We make various assumptions and judgments about
the collectability of our loan portfolio, including the creditworthiness of our borrowers and the
value of any collateral securing the repayment of our loans. We maintain an allowance for loan
losses in an attempt to cover probable incurred losses inherent to the risks associated with
lending. In determining the size of this allowance, we rely on an analysis of our loan portfolio
based on volume and types of loans, internal loan classifications, trends in classifications,
volume and trends in delinquencies, nonaccruals and charge-offs, national and local economic
conditions, other factors and other pertinent information. If our assumptions are inaccurate, our
current allowance may not be sufficient to cover probable incurred loan losses, and additional
provisions may be necessary which would decrease our earnings.
In addition, federal and state regulators periodically review our loan portfolio and may
require us to increase our provision for loan losses or recognize loan charge-offs. Their
conclusions about the quality of our loan portfolio may be different than ours. Any increase in our
allowance for loan losses or loan charge-offs as required by these regulatory agencies could have a
negative effect on our operating results. Moreover, additions to the allowance may be necessary
based on changes in economic and real estate market conditions, new information regarding existing
loans, identification of additional problem loans and other factors, both within and outside of our
managements control. These additions may require increased provision expense which would
negatively impact our results of operations.
We have increased levels of other real estate owned, primarily as a result of foreclosures, and we
anticipate higher levels of foreclosed real estate expense.
As we have begun to resolve non-performing real estate loans, we have increased the level of
foreclosed properties, primarily those acquired from builders and from residential land developers.
Foreclosed real estate expense consists of three types of charges: maintenance costs, valuation
adjustments to appraisal values and gains or losses on disposition. These charges will likely
remain at above historical levels as our level of other real estate owned remains elevated, and
also if local real estate values continue to decline, negatively affecting our results of
operations.
Competition with other banking institutions could adversely affect our profitability.
We face significant competition in our primary market areas from a number of sources,
currently including eight commercial banks and one savings institution in Sevier County and twelve
commercial banks and one savings institution in Blount County. As of June 30, 2009, there were 57
commercial bank branches and three savings institutions branches located in
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Sevier County and 52
commercial bank branches and one savings institution branch located in Blount County.
Liquidity needs could adversely affect our results of operations and financial condition.
We rely on dividends from the Bank, which are currently limited as a result of the Banks loss
in 2009, as our primary source of funds, and the Bank relies on customer deposits and loan
repayments as its primary source of funds. While scheduled loan repayments are a relatively stable
source of funds, they are subject to the ability of borrowers to repay the loans. The ability of
borrowers to repay loans can be adversely affected by a number of factors, including changes in
economic conditions, adverse trends or events affecting business industry groups, reductions in
real estate values or markets, business closings or lay-offs, inclement weather, natural disasters,
and international instability. Additionally, deposit levels may be affected by a number of factors,
including rates paid by competitors, general interest rate levels, returns available to customers
on alternative investments, and general economic conditions. We have relied to a significant degree
on national time deposits and brokered deposits, which may be more volatile than local time
deposits. We have committed to the OCC to reduce our dependence on such sources and have sought to
improve our asset and liability liquidity. However, actions to improve liquidity may adversely
affect our profitability. We may be required from time to time to rely on secondary sources of
liquidity to meet withdrawal demands or otherwise fund operations. Such sources include the Federal
Home Loan Bank of Cincinnati, or the FHLB of Cincinnati, advances and federal funds lines of
credit from correspondent banks. The availability of these sources may be restricted because of
losses. To utilize brokered deposits and national market time deposits without additional
regulatory approvals, the Bank must remain well capitalized and must not become subject to a formal
enforcement action that requires the Bank to maintain capital levels above those required to be
well capitalized under the prompt corrective action provisions of the Federal Deposit Insurance
Corporation Improvement Act of 1991, or FDICIA. While we believe that available liquidity sources
are currently adequate, there can be no assurance they will be sufficient to meet future liquidity
demands.
Our ability to maintain required capital levels and adequate sources of funding and liquidity could
be impacted by changes in the capital markets and deteriorating economic and market conditions.
We and the Bank are required to maintain certain capital levels established by banking
regulations or specified by bank regulators. We must also maintain adequate funding sources in the
normal course of business to support our operations and fund outstanding liabilities. Our ability
to maintain capital levels, sources of funding and liquidity could be impacted by changes in the
capital markets in which we operate and deteriorating economic and market conditions. Additionally,
the Bank has agreed with the OCC that it will maintain its Tier 1 leverage capital ratio at a
minimum of 9% and its Total risk-based capital ratio at a minimum of 13%. Failure to meet
applicable capital guidelines or to satisfy certain other regulatory requirements could subject the
Bank to a variety of enforcement remedies available to the federal regulatory authorities.
Fluctuations in interest rates could reduce our profitability.
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Changes in interest rates may affect our level of interest income, the primary component of
our gross revenue, as well as the level of our interest expense, our largest recurring expenditure.
Interest rate fluctuations are caused by many factors which, for the most part, are not under our
direct control. For example, national monetary policy plays a significant role in the determination
of interest rates. Additionally, competitor pricing and the resulting negotiations that occur with
our customers also impact the rates we collect on loans and the rates we pay on deposits.
As interest rates change, we expect that we will periodically experience gaps in the
interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing
liabilities will be more sensitive to changes in market interest rates than our interest-earning
assets, or vice versa. In either event, if market interest rates should move contrary to our
position, this gap may work against us, and our earnings may be negatively affected.
Changes in the level of interest rates also may negatively affect our ability to originate
real estate loans, the value of our assets and our ability to realize gains from the sale of our
assets, all of which ultimately affect our earnings.
Our common stock is currently traded on the over-the-counter, or OTC, bulletin board and has
substantially less liquidity than the average stock quoted on a national securities exchange.
Although our common stock is publicly traded on the OTC bulletin board, our common stock has
substantially less daily trading volume than the average trading market for companies quoted on the
Nasdaq Global Market, or any national securities exchange. A public trading market having the
desired characteristics of depth, liquidity and orderliness depends on the presence in the
marketplace of willing buyers and sellers of our common stock at any given time. This presence
depends on the individual decisions of investors and general economic and market conditions over
which we have no control.
The market price of our common stock has fluctuated significantly, and may fluctuate in the
future. These fluctuations may be unrelated to our performance. General market or industry price
declines or overall market volatility in the future could adversely affect the price of our common
stock, and the current market price may not be indicative of future market prices.
Loss of our senior executive officers or other key employees could impair our relationship with our
customers and adversely affect our business.
We have assembled a senior management team which has substantial background and experience in
banking and financial services and in the Sevier County and Blount County, Tennessee banking
markets. Loss of the services of any of these key personnel could negatively impact our business
because of their skills, years of industry experience, customer relationships and the potential
difficulty of promptly replacing them.
Our business is dependent on technology, and an inability to invest in technological improvements
may adversely affect our results of operations and financial condition.
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The financial services industry is undergoing rapid technological changes with frequent
introductions of new technology-driven products and services. In addition to better serving
customers, the effective use of technology increases efficiency and enables financial institutions
to reduce costs. We have made significant investments in data processing, management information
systems and internet banking accessibility. Our future success will depend in part upon our ability
to create additional efficiencies in our operations through the use of technology, particularly in
light of our past and projected growth strategy. Many of our competitors have substantially greater
resources to invest in technological improvements. There can be no assurance that our technological
improvements will increase our operational efficiency or that we will be able to effectively
implement new technology-driven products and services or be successful in marketing these products
and services to our customers.
We are subject to various statutes and regulations that may limit our ability to take certain
actions.
We operate in a highly regulated industry and are subject to examination, supervision, and
comprehensive regulation by various regulatory agencies. Our compliance with these regulations is
costly and restricts certain of our activities, including payment of dividends, mergers and
acquisitions, investments, loans and interest rates charged, interest rates paid on deposits and
locations of offices. We are also subject to capitalization guidelines established by our
regulators, which require us to maintain specified levels of capital. As economic conditions
deteriorate, our regulators may review our operations with more scrutiny and we may be subject to
increased regulatory oversight which could adversely affect our operations.
Significant changes in laws and regulations applicable to the banking industry have been
recently adopted and others are being considered in Congress,
including the Dodd-Frank Wall Street Reform and Consumer Protection
Act. We cannot predict the effects of
these changes on our business and profitability. Because government regulation greatly affects the
business and financial results of all commercial banks and bank holding companies, our cost of
compliance could adversely affect our ability to operate profitably.
National or state legislation or regulation may increase our expenses and reduce earnings.
Federal bank regulators are increasing regulatory scrutiny, and additional restrictions on
financial institutions have been proposed by regulators and by Congress. Changes in tax law,
federal legislation, regulation or policies, such as bankruptcy laws, deposit insurance, consumer
protection laws, and capital requirements, among others, can result in significant increases in our
expenses and/or charge-offs, which may adversely affect our earnings. Changes in state or federal
tax laws or regulations can have a similar impact. Many state and municipal governments, including
the State of Tennessee, are under financial stress due to the economy. As a result, these
governments could seek to increase their tax revenues through increased tax levies which could have
a meaningful impact on our results of operations. Furthermore, financial institution regulatory
agencies are expected to continue to be very aggressive in responding to concerns and trends
identified in examinations, including the continued issuance of additional formal or informal
enforcement or supervisory actions. These actions, whether formal or informal, could result in our
agreeing to limitations or to take actions that limit our operational flexibility, restrict our
growth or increase our capital or liquidity levels. Failure to comply with any formal or informal
regulatory restrictions, including informal supervisory actions, could lead
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to further regulatory
enforcement actions. Negative developments in the financial services industry and the impact of
recently enacted or new legislation in response to those developments could negatively impact our
operations by restricting our business operations, including our ability to originate or sell
loans, and adversely impact our financial performance. In addition, industry, legislative or
regulatory developments may cause us to materially change our existing strategic direction, capital
strategies, compensation or operating plans.
Certain legislative and regulatory initiatives that were enacted in response to the financial
crisis are beginning to wind down.
The U.S. federal, state and foreign governments have taken various actions in an attempt to
deal with the worldwide financial crisis that began in the second half of 2008 and the severe
decline in the global economy. Some of these programs are beginning to expire and the impact of the
wind down on the financial sector and on the economic recovery is unknown. In the United States,
the Emergency Economic Stabilization Act of 2008, or EESA, was enacted on October 3, 2008 and the
American Recovery and Reinvestment Act of 2009 was enacted on February 17, 2009. The Transaction
Account Guarantee portion of the FDICs Temporary Liquidity Guarantee Program, which guarantees
noninterest bearing transaction accounts on an unlimited basis is scheduled to continue until
December 31, 2010.
Although we have initiated efforts to reduce our reliance on noncore funding, this type of funding
still represents a significant component of our funding base.
In addition to the traditional core deposits, such as demand deposit accounts, interest
checking, money market savings and certificates of deposits, we utilize several noncore funding
sources, such as brokered certificates of deposit, FHLB of Cincinnati advances, federal funds
purchased and other sources. We utilize these noncore funding sources to supplement core funding
deficits. The availability of these noncore funding sources is subject to broad economic conditions
and, as such, the cost of funds may fluctuate significantly and/or be restricted, thus impacting
our net interest income, our immediate liquidity and/or our access to additional liquidity.
Brokered certificates of deposit have received scrutiny from regulators in recent months. We
impose upon ourselves limitations as to the absolute level of brokered deposits we may have on our
balance sheet at any point in time, and we have committed to bank regulators to reduce our reliance
on brokered deposits. The pricing of these deposits are subject to the broader wholesale funding
market and the depositors views on our financial strength and may fluctuate significantly in a
very short period of time. Additionally, the availability of these deposits is impacted by overall
market conditions as investors determine whether to invest in less risky certificates of deposit or
in riskier debt and equity markets. As money flows between these various investment instruments,
market conditions will impact the pricing and availability of brokered funds, which may negatively
impact our liquidity and cost of funds.
We impose certain internal limits as to the absolute level of noncore funding we will incur at
any point in time. Should we exceed those limitations, we may need to modify our growth plans,
liquidate certain assets, participate loans to correspondents or execute other actions
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to allow for
us to return to an acceptable level of noncore funding within a reasonable amount of time.
If the federal funds rate remains at current extremely low levels, our net interest margin, and
consequently our net earnings, may be negatively impacted.
Because of significant competitive deposit pricing pressures in our market and the negative
impact of these pressures on our cost of funds, coupled with the fact that a significant portion of
our loan portfolio has variable rate pricing that moves in concert with changes to the Federal
Reserve Board of Governors federal funds rate (which is at an extremely low rate as a result of
the current recession), we experienced net interest margin compression throughout 2008 and 2009,
which continued during the first three months of 2010. Because of these competitive pressures, we
have been unable to lower the rate that we pay on interest-bearing liabilities to the same extent
and as quickly as the yields we charge on interest-earning assets. As a result, our net interest
margin, and consequently our profitability, has been negatively impacted.
We have a significant deferred tax asset and cannot give any assurance that it will be fully
realized.
We had net deferred tax assets of approximately $5 million as of March 31, 2010. We did not
establish a valuation allowance against our net deferred tax assets as of March 31, 2010 because we
believe that it is more likely than not that all of these assets will be realized. In evaluating
the need for a valuation allowance, we considered the reversal of deferred tax liabilities, the
ability to carryback losses to prior years, tax planning strategies and estimated future taxable
income based on management prepared forecasts. This process required significant judgment by
management about matters that are by nature uncertain. If future events differ significantly from
our current forecasts, we may need to establish a valuation allowance, which could have a material
adverse effect on our results of operations and financial condition.
Holders of our junior subordinated debentures have rights that are senior to those of our common
shareholders.
At March 31, 2010, we had outstanding trust preferred securities from special purpose trusts
and accompanying junior subordinated debentures totaling $13.4 million. Payments of the principal
and interest on the trust preferred securities of these trusts are conditionally guaranteed by us.
Further, the accompanying junior subordinated debentures we issued to the trusts are senior to our
shares of common stock and preferred stock. As a result, we must make payments on the junior
subordinated debentures before any dividends can be paid on our common stock and, in the event of
our bankruptcy, dissolution or liquidation, the holders of the junior subordinated debentures must
be satisfied before any distributions can be made on our common stock. We have the right to defer
distributions on our junior subordinated debentures (and the related trust preferred securities)
for up to five years, during which time no dividends may be paid on our common stock. Because of
the losses the Bank incurred in 2009, it is not permitted to pay dividends to us without the
consent of the OCC. As a result, we must use cash on hand to pay our obligations on the
subordinated debentures related to our trust preferred securities. At March 31, 2010, we had cash
and receivables in an amount sufficient to make these payments until September 30, 2010. If the
Bank is unable to secure necessary approvals to pay dividends to
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us we may be required to continue
the current suspension of dividends on our common stock and to defer distributions on our junior
subordinated debentures.
If a change in control or change in management is delayed or prevented, the market price of our
common stock could be negatively affected.
Certain federal and state regulations may make it difficult, and expensive, to pursue a tender
offer, change in control or takeover attempt that our board of directors opposes. As a result, our
shareholders may not have an opportunity to participate in such a transaction, and the trading
price of our stock may not rise to the level of other institutions that are more vulnerable to
hostile takeovers.
An investment in our common stock is not an insured deposit.
Our common stock is not a bank deposit and, therefore, is not insured against loss by the
FDIC, any other deposit insurance fund or by any other public or private entity. Investment in our
common stock is inherently risky for the reasons described in this Risk Factors section and
elsewhere in this prospectus and is subject to the same market forces that affect the price of
common stock in any company. As a result, if you acquire our stock, you could lose some or all of
your investment.
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FORWARD-LOOKING STATEMENTS
Certain of the statements made herein are forward-looking statements within the meaning and
subject to the protections of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act.
Forward-looking statements include statements with respect to our beliefs, plans, objectives,
goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and
involve known and unknown risks, uncertainties and other factors, which may be beyond our control,
and which may cause the actual results, performance or achievements of the Company to be materially
different from future results, performance or achievements expressed or implied by such
forward-looking statements.
All statements other than statements of historical fact are statements that could be
forward-looking statements. You can identify these forward-looking statements through our use of
words such as may, will, anticipate, assume, should, indicate, seek, attempt,
would, believe, contemplate, expect, estimate, continue, plan, point to, project,
could, intend, target, potential and other similar words and expressions of the future.
These forward-looking statements may not be realized due to a variety of factors, including,
without limitation, those described under Risk Factors in this prospectus and the following
factors:
| the effects of greater than anticipated deterioration in economic and business conditions (including in the residential and commercial real estate construction and development segment of the economy) nationally and in our local market; | ||
| deterioration in the financial condition of borrowers resulting in significant increases in loan losses and provisions for those losses; | ||
| lack of sustained growth in the economy in the Sevier County and Blount County, Tennessee area; | ||
| government monetary and fiscal policies as well as legislative and regulatory changes, including changes in banking, securities and tax laws and regulations; | ||
| the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values of loan collateral, securities, and interest sensitive assets and liabilities; | ||
| the effects of competition from a wide variety of local, regional, national and other providers of financial, investment, and insurance services; | ||
| the failure of assumptions underlying the establishment of reserves for possible loan losses and other estimates; | ||
| the risks of mergers, acquisitions and divestitures, including, without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and the possible failure to achieve expected gains, revenue growth and/or expense savings from such transactions; | ||
| the effects of failing to comply with our regulatory commitments; | ||
| changes in accounting policies, rules and practices; | ||
| changes in technology or products that may be more difficult, or costly, or less effective, than anticipated; |
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| the effects of war or other conflicts, acts of terrorism or other catastrophic events that may affect general economic conditions; | ||
| results of regulatory examinations; and | ||
| other factors and information described in this report and in any of our other reports that we make with the Securities and Exchange Commission, or the Commission, under the Exchange Act. |
All written or oral forward-looking statements that are made by or are attributable to us are
expressly qualified in their entirety by this cautionary notice. Except as required by the federal
securities laws we do not undertake to update, revise or correct any of the forward-looking
statements after the date of this report, or after the respective dates on which such statements
otherwise are made.
THE OFFERING
Minimum/Maximum
We are offering a minimum of 10,000 shares and a maximum of 265,000 shares of our common stock
for a price of $10.00 per share, for a total minimum amount of gross proceeds of $100,000 and a
total maximum amount of gross proceeds of $2,650,000, in each case before deducting the estimated
$62,689 of expenses we expect to incur in this offering. Investors must purchase at least 100
shares to participate in this offering but are not limited in the maximum number of shares they can
purchase. If we do not sell the minimum number of shares being offered by this prospectus, we will
not be required to accept any subscriptions and will return your subscription fee to you, without
interest.
Director and Executive Officer Participation
Our directors and executive officers have indicated to us that they anticipate that they will
subscribe for a minimum of [ ] shares in this offering.
Preference for Existing Shareholders
We are first offering the shares to our existing shareholders as of the close of business on
July ___, 2010. If after August ___, 2010, our existing shareholders have
not purchased all of the shares we are offering, we will offer any unsold shares to persons who
were not existing shareholders of ours as of the close of business on July ___, 2010. We reserve
the right, in our sole discretion, to extend the initial period in which only our
existing shareholders are allowed to purchase shares in the offering if our board of directors determines to do so.
Offering period
We will begin accepting subscriptions for the shares at 8:00 a.m. eastern daylight time on
___, August ___, 2010 and the offering period for the shares will end when all of the shares of
the common stock are sold or 5:00 p.m., Sevierville time, on September 30, 2010, whichever will
occur first. We may extend this date at our discretion for additional
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periods not exceeding a total of thirty (30) additional days (i.e., until October 30, 2010). We
will promptly notify subscribers of any extensions.
How to Participate in This Offering
Purchasers must follow the following procedure if participating in this offering:
1. Complete, date and sign each of the subscription agreement which is included with this
prospectus. Make sure you follow the instructions within the subscription agreement when completing
it.
2. Make a check payable to the order of Mountain National Bancshares, Inc., in the amount of
$10.00 times the number of shares you wish to purchase.
3. Persons participating in this offering must purchase at least 100 shares but are not
limited in the maximum number of shares that they can purchase.
4. Beginning no earlier than 8:00 a.m. eastern daylight time on , August ___, 2010,
return the completed subscription agreement and check to:
In person:
Mountain National Bancshares, Inc.
Michael Brown
300 East Main Street
Sevierville, Tennessee 37862
Mountain National Bancshares, Inc.
Michael Brown
300 East Main Street
Sevierville, Tennessee 37862
By mail:
Mountain National Bancshares, Inc.
Michael Brown
P.O. Box 6519
Sevierville, Tennessee 37864
Mountain National Bancshares, Inc.
Michael Brown
P.O. Box 6519
Sevierville, Tennessee 37864
5. If we accept your subscription, upon receipt of proper payment and a completed and duly
executed subscription agreement, you will be entitled to receive a certificate representing the
number of shares purchased, which will be validly issued, fully paid and nonassessable.
Certificates will be mailed as soon as reasonably possible following consummation of the offering.
6. The subscription agreement is irrevocable.
Our Discretion
We reserve the right, in our sole discretion, to accept or reject any subscription in whole or
in part on or before the expiration date of this offering and to not offer the shares in those
states where existing shareholders or prospective purchasers reside, where compliance with the
states securities laws would require that we register the shares for issuance under the states
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securities laws or where compliance with those laws would not be in our, or our shareholders, best
interests. If the offering is over subscribed, we plan to accept subscriptions on a first-come,
first-served basis. We will notify all subscribers within ten business days after the earlier of
the final expiration date or the sale of all of the shares being offered in this offering whether
their subscriptions have been accepted. If we do not accept all or a portion of a subscription, we
will also return the unaccepted portion of the subscription funds, without interest.
USE OF PROCEEDS
We estimate that our net proceeds from our sale of the 265,000 shares of common stock we are
offering will be approximately $2,587,000 after deducting estimated offering expenses payable by us
assuming a public offering price of $10.00 per share. If we are only able to sell the minimum
number of shares we are offering, our net proceeds, after deducting estimated offering expenses
payable by us assuming a $10.00 public offering price per share will
be $37,000.
Assuming we sell all of the shares we are offering, we will invest approximately $1,500,000 of
the net proceeds in the Bank where these proceeds would be available for general corporate
purposes, including supporting the Banks capital position and funding the Banks lending and
investment activities. We will retain the remaining approximately $1,087,000 and use it for our
general corporate purposes, including the payment of our obligations related to our junior
subordinated debentures and working capital to position us for future internal growth. Pending
these uses, the net proceeds will be invested by us in a variety of short-term assets, including
federal funds, interest-bearing deposits in other banks and similar investments.
PRICE RANGE OF OUR COMMON STOCK
There is not a large market for the Companys shares, which are quoted on the OTC Bulletin
Board under the symbol MNBT and are not traded on any national exchange. Trading is generally
limited to private transactions and, therefore, there is limited reliable information available as
to the number of trades or the prices at which our stock has traded. Management has reviewed the
limited information available regarding the range of prices at which the Companys common stock
has been sold. The following table sets forth, for the calendar periods indicated, the range of
high and low reported sales prices. This data is provided for information purposes only and should
not be viewed as indicative of the actual or market value of our common stock:
Market Price Range | ||||||||
Per Share | ||||||||
Year/Period | High | Low | ||||||
2010: |
$ | 8.10 | $ | 5.10 | ||||
First Quarter |
8.10 | 5.75 | ||||||
Second Quarter |
6.75 | 5.10 | ||||||
Third
Quarter (through July 21, 2010) |
5.75 | 5.75 | ||||||
2009: |
$ | 16.75 | $ | 8.00 | ||||
First Quarter |
16.75 | 11.00 | ||||||
Second Quarter |
16.50 | 12.50 | ||||||
Third Quarter |
15.00 | 9.00 | ||||||
Fourth Quarter |
10.50 | 8.00 | ||||||
2008: |
$ | 25.00 | $ | 16.20 | ||||
First Quarter |
25.00 | 20.00 | ||||||
Second Quarter |
25.00 | 19.90 | ||||||
Third Quarter |
22.00 | 18.00 | ||||||
Fourth Quarter |
18.50 | 16.20 |
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These quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions. They have been adjusted to reflect the five
percent stock dividend issued March 2008.
As of July 14, 2010, the Company has approximately 2,000 holders of record of its common
stock. The Company has no other class of securities issued or outstanding.
DIVIDEND POLICY
Dividends from the Bank are the Companys primary source of funds to pay dividends on its
capital stock. Under the National Bank Act, the Bank may, in any calendar year, without the
approval of the OCC, pay dividends to the extent of net profits for that year, plus retained net
profits for the preceding two years (less any required transfers to surplus). Given the losses
incurred by the Bank in 2009, the Banks ability to pay dividends to the Company beginning on
January 1, 2010 is limited. The need to maintain adequate capital in the Bank also limits dividends
that may be paid to the Company. The OCC and Federal Reserve have the general authority to limit
the dividends paid by insured banks and bank holding companies, respectively, if such payment may
be deemed to constitute an unsafe or unsound practice. If, in the particular circumstances, the OCC
determines that the payment of dividends would constitute an unsafe or unsound banking practice,
the OCC may, among other things, issue a cease and desist order prohibiting the payment of
dividends. Additional information regarding restrictions on the ability of the Bank to pay
dividends to the Company is contained in this prospectus under Business- Supervision and
Regulation.
On March 7, 2008, we issued a five percent stock dividend to stockholders of record as of
February 15, 2008. In lieu of fractional shares, we made a cash payment totaling $17,802, based on
a price of $24.00 per share. The total number of shares issued pursuant to the dividend was
124,718.
During November 2008, the Board of Directors approved a special cash dividend of $0.38 per
issued and outstanding share of Common Stock for stockholders of record as of November 26, 2008.
The dividend totaling approximately $1,013,000 was paid on December 15, 2008.
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CAPITALIZATION
The following table sets forth our capitalization and certain capital ratios as of March 31,
2010. Our capitalization is presented on an actual basis and on an as adjusted basis to reflect
the sale of 265,000 shares of our common stock in this offering and our receipt of approximately
$2,587,000 in estimated net proceeds from this offering, assuming a public offering price of $10.00
per share and after deducting the estimated expenses of this offering.
March 31, 2010 | ||||||||
Actual | As Adjusted | |||||||
(Dollars in thousands) | ||||||||
Stockholders equity: |
||||||||
Common stock, par value $1.00; 10,000,000 shares authorized: 2,631,611 issued and outstanding at March 31, 2010 As adjusted: 2,896,611 issued and outstanding |
2,631,611 | 2,896,611 | ||||||
Additional paid-in capital |
42,127,938 | 44,450,249 | ||||||
Retained earnings |
2,657,816 | 2,657,816 | ||||||
Accumulated other comprehensive
income (loss), net |
9,602 | 9,602 | ||||||
Total stockholders equity |
47,426,967 | 50,014,278 | ||||||
Capital ratios-Company (3): |
||||||||
Leverage (1) |
9.10 | % | 9.45 | % | ||||
Risk-based capital (2) |
14.57 | % | 15.07 | % | ||||
Tier 1 |
13.31 | % | 13.81 | % | ||||
Total |
7.33 | % | 7.70 | % | ||||
Capital ratios-Bank (3): |
||||||||
Leverage (1) |
9.01 | % | 9.22 | % | ||||
Risk-based capital (2) |
14.45 | % | 14.74 | % | ||||
Tier 1 |
13.18 | % | 13.47 | % | ||||
Total |
9.26 | % | 9.47 | % |
(1) | Leverage ratio is defined as Tier 1 capital (pursuant to risk-based capital guidelines) as a percentage of adjusted average assets for the quarter ended March 31, 2010. As adjusted calculation assumes that proceeds from offering would have been received as the last transaction for the quarter ended March 31, 2010. | |
(2) | The as adjusted calculations for the risk-based capital ratios assume that the proceeds from the offering are invested in assets which carry a 100% risk-weighting as of March 31, 2010. | |
(3) | The as adjusted calculations for the Banks capital ratios assume that approximately $1,500,000 of the proceeds from the offering are contributed to the Bank. |
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BUSINESS
The Company
Mountain National is a bank holding company registered with the Board of Governors of the
Federal Reserve System, or the Federal Reserve, under the Bank Holding Company Act of 1956, as
amended, or the BHC Act. The Company provides a full range of banking services through its
banking subsidiary, Mountain National Bank.
For the purposes of the discussions in this prospectus, the words we, us, and our refer
to the combined entities of the Company and the Bank unless otherwise indicated or evident. The
Companys main office is located at 300 East Main Street, Sevierville, Tennessee 37862. The Company
was incorporated as a business corporation in March 2002 under the laws of the State of Tennessee
for the purpose of acquiring 100% of the issued and outstanding shares of common stock of the Bank.
Effective July 1, 2002, the Company and the Bank entered into a reorganization pursuant to which
the Company acquired 100% of the outstanding shares of the Bank and the shareholders of the Bank
became the shareholders of the Company. In June 2003, the Company received approval from the
Federal Reserve Bank of Atlanta to become a bank holding company.
At December 31, 2009, the assets of the Company consisted primarily of its ownership of the
capital stock of the Bank.
The Company is authorized to engage in any activity permitted by law to a corporation, subject
to applicable federal and state regulatory restrictions on the activities of bank holding
companies. The Companys holding company structure provides it with greater flexibility than the
Bank would otherwise have relative to expanding and diversifying its business activities through
newly formed subsidiaries or through acquisitions. While management of the Company has no present
plans to engage in any other business activities, management may from time to time study the
feasibility of establishing or acquiring subsidiaries to engage in other business activities to the
extent permitted by law.
The Bank
The Bank is organized as a national banking association. The Bank applied to the OCC, and the
FDIC, on February 16, 1998, to become an insured national banking association. The Bank received
approval from the OCC to organize as a national banking association on June 16, 1998 and commenced
business on November 23, 1998. The Banks principal business is to accept demand and savings
deposits from the general public and to make residential mortgage, commercial and consumer loans.
Our Banking Business
General. Our banking business consists primarily of traditional commercial banking
operations, including taking deposits and originating loans. We conduct our banking activities from
our main office located in Sevierville, Tennessee and through eight additional branch offices in
Sevier County, Tennessee, as well as a regional headquarters and two branch offices in
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Blount County, Tennessee. We operate two branch offices in Gatlinburg, two branch offices in Pigeon
Forge, a branch office in Seymour, a branch office in Kodak, two branch offices in Sevierville, all
in Sevier County, and two branch offices and our Blount County regional headquarters in Maryville,
Blount County, Tennessee. The retail nature of our commercial banking operations allows for
diversification in the number of our depositors and borrowers, and we do not believe that we are
dependent on a single or a few customers.
We offer a variety of retail banking services. We seek savings and other time and demand
deposits from consumers and businesses in our primary market area by offering a full range of
deposit accounts, including savings, demand deposit, retirement, including individual retirement
accounts, or IRAs, and professional and checking accounts, as well as certificates of deposit.
We use the deposit funds we receive to originate mortgage, commercial and consumer loans, and to
make other authorized investments. In addition, we currently maintain 20 full-service ATMs
throughout our market area. Because the Bank is a member of a number of payment systems networks,
Bank customers may also access banking services through ATMs and point of sale terminals throughout
the world. In addition to traditional deposit-taking and lending services, we also provide a
variety of checking accounts, savings programs, night depository services, safe deposit facilities
and credit card plans.
The banking industry is significantly affected by prevailing economic conditions, as well as
government policies and regulations concerning, among other things, monetary and fiscal affairs,
the housing industry and financial institutions. Deposits at commercial banks are influenced by
economic conditions, including interest rates and competing investment instruments, levels of
personal income and savings, among others. Lending activities are also influenced by a number of
economic factors, including demand for and supply of housing, conditions in the construction
industry, local economic and seasonal factors and availability of funds. Our primary sources of
funding for lending activities include savings and demand deposits, income from investments, loan
principal payments and borrowings. For additional information relating to our deposits and loans,
refer to Managements Discussion and Analysis of Financial Condition and Results of Operations in
our annual report on Form 10-K for the year ended December 31, 2009 incorporated by reference
herein.
Market Areas. Our primary market areas are Sevier and Blount Counties, contiguous
counties located in eastern Tennessee. We intend to continue our focus on these primary market
areas in the future. Additionally, even with our current market area focus, some of our business
may come from other areas contiguous to our primary market area.
Lending Activities
General. We concentrate on developing a diversified real estate loan portfolio
consisting of first mortgage loans secured by residential properties, loans secured by commercial
properties and other commercial and consumer loans.
Real Estate Lending. We originate permanent and construction loans having terms in the
case of the permanent loans of up to 30 years that are typically secured by residential real estate
comprised of single-family dwellings and multi-family dwellings of up to four units. All of our
residential real estate loans consist of conventional loans that are not insured or guaranteed by
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government agencies. We also originate and hold in our portfolio traditional fixed-rate mortgage
loans in appropriate circumstances.
Consumer Lending. We originate consumer loans that typically fall into the following
categories:
| loans secured by junior liens on real estate, including home improvement and home equity loans, which have an average maturity of about three years and generally are limited to 80% of appraised value, and home equity lines of credit; | ||
| loans secured by personal property, such as automobiles, recreational vehicles or boats, which typically have 36 to 60 month maturities; | ||
| loans to our depositors secured by their time deposit accounts or certificates of deposit; | ||
| unsecured personal loans and personal lines of credit; and | ||
| credit card loans. |
Consumer loans generally entail greater risk than residential mortgage loans, particularly in
the case of consumer loans that are unsecured or that are secured by rapidly depreciating assets
such as automobiles. Where consumer loans are unsecured or secured by depreciating assets, the
absence of collateral or the insufficiency of any repossessed collateral to serve as an adequate
source of repayment of the outstanding loan balance poses greater risk of loss to us. When a
deficiency exists between the outstanding balance of a defaulted loan and the value of collateral
repossessed, the borrowers financial instability and life situations that led to the default
(which may include job loss, divorce, illness or personal bankruptcy, among other things) often do
not warrant substantial further collection efforts. Furthermore, the application of various federal
and state laws, including federal bankruptcy and state insolvency laws, may limit the amount that
we can recover in the event a consumer defaults on an unsecured or undersecured loan.
Construction Lending. We offer single-family residential construction loans to
borrowers for construction of one-to-four family residences in our primary market area. Generally,
we limit our construction lending to construction-permanent loans and make these loans to
individuals building their primary residences. We also originate construction loans to selected
local builders for construction of single-family dwellings.
Our construction loans may have fixed or adjustable interest rates and are underwritten in
accordance with the same standards that we apply to permanent mortgage loans, with the exception
that our construction loans generally provide for disbursement of the loan amount in stages during
a construction period of up to 12 months, during which period the borrower is required to make
monthly payments of accrued interest on the outstanding loan balance. We typically require a
maximum loan-to-value ratio of 80% on construction loans we originate. While our construction loans
generally convert to permanent loans following construction, the construction loans we extend to
builders generally require repayment in full upon the completion of construction, or,
alternatively, may be assumed by the borrower.
Construction lending affords us the opportunity to earn higher interest rates and fees with
shorter terms to maturity than does single-family permanent mortgage lending. Construction lending,
however, is generally considered to involve a higher degree of risk than single-family
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permanent mortgage lending because of the inherent difficulty in estimating both a propertys value
at completion of the project and the projected cost of the project. If the estimate of construction
cost proves to be inaccurate, we may be required to advance funds beyond the amount originally
committed to complete the project. If the estimate of value upon completion proves inaccurate, we
may be confronted at, or prior to, the maturity of the loan with collateral of insufficient value
to assure full repayment. Construction projects may also be jeopardized by downturns in the economy
or demand in the area where the project is being undertaken, disagreements between borrowers and
builders and by the failure of builders to pay subcontractors. Loans to builders to construct homes
for which no purchaser has been identified carry more risk because the builders ability to repay
the loan is often dependent on the builders ability to sell the property prior to the time the
construction loan becomes due.
Commercial Lending. We originate secured and unsecured loans for commercial,
corporate, business and agricultural purposes, and we engage in commercial real estate activities
consisting of loans for hotels, motels, restaurants, retail store outlets and service providers
such as insurance agencies. Currently, we concentrate our commercial lending efforts on originating
loans to small businesses for purposes of providing working capital, capital improvements, and
construction and leasehold improvements. These loans typically have one-year maturities, if they
are unsecured loans, or, in the case of small business loans secured by real estate, have an
average maturity of five years. We also participate in the Small Business Administrations
guaranteed commercial loan program.
Commercial lending, while generally considered to involve a higher degree of credit risk than
long-term financing of residential properties, generally provides higher yields and greater
interest rate sensitivity than do residential mortgage loans. Commercial loans are generally
adjustable rate loans or loans that have short-term maturities of one to three years. The higher
risks inherent in commercial lending include risks specific to the business venture, delays in
leasing the collateral and excessive collateral dependency, vacancy, delays in obtaining or
inability to obtain permanent financing and difficulties we may experience in exerting influence
over or acquiring the collateral following a borrowers default. Moreover, commercial loans often
carry larger loan balances to single borrowers or groups of related borrowers than do residential
real estate loans. With respect to commercial real estate lending, the borrowers ability to make
principal and interest payments on loans secured by income-producing properties is typically
dependent on the successful operation of the related real estate project and thus may be subject to
a greater extent to adverse conditions in the real estate market or in the economy generally. We
attempt to mitigate the risks inherent in commercial lending by, among other things, securing our
loans with adequate collateral and extending commercial loans only to persons located in our
primary market area.
Creditworthiness and Collateral. We require each prospective borrower to complete a
detailed loan application which we use to evaluate the applicants creditworthiness. All loan
applications are reviewed and approved or disapproved in accordance with guidelines established by
the Banks Board of Directors. We also require that loan collateral be appraised by an in house
evaluation or by independent appraisers approved by the Banks Board of Directors and require
borrowers to maintain fire and casualty insurance on collateral in accordance with guidelines
established by the Banks Board of Directors. Title insurance is required for most real property
collateral.
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Loan Originations. We originate loans primarily for our own portfolio but, subject to
market conditions, we may sell certain loans we originate in the secondary market. Initially, most
of our loans are originated based on referrals and to walk-in customers. We also use various
methods of local advertising to stimulate originations.
Secondary Market Activities. We engage in secondary mortgage market activities,
principally the sale of certain residential mortgage loans on a servicing-released basis, subject
to market conditions. Secondary mortgage market activities permit us to generate fee income and
sale income to supplement our principal source of income net interest income resulting from the
interest margin between the yield on interest-earning assets like loans and investment securities
and the interest paid on interest-bearing liabilities such as savings deposits, time deposit
certificates and funds borrowed by the Bank.
From time to time we originate a limited number of permanent, conventional residential
mortgage loans that we sell on a servicing-released basis to private institutional investors such
as savings institutions, banks, life insurance companies and pension funds. We originate these
loans on terms and conditions similar to those required for sale to the Federal Home Loan Mortgage
Corporation, or FHLMC, and the Federal National Mortgage Association, or FNMA, except that we
occasionally offer these loans with higher dollar limits than are permissible for FHLMC or
FNMA-eligible loans.
The loan-to-value ratios we require for the residential mortgage loans we originate are
determined based on guidelines established by the Banks Board of Directors pursuant to applicable
law.
Income from Lending Activities. Our lending activities generate interest and loan
origination fee income. Loan origination fees are calculated as a percentage of the principal
amount of the mortgage loans we originate and are charged to the borrower by the Bank for
originating the loan. We also receive loan fees and charges related to existing loans, which
include late charges and assumption fees.
Loan Delinquencies and Defaults. When a borrower fails to make a required loan payment
for 30 days, we classify the loan as delinquent. If the delinquency exceeds 90 days and is not
cured through the Banks normal collection procedures, we institute more formal recovery efforts.
If a foreclosure action is initiated and the loan is not reinstated, paid in full or refinanced,
the property is sold at a judicial or trustee sale at which, in some instances, the Bank acquires
the property. Thereafter, such acquired property is recorded in the Banks records as other real
estate owned, or OREO, until the property is sold. In some cases, we may finance sales of OREO,
which may involve our origination of loans to facilitate that typically involve a lower down
payment or a longer term.
Investment Activities
Our investment securities portfolio is an integral part of our total assets and liabilities
management strategy. We use our investments, in part, to further our interest rate risk management
objective of reducing our sensitivity to interest-rate fluctuations. Our primary
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objective in making investment determinations with respect to our securities portfolio is to
achieve a high degree of maturity and rate matching between these assets and our interest-bearing
liabilities. In order to achieve this goal, we concentrate our investments, which constituted
approximately 23% of our total assets at December 31, 2009, in U.S. government securities or other
securities of similar low risk. The U.S. government and other investment-grade securities in which
we invest typically have maturities ranging from 30 days to 30 years.
Sources of Funds
General. Deposits are the primary source of funds we use to support our lending
activities and other general business activities. Other sources of funds include loan repayments,
loan sales and borrowings. Although deposit activity is significantly influenced by fluctuations in
interest rates and general market conditions, loan repayments are a relatively stable source of
funds. We also use short-term borrowings to compensate in periods where our normal funding sources
are insufficient to satisfy our funding needs. We use long-term borrowings to support extended
activities and to extend the term of our liabilities.
Deposits. We offer a variety of programs designed to attract both short-term and
long-term deposits from the general public in our market areas. These programs include savings
accounts, NOW accounts, demand deposit accounts, money market deposit accounts, fixed-rate and
variable-rate certificate of deposit accounts of varying maturities, retirement accounts and
certain other accounts. We particularly focus on promoting long-term deposits, such as IRA accounts
and certificates of deposit. Additionally, we use brokered deposits that are comparable in rate and
term to our traditional certificates of deposit.
Borrowings. The Bank became a member of the FHLB of Cincinnati in December 2001. The
FHLB of Cincinnati functions as a central reserve bank that provides credit for member
institutions. As a member, the Bank is required to own capital stock in the FHLB of Cincinnati.
Membership in the FHLB of Cincinnati entitles the Bank, provided certain standards related to
creditworthiness have been met, to apply for advances on the security of the FHLB of Cincinnati
stock it holds as well as on the security of certain of its residential mortgage loans, commercial
loans and other assets (principally, its investment securities that are obligations of, or
guaranteed by, the United States). The FHLB of Cincinnati makes advances to the Bank pursuant to
several different credit programs. Each credit program has its own interest rate and range of
maturities. Interest rates on FHLB of Cincinnati advances are generally variable and adjust to
reflect actual conditions existing in the credit markets. The uses for which we may employ funds
received pursuant to FHLB of Cincinnati advances are prescribed by the various lending programs,
which also prescribe borrowing limitations. Acceptable uses prescribed by the FHLB of Cincinnati
have included expansion of residential mortgage lending and funding short-term liquidity needs.
Depending on the particular credit program under which we borrow, borrowing limitations are
generally based on the FHLB of Cincinnatis assessment of our creditworthiness. The FHLB of
Cincinnati is required to review the credit limitations and standards to which we are subject at
least once every six months.
Financing. In August of 1998, the Bank completed an offering of common stock which
yielded proceeds of $12,000,000. On November 7, 2003, the Company completed the sale, through its
wholly owned statutory trust subsidiary, MNB Capital Trust I, of $5,500,000 of trust
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preferred securities, which we refer to as Capital Securities I, which mature on December 31,
2033, and have a liquidation amount of $50,000 per Capital Security. Interest on the Capital
Securities I is to be paid quarterly on the last day of each March, June, September and December
and is reset quarterly based on the three-month LIBOR plus 305 basis points. The Company used the
net proceeds from the offering of Capital Securities I to pay off an outstanding line of credit.
On June 20, 2006, the Company completed the sale, through its wholly owned statutory trust
subsidiary, MNB Capital Trust II, of $7,500,000 of trust preferred securities, which we refer to as
Capital Securities II, which mature on July 7, 2036, and have a liquidation amount of $1,000 per
Capital Security. Interest on the Capital Securities II is to be paid quarterly on the seventh day
of each January, April, July and October and is reset quarterly based on the three-month LIBOR plus
160 basis points. The Company used the net proceeds from the offering of Capital Securities II to
increase regulatory capital for the Company and for operating funds for the Bank.
During the third quarter of 2005, the Company sold 416,500 shares of common stock. This sale
resulted in an increase in common stock and surplus of approximately $9,896,500. In connection with
the offering, there were 416,500 warrants issued, one warrant for each share of stock sold, that
had an exercise price of $25.20 per warrant. The warrants could be exercised beginning after one
year from the date of the sale of the common stock, and had to be exercised no later than two years
from the date of the sale. The final day to exercise the common stock warrants was September 7,
2007. During the period in which they could be exercised, 476,194 out of 482,151 (adjusted for 5%
stock dividends) warrants were exercised at a weighted average exercise price of $21.77 (adjusted
for 5% stock dividends). The total corresponding increase to shareholders equity from the
conversion of the stock warrants to common stock from September 7, 2006 to September 7, 2007, the
period the warrants could be exercised, was approximately $10,367,000.
Competition
We face significant competition in our primary market areas from a number of sources,
including eight commercial banks and one savings institution in Sevier County and twelve commercial
banks and one savings institution in Blount County. As of June 30, 2009, there were 57 commercial
bank branches and three savings institutions branches located in Sevier County and 52 commercial
bank branches and one savings institution branch located in Blount County.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 and other federal and
state laws have resulted in increased competition from both conventional banking institutions and
other businesses offering financial services and products. Mortgage banking firms, finance
companies, real estate investment trusts, insurance companies, leasing companies and certain
government agencies provide additional competition for loans and for certain financial services. We
also compete for deposit accounts with a number of other financial intermediaries, including
securities brokerage firms, money market mutual funds, government and corporate securities and
credit unions. The primary criteria on which institutions compete for deposits and loans are
interest rates, loan origination fees and range of services offered.
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As evidenced by our historical deposit and loan growth, notwithstanding the net reduction in
loans during 2009, we have been able to compete with our larger, more established competitors by
attracting customers from existing financial institutions as well as from growth in our communities
by focusing on providing a high level of customer service and by providing the products most
important to our customers. During our operating history, we have been successful in hiring a staff
with significant local bank experience that shares our commitment to providing our customers with
the highest levels of customer service. While focusing on customer service, we are also able to
offer our customers most of the banking services offered by our local competitors, including
Internet banking, investment services and sweep accounts.
Employees
We currently employ a total of 154 employees, including 153 full time employees. We are not a
party to any collective bargaining agreements with our employees, and we consider relations with
our employees to be good.
Seasonality
Due to the predominance of the tourism industry in Sevier County, a significant portion of our
commercial loan portfolio is concentrated within that industry. The predominance of the tourism
industry also makes our business more seasonal in nature than may be the case with banks and
financial institutions in other market areas. Deposit growth generally slows during the first
quarter each year and then increases during each of the last three quarters. Our cost of funds
tends to increase during the first quarter each year due to our dependence on borrowed funds that
typically have a higher interest rate than our core deposits. The tourism industry in Sevier County
has remained relatively stable during the past couple of years, particularly with respect to
overnight rentals and hospitality services, and management does not anticipate any significant
changes in that trend in the future.
Supervision and Regulation
Supervision and Regulation
Bank holding companies and banks are extensively regulated under federal and state law. This
discussion is qualified in its entirety by reference to the particular statutory and regulatory
provisions referred to below and is not intended to be a complete description of the statutes or
regulations applicable to the Companys and the Banks business. Supervision, regulation, and
examination of the Company and the Bank and their respective subsidiaries by the bank regulatory
agencies are intended primarily for the protection of bank depositors rather than holders of
Company capital stock. Any change in applicable law or regulation may have a material effect on the
Companys business.
Bank Holding Company Regulation
The Company, as a bank holding company, is subject to supervision and regulation by the Board
of Governors of the Federal Reserve under the BHC Act. Bank holding companies are generally limited
to the business of banking, managing or controlling banks, and other activities
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that the Federal Reserve determines to be so closely related to banking, or managing or controlling
banks, as to be a proper incident thereto. The Company is required to file with the Federal Reserve
periodic reports and such other information as the Federal Reserve may request. The Federal Reserve
examines the Company and may examine non-bank subsidiaries the Company may acquire.
The BHC Act requires prior Federal Reserve approval for, among other things, the acquisition
by a bank holding company of direct or indirect ownership or control of more than 5% of the voting
shares or substantially all the assets of any bank, or for a merger or consolidation of a bank
holding company with another bank holding company. With certain exceptions, the BHC Act prohibits a
bank holding company from acquiring direct or indirect ownership or control of voting shares of any
company which is not a bank or bank holding company, and from engaging directly or indirectly in
any activity other than banking or managing or controlling banks or performing services for its
authorized subsidiaries. A bank holding company, may, however, engage in or acquire an interest in
a company that engages in activities which the Federal Reserve has determined by regulation or
order to be so closely related to banking or managing or controlling banks as to be a proper
incident thereto.
The Gramm-Leach-Bliley Act of 1999, or the GLB Act, substantially revised the statutory
restrictions separating banking activities from certain other financial activities. Under the GLB
Act, bank holding companies that are well-capitalized and well-managed, as defined in Federal
Reserve Regulation Y, which have and maintain satisfactory Community Reinvestment Act, or CRA,
ratings, and meet certain other conditions, can elect to become financial holding companies.
Financial holding companies and their subsidiaries are permitted to acquire or engage in previously
impermissible activities such as insurance underwriting, securities underwriting, travel agency
activities, broad insurance agency activities, merchant banking, and other activities that the
Federal Reserve determines to be financial in nature or complementary thereto. In addition, under
the merchant banking authority added by the GLB Act and Federal Reserve regulation, financial
holding companies are authorized to invest in companies that engage in activities that are not
financial in nature, as long as the financial holding company makes its investment with the
intention of limiting the term of its investment and does not manage the company on a day-to-day
basis, and the invested company does not cross-market with any of the financial holding companys
controlled depository institutions. Financial holding companies continue to be subject to the
overall oversight and supervision of the Federal Reserve, but the GLB Act applies the concept of
functional regulation to the activities conducted by subsidiaries. For example, insurance
activities would be subject to supervision and regulation by state insurance authorities. While the
Company has no present plans to become a financial holding company, it may elect to do so in the
future in order to exercise the broader activity powers provided by the GLB Act. The GLB Act also
includes consumer privacy provisions, and the federal bank regulatory agencies have adopted
extensive privacy rules implementing the GLB Act.
The Company is a legal entity separate and distinct from the Bank. Various legal limitations
restrict the Bank from lending or otherwise supplying funds to the Company. The Company and the
Bank are subject to Section 23A of the Federal Reserve Act and Federal Reserve Regulation W
thereunder. Section 23A defines covered transactions, which include extensions of credit, and
limits a banks covered transactions with any affiliate to 10% of such
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banks capital and surplus. All covered and exempt transactions between a bank and its affiliates
must be on terms and conditions consistent with safe and sound banking practices, and banks and
their subsidiaries are prohibited from purchasing low-quality assets from the banks affiliates.
Finally, Section 23A requires that all of a banks extensions of credit to its affiliates be
appropriately secured by acceptable collateral, generally United States government or agency
securities. The Company and the Bank also are subject to Section 23B of the Federal Reserve Act,
which generally limits covered and other transactions among affiliates to be on terms, including
credit standards, that are substantially the same or at least as favorable to the bank or its
subsidiary as those prevailing at the time for similar transactions with unaffiliated companies.
The BHC Act permits acquisitions of banks by bank holding companies, such that the Company and
any other bank holding company located in Tennessee may acquire a bank located in any other state,
and any bank holding company located outside Tennessee may lawfully acquire any bank based in
another state, subject to certain deposit-percentage, age of bank charter requirements, and other
restrictions. Federal law also permits national and state-chartered banks to branch interstate
through acquisitions of banks in other states. Under Tennessee law, in order for an out-of-state
bank or bank holding company to establish a branch in Tennessee, the bank or bank holding company
must purchase an existing bank, bank holding company, or branch of a bank in Tennessee which has
been in existence for at least three years. De novo interstate branching is permitted under
Tennessee law on a reciprocal basis. The Bank is eligible to be acquired by any bank or bank
holding company, whether inter-or intrastate, since it has been in existence for more than three
years.
Federal Reserve policy requires a bank holding company to act as a source of financial
strength and to take measures to preserve and protect bank subsidiaries in situations where
additional investments in a troubled bank may not otherwise be warranted. In addition, under the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, or FIRREA, where a bank
holding company has more than one bank or thrift subsidiary, each of the bank holding companys
subsidiary depository institutions are responsible for any losses to the FDIC as a result of an
affiliated depository institutions failure. As a result, a bank holding company may be required to
loan money to its subsidiaries in the form of capital notes or other instruments that qualify as
capital under regulatory rules. However, any loans from the holding company to such subsidiary
banks likely will be unsecured and subordinated to such banks depositors and perhaps to other
creditors of the bank.
Bank Regulation
The Bank is subject to supervision, regulation, and examination by the OCC which monitors all
areas of the operations of the Bank, including reserves, loans, mortgages, issuances of securities,
payment of dividends, establishment of branches, capital adequacy, and compliance with laws. The
Bank is a member of the FDIC and, as such, its deposits are insured by the FDIC to the maximum
extent provided by law. See FDIC Insurance Assessments.
While the OCC has authority to approve branch applications, national banks are required by the
National Bank Act to adhere to branching laws applicable to state chartered banks in the states in
which they are located. With prior regulatory approval, Tennessee law permits banks based in the
state to either establish new or acquire existing branch offices throughout Tennessee
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and in other states on a reciprocal basis. The Bank and any other national or state-chartered bank
generally may branch across state lines by merging with banks in other states if allowed by the
applicable states laws. Tennessee law, with limited exceptions, currently permits branching across
state lines either through interstate merger or branch acquisition. Tennessee, however, only
permits an out-of-state bank, short of an interstate merger, to branch into Tennessee through
branch acquisition if the home state of the out-of-state bank permits Tennessee-based banks to
acquire branches there.
The OCC has adopted a series of revisions to its regulations, including expanding the powers
exercisable by operating subsidiaries of national banks. These changes also modernize and
streamline corporate governance, investment and fiduciary powers. The OCC also has the ability to
preempt state laws purporting to regulate the activities of national banks.
The OCC has adopted the Federal Financial Institutions Examination Councils, or FFIECs,
rating system and assigns each financial institution a confidential composite rating based on an
evaluation and rating of six essential components of an institutions financial condition and
operations including Capital Adequacy, Asset Quality, Management, Earnings, Liquidity and
Sensitivity to market risk, as well as the quality of risk management practices. For most
institutions, the FFIEC has indicated that market risk primarily reflects exposures to changes in
interest rates. When regulators evaluate this component, consideration is expected to be given to:
(i) managements ability to identify, measure, monitor, and control market risk; (ii) the
institutions size; (iii) the nature and complexity of its activities and its risk profile; and
(iv) the adequacy of its capital and earnings in relation to its level of market risk exposure.
Market risk is rated based upon, but not limited to, an assessment of the sensitivity of the
financial institutions earnings or the economic value of its capital to adverse changes in
interest rates, foreign exchange rates, commodity prices, or equity prices; managements ability to
identify, measure, monitor, and control exposure to market risk; and the nature and complexity of
interest rate risk exposure arising from nontrading positions.
On June 2, 2009, the Banks board of directors entered into a formal written agreement with
the OCC in which the Bank agreed to make a variety of operational improvements, including action
plans to reduce its credit risk, level of criticized assets, concentration of commercial real
estate loans and dependency on wholesale funding sources, and to improve its loan and loan
concentration risk management, allowance for loan loss process, loan review problem loan
identification and its loan workout procedures and staffing. The Bank has been actively addressing
the issues reflected in the agreement and continuing to implement new enhanced processes and
practices to achieve compliance. The Banks Board of Directors believes that actions it is taking
under the agreement are positive responses to existing economic uncertainties.
The GLB Act requires banks and their affiliated companies to adopt and disclose privacy
policies regarding the sharing of personal information they obtain from their customers with third
parties. The GLB Act also permits bank subsidiaries to engage in financial activities through
subsidiaries similar to those permitted to financial holding companies. See the discussion
regarding the GLB Act in Bank Holding Company Regulation above.
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Community Reinvestment Act
The Company and the Bank are subject to the CRA, and the federal banking agencies
regulations. Under the CRA, all banks and thrifts have a continuing and affirmative obligation,
consistent with their safe and sound operation to help meet the credit needs for their entire
communities, including low and moderate income neighborhoods. The CRA requires a depository
institutions primary federal regulator, in connection with its examination of the institution, to
assess the institutions record of assessing and meeting the credit needs of the communities served
by that institution, including low- and moderate-income neighborhoods. The regulatory agencys
assessment of the institutions record is made available to the public. Further, such assessment is
required of any institution which has applied to: (i) charter a national bank; (ii) obtain deposit
insurance coverage for a newly-chartered institution; (iii) establish a new branch office that
accepts deposits; (iv) relocate an office; (v) merge or consolidate with, or acquire the assets or
assume the liabilities of, a federally regulated financial institution, or (vi) expand other
activities, including engaging in financial services activities authorized by the GLB Act. A less
than satisfactory CRA rating will slow, if not preclude, expansion of banking activities and
prevent a company from becoming a financial holding company. The Bank has a satisfactory CRA
rating.
The GLB Act and federal bank regulations have made various changes to the CRA. Among other
changes, CRA agreements with private parties must be disclosed and annual CRA reports must be made
to a banks primary federal regulator. A bank holding company will not be permitted to become or
remain a financial holding company and no new activities authorized under the GLB Act may be
commenced by a holding company or by a bank financial subsidiary if any of its bank subsidiaries
received less than a satisfactory CRA rating in its latest CRA examination. Under current OCC
regulations, the Bank has intermediate small bank status. The requirements for an intermediate
small bank to meet its CRA objectives are more stringent than those for a small bank, but less so
than those for large banks.
The Bank is also subject to, among other things, the provisions of the Equal Credit
Opportunity Act, or the ECOA, and the Fair Housing Act, or the FHA, both of which prohibit
discrimination based on race or color, religion, national origin, sex, and familial status in any
aspect of a consumer or commercial credit or residential real estate transaction. In 1994, the
Department of Housing and Urban Development, the Department of Justice, or the DOJ, and the
federal banking agencies issued an Interagency Policy Statement on Discrimination in Lending in
order to provide guidance to financial institutions in determining whether discrimination exists,
how the agencies will respond to lending discrimination, and what steps lenders might take to
prevent discriminatory lending practices. The DOJ has also increased its efforts to prosecute what
it regards as violations of the ECOA and FHA.
Sarbanes-Oxley Act
We are required to comply with various corporate governance and financial reporting
requirements under the Sarbanes-Oxley Act of 2002, as well as rules and regulations adopted by the
Commission and the Public Company Accounting Oversight Board thereunder. In particular, we are
required to include management reports on internal controls as part of our annual report for the
year ended December 31, 2009, pursuant to Section 404 of the Sarbanes-Oxley Act. We
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have spent significant amounts of time and money on compliance with these rules and anticipate a
similar burden going forward. We completed our assessment of our internal controls in a timely
manner and managements report on internal controls is included in our annual report on Form 10-K
for the year ended December 31, 2009. Our failure to comply with these internal control rules may
materially adversely affect our reputation, our ability to obtain the necessary certifications to
our financial statements, and the values of our securities.
Emergency Economic Stabilization Act
On October 3, 2008, Congress passed the EESA, which provides the U. S. Secretary of the
Treasury with broad authority to implement certain actions to help restore stability and liquidity
to U.S. markets. Several programs have been initiated by the U.S. Treasury, the Board of Governors
of the Federal Reserve and the FDIC to stabilize the financial system. The U.S. Treasurys Troubled
Asset Relief Program and Capital Purchase Program, or the TARP/CPP, was created to invest up to
$250 billion into banks and savings institutions of all sizes. The program is voluntary and
requires an institution to comply with a number of restrictions and provisions, including limits on
executive compensation, stock redemptions and declaration of dividends. The Company decided, after
very careful consideration, not to participate in this program. The Company and the Bank are both
well-capitalized and management believes the Company and the Bank will continue to be
well-capitalized going forward. The FDIC also began to temporarily provide a 100% guarantee of the
senior debt of all FDIC insured institutions, as well as deposits in noninterest-bearing deposit
accounts under its Temporary Liquidity Guarantee Program, or the TLGP. The Bank continues to
participate in the transaction account guarantee program, which expires on December 31, 2010. Under
the transaction account guarantee program, an institution can provide full coverage on non-interest
bearing transaction accounts for an annual assessment of 10, 20 or 25 basis points, depending on
the institutions risk category, of any deposit amounts exceeding the $250,000 deposit insurance
limit, in addition to the normal risk-based assessment. The Banks participation in the transaction
account guarantee component of the TLGP is discussed in more detail under FDIC Insurance
Assessments below.
Payments of Dividends
The Company is a legal entity separate and distinct from the Bank. The prior approval of the
OCC is required if the total of all dividends declared by a national bank (such as the Bank) in any
calendar year will exceed the sum of such banks net profits for the year and its retained net
profits for the preceding two calendar years, less any required transfers to surplus. Federal law
also prohibits any national bank from paying dividends that would be greater than such banks
undivided profits after deducting statutory bad debts in excess of such banks allowance for
possible loan losses.
In addition, the Company and the Bank are subject to various general regulatory policies and
requirements relating to the payment of dividends, including requirements to maintain adequate
capital above regulatory minimums. The appropriate federal regulatory authority is authorized to
determine under certain circumstances relating to the financial condition of a national or state
member bank or a bank holding company that the payment of dividends would be an unsafe or unsound
practice and to prohibit payment thereof. The OCC and the Federal Reserve have indicated that
paying dividends that deplete a national or state member banks
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capital base to an inadequate level would be an unsound and unsafe banking practice. The OCC and
the Federal Reserve have each indicated that depository institutions and their holding companies
should generally pay dividends only out of current operating earnings.
As of December 31, 2009, the Bank could, without prior approval, declare dividends of
approximately $3,727,000. Pursuant to federal banking regulations and due to losses incurred in
2009, beginning in 2010, the Bank and the Company had no net retained profits from the previous two
years available for dividend payments. The Bank and the Company may not, subsequent to January 1,
2010, without prior consent, pay any dividends until such time that current year profits exceed the
net losses and dividends of the prior two years.
Capital
The Federal Reserve and the OCC have risk-based capital guidelines for bank holding companies
and national banks, respectively. These guidelines require a minimum ratio of capital to
risk-weighted assets (including certain off-balance-sheet activities, such as standby letters of
credit) of 8%. At least half of the total capital must consist of common equity, retained earnings,
noncumulative perpetual preferred stock and a limited amount of cumulative perpetual preferred
stock, less goodwill and other specified intangible assets (Tier 1 capital). Additionally,
qualified trust preferred securities and other restricted capital elements such as minority
interests in the equity accounts of consolidated subsidiaries are permitted to be included as Tier
1 capital up to 25% of core capital, net of goodwill and intangibles. The Company expects that it
will continue to treat its $13 million of trust preferred securities as Tier 1 capital subject to
the limits listed above. Voting common equity must be the predominant form of capital. The
remainder may consist of non-qualifying preferred stock, qualifying subordinated, perpetual, and/or
mandatory convertible debt, up to 45% of pretax unrealized holding gains on available for sale
equity securities with readily determinable market values that are prudently valued, and a limited
amount of any loan loss allowance (Tier 2 capital and, together with Tier 1 capital, Total
Capital).
In addition, the Federal Reserve and the OCC have established minimum leverage ratio
guidelines for bank holding companies and national banks, which provide for a minimum leverage
ratio of Tier 1 capital to adjusted average quarterly assets (leverage ratio) equal to 3%, plus
an additional cushion of 1.0% to 2.0%, if the institution has less than the highest regulatory
rating. The guidelines also provide that institutions experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets. Higher capital may be
required in individual cases depending upon a bank holding companys risk profile. All bank holding
companies and banks are expected to hold capital commensurate with the level and nature of their
risks, including the volume and severity of their problem loans. Lastly, the Federal Reserves
guidelines indicate that the Federal Reserve will continue to consider a tangible Tier 1 leverage
ratio (deducting all intangibles) in evaluating proposals for expansion or new activity.
The FDICIA, among other things, requires the federal banking agencies to take prompt
corrective action regarding depository institutions that do not meet minimum capital requirements.
FDICIA establishes five capital tiers: well capitalized, adequately capitalized,
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undercapitalized, significantly undercapitalized, and critically undercapitalized. A
depository institutions capital tier will depend upon how its capital levels compare to various
relevant capital measures and certain other factors, as established by regulation.
All of the federal banking agencies have adopted regulations establishing relevant capital
measures and relevant capital levels. The relevant capital measures are the Total Capital ratio,
Tier 1 capital ratio, and the leverage ratio. Under the regulations, a national bank will be (i)
well capitalized if it has a Total Capital ratio of 10% or greater, a Tier 1 capital ratio of 6% or
greater, and a leverage ratio of at least 5%, and is not subject to any written agreement, order,
capital directive, or prompt corrective action directive by a federal bank regulatory agency to
meet and maintain a specific capital level for any capital measure, (ii) adequately capitalized if
it has a Total Capital ratio of 8% or greater, a Tier 1 capital ratio of 4% or greater, and a
leverage ratio of 4% or greater (3% in certain circumstances), (iii) undercapitalized if it has a
Total Capital ratio of less than 8%, or a Tier 1 capital ratio of less than 4% (3% in certain
circumstances), (iv) significantly undercapitalized if it has a total capital ratio of less than 6%
or a Tier I capital ratio of less than 3%, or a leverage ratio of less than 3%, or (v) critically
undercapitalized if its tangible equity is equal to or less than 2% of average quarterly tangible
assets.
Failure to meet statutorily mandated capital guidelines or more restrictive ratios separately
established for a financial institution, like those the Bank is currently subject to, could subject
a bank or bank holding company to a variety of enforcement remedies, including issuance of a
capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting or
renewing brokered deposits, limitations on the rates of interest that the institution may pay on
its deposits and other restrictions on its business. As described above, significant additional
restrictions can be imposed on FDIC-insured depository institutions that fail to meet applicable
capital requirements.
During the first quarter of 2010, the Bank agreed to an OCC requirement to maintain a minimum
Tier 1 capital to average assets ratio of 9% and a minimum total capital to risk-weighted assets
ratio of 13%. As of March 31, 2010, the Bank was in compliance with these new minimum
requirements.
As of March 31, 2010, the consolidated capital ratios of the Company and Bank were as follows:
Regulatory | ||||||||||||||||
Minimum to be | Regulatory Minimum | |||||||||||||||
Adequately | to be Well | |||||||||||||||
Capitalized | Capitalized | Company | Bank | |||||||||||||
Tier 1 capital ratio |
4.0 | % | 6.0 | % | 13.31 | % | 13.18 | % | ||||||||
Total capital ratio |
8.0 | % | 10.0 | % | 14.57 | % | 14.45 | % | ||||||||
Leverage ratio |
3.0-5.0 | % | 5.0 | % | 9.10 | % | 9.01 | % |
FDICIA
FDICIA directs that each federal banking regulatory agency prescribe standards for depository
institutions and depository institution holding companies relating to internal controls,
information systems, internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth compensation, a maximum ratio of classified assets to capital, minimum
earnings sufficient to absorb losses, a minimum ratio of market value to book value for
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publicly traded shares, and such other standards as the federal regulatory agencies deem
appropriate.
FDICIA generally prohibits a depository institution from making any capital distribution
(including payment of a dividend) or paying any management fee to its holding company if the
depository institution would thereafter be undercapitalized. Undercapitalized depository
institutions are subject to growth limitations and are required to submit a capital restoration
plan for approval. For a capital restoration plan to be acceptable, the depository institutions
parent holding company must guarantee that the institution will comply with such capital
restoration plan. The aggregate liability of the parent holding company is limited to the lesser of
5% of the depository institutions total assets at the time it became undercapitalized and the
amount necessary to bring the institution into compliance with applicable capital standards.
FDICIA also contains a variety of other provisions that may affect the operations of the
Company and the Bank, including reporting requirements, regulatory standards for real estate
lending, truth in savings provisions, the requirement that a depository institution give 90 days
prior notice to customers and regulatory authorities before closing any branch, and a prohibition
on the acceptance or renewal of brokered deposits by depository institutions that are not well
capitalized or are adequately capitalized and have not received a waiver from the FDIC. The Company
and the Bank are considered well capitalized, and brokered deposits are not restricted.
Enforcement Policies and Actions
The Federal Reserve and the OCC monitor compliance with laws and regulations. Violations of
laws and regulations, or other unsafe and unsound practices, may result in these agencies imposing
fines or penalties, cease and desist orders, or taking other enforcement actions. Under certain
circumstances, these agencies may enforce these remedies directly against officers, directors,
employees and others participating in the affairs of a bank or bank holding company.
Fiscal and Monetary Policy
Banking is a business that depends on interest rate differentials. In general, the difference
between the interest paid by a bank on its deposits and its other borrowings, and the interest
received by a bank on its loans and securities holdings, constitutes the major portion of a banks
earnings. Thus, the earnings and growth of Mountain National and the Bank are subject to the
influence of economic conditions generally, both domestic and foreign, and also to the monetary and
fiscal policies of the United States and its agencies, particularly the Federal Reserve. The
Federal Reserve regulates the supply of money through various means, including open market dealings
in United States government securities, the discount rate at which banks may borrow from the
Federal Reserve, and the reserve requirements on deposits. The nature and timing of any changes in
such policies and their effect on Mountain National and its subsidiary cannot be predicted. During
2008, the Federal Reserve reduced the target federal funds rate seven times for a range of 4.00 -
4.25%. The year-end target federal funds rate was expressed as a range from 0.00 0.25%. During
2008, the Federal Reserve also reduced the discount rate eight times for a
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total of 4.25%. The target federal funds and discount rates in effect at December 31, 2008 were
unchanged throughout 2009.
FDIC Insurance Assessments
The FDIC has adopted a risk-based assessment system for insured depository institutions that
takes into account the risks attributable to different categories and concentrations of assets and
liabilities. In early 2006, Congress passed the Federal Deposit Insurance Reform Act of 2005, which
made certain changes to the Federal deposit insurance program. These changes included merging the
Bank Insurance Fund, or BIF, and the Savings Association Insurance Fund creating the Deposit
Insurance Fund, or DIF, increasing retirement account coverage to $250,000 and providing for
inflationary adjustments to general coverage beginning in 2010, providing the FDIC with authority
to set the funds reserve ratio within a specified range, and requiring dividends to banks if the
reserve ratio exceeds certain levels. The new statute grants banks an assessment credit based on
their share of the assessment base on December 31, 1996, and the amount of the credit can be used
to reduce assessments in any year subject to certain limitations. Because it was not organized
until 1998, the Bank was not eligible to receive this one-time assessment credit.
Beginning in October 2008, the FDIC temporarily increased FDIC deposit insurance coverage per
separately insured depositor to $250,000. The standard coverage limit was originally set to return
to $100,000 on January 1, 2010, however; in May 2009, the FDIC extended the $250,000 maximum
through December 31, 2013. On January 1, 2014, the standard coverage limit is scheduled to return
to $100,000 for all deposit accounts, except for certain retirement accounts.
Also in October 2008, the FDIC introduced the TLGP, a program designed to improve the
functioning of the credit markets and to strengthen capital in the financial system during this
period of economic distress. The TLGP has two components: 1) a debt guarantee program, guaranteeing
newly issued senior unsecured debt, and 2) a transaction account guarantee program, providing a
full guarantee of noninterest-bearing deposit transaction accounts, Negotiable Order of Withdrawal,
or NOW, accounts paying less than 0.5% annual interest, and Interest on Lawyers Trust Accounts,
regardless of the amount. The Bank did not participate in the debt guarantee program. The Bank is
presently participating in the transaction account guarantee program and, as such, all funds in
covered accounts held through December 31, 2010 will be covered with a full guarantee. In
connection with this guarantee, a 10, 20 or 25 basis point annual rate surcharge, depending on the
institutions risk category, will be assessed on amounts in covered accounts exceeding $250,000.
FDIC-insured depository institutions are required to pay deposit insurance premiums based on
the risk an institution poses to the DIF. In order to restore reserves and ensure that the DIF will
be able to adequately cover losses from future bank failures, the FDIC approved new deposit
insurance rules in November 2009. These rules modify the way the assessment system differentiates
risks among insured institutions and implements changes in assessment rates, including base
assessment rates, in order to increase assessment revenue. The FDICs new deposit insurance rules
required insured depository institutions to prepay their estimated quarterly risk-based assessments
for all of 2010, 2011 and 2012. On December 30, 2009, the
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Bank prepaid its assessment in the amount of approximately $4 million related to years 2010 through
2012. In addition, the annual assessment rate will increase uniformly by three basis points
beginning in 2011. Continuing declines in the DIF may result in the FDIC imposing additional
assessments in the future, which could adversely affect the Companys capital levels and earnings.
In addition to DIF assessments, all FDIC-insured depository institutions must pay an annual
assessment to provide funds for the repayment of debt obligations of the Financing Corporation, or
FICO. The FICO is a government-sponsored entity that was formed to borrow the money necessary to
carry out the closing and ultimate disposition of failed thrift institutions by the Resolution
Trust Corporation. The FICO assessments are set quarterly and ranged from 1.12 basis points in the
first quarter of 2008 to 1.14 basis points in the last quarter of 2008 and from 1.04 basis points
in the first quarter of 2009 to 1.02 basis points in the last quarter of 2009. The FICO assessment
rate for the first quarter of 2010 is 1.06 basis points.
During the two years ended December 31, 2009 and 2008, the Bank paid approximately $55,000 and
$49,000, respectively, in FICO assessments. The Bank paid approximately $5,613,000 during 2009 for
FDIC deposit insurance premiums, including approximately $5,000 for premiums related to the
transaction account guarantee program, approximately $306,000 as a special one-time assessment to
provide additional reserves for the DIF and approximately $4,144,000 in prepaid quarterly risk
based assessments for all of 2010, 2011 and 2012, as described above.
Other Laws and Regulations
The International Money Laundering Abatement and Anti-Terrorism Funding Act of 2001 specifies
know your customer requirements that obligate financial institutions to take actions to verify
the identity of the account holders in connection with opening an account at any U.S. financial
institution. Banking regulators will consider compliance with this Acts money laundering
provisions in acting upon acquisition and merger proposals, and sanctions for violations of this
Act can be imposed in an amount equal to twice the sum involved in the violating transaction, up to
$1 million.
Under the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, financial institutions are
subject to prohibitions against specified financial transactions and account relationships as well
as to enhanced due diligence and know your customer standards in their dealings with foreign
financial institutions and foreign customers. For example, the enhanced due diligence policies,
procedures, and controls generally require financial institutions to take reasonable steps:
| to conduct enhanced scrutiny of account relationships to guard against money laundering and report any suspicious transaction; | ||
| to ascertain the identity of the nominal and beneficial owners of, and the source of funds deposited into, each account as needed to guard against money laundering and report any suspicious transactions; |
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| to ascertain for any foreign bank, the shares of which are not publicly traded, the identity of the owners of the foreign bank, and the nature and extent of the ownership interest of each such owner; and | ||
| to ascertain whether any foreign bank provides correspondent accounts to other foreign banks and, if so, the identity of those foreign banks and related due diligence information. |
The USA PATRIOT Act requires financial institutions to establish anti-money laundering
programs, and sets forth minimum standards for these programs, including:
| the development of internal policies, procedures, and controls; | ||
| the designation of a compliance officer; | ||
| an ongoing employee training program; and | ||
| an independent audit function to test the programs. |
In addition, the USA PATRIOT Act authorizes the Secretary of the Treasury to adopt rules
increasing the cooperation and information sharing between financial institutions, regulators, and
law enforcement authorities regarding individuals, entities and organizations engaged in, or
reasonably suspected based on credible evidence of engaging in, terrorist acts or money laundering
activities.
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information concerning our directors and executive
officers as of July 15, 2010:
Name | Age | Position (3) | Director Since | |||||||
Dwight B. Grizzell (2) (3)
|
59 | President and Chief Executive Officer | 1998 | |||||||
Michael L. Brown
|
51 | Executive Vice President Chief Operating Officer | |
|||||||
Grace D. McKinzie
|
57 | Executive Vice President Chief Lending Officer | |
|||||||
James E. Bookstaff (2)
|
67 | Director | 1998 | |||||||
Gary A. Helton (1) (3)
|
49 | Director | 1998 | |||||||
Charlie R. Johnson (2)
|
68 | Director | 1998 | |||||||
Sam L. Large (2) (3)
|
57 | Director | 1998 | |||||||
Jeffrey J. Monson (2)
|
55 | Director | 1998 | |||||||
Linda N. Ogle (1) (3)
|
64 | Director | 1998 | |||||||
Michael C. Ownby (1)
|
59 | Director | 1998 | |||||||
John M. Parker (1) (2)
|
62 | Director | 1998 | |||||||
Ruth Reams (2)
|
69 | Director | 1998 |
(1) | Member of the Audit Committee of the Board of Directors. | |
(2) | Member of the Executive/Loan Committee of the Board of Directors. | |
(3) | Member of the ALCO/Investment Committee of the Board of Directors. |
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Dwight B. Grizzell, age 59, is the President/CEO and Director of the Company and the Bank. Mr.
Grizzell has 38 years of banking experience. Before becoming the Banks CEO, he served as Regional
President of BankFirst for Sevier County from 1996 through 1997. Prior to that he was the
President/CEO and Director of First National Bank of Gatlinburg. Mr. Grizzell began his career with
Third National Bank in Nashville in 1972. Mr. Grizzell held numerous managerial and administrative
positions with Third National Bank, First Security National Bank in Lexington, Kentucky and First
National Bank of Gatlinburg in Tennessee. He has served in numerous civic and professional
capacities and is a member of the Tennessee Bankers Association Board of Directors; serves on the
TBA Government Relations Committee; and is State Director of the Independent Community Bankers
Association. He is a member of the Leadership Sevier Class of 1998, and is a member of the Great
Smoky Mountains Church of Christ. Mr. Grizzells extensive experience in the local banking industry
and involvement in business and civic organizations in the communities in which the Bank operates
affords the Board valuable insight regarding the business and operation of the Bank. Mr. Grizzells
knowledge of all aspects of the Companys and the Banks business position him well to continue to
serve as our President and Chief Executive Officer.
Michael L. Brown, age 51, serves as Executive Vice President Chief Operating Officer of the
Company and the Bank. Mr. Brown has been with the Company since its inception in 2002 and with the
Bank since 1998. Prior to joining the Bank, Mr. Brown served as a Senior Vice President of First
National Bank of Gatlinburg from 1995 to 1997, which later was acquired by BankFirst where he
continued to serve in that capacity until joining Mountain National Bank in 1998. Mr. Brown has a
combined banking career spanning 28 years, beginning with First Federal Savings Bank in Maryville,
Tennessee in 1981. He is a graduate of the University of Tennessee and the Graduate School of
Banking at LSU. He has served in several civic and professional organizations during his career.
Mr. Brown is currently a member of the Sevierville Rotary Club, and is a graduate of Leadership
Sevier, as well as Leadership Blount County. He is currently serving on the Payments and Technology
Committee of the Independent Community Bankers of America. Mr. Brown and his family are active
members of East Maryville Baptist Church.
Grace D. McKinzie, age 57, serves as Executive Vice President Chief Lending Officer of the
Company and the Bank. Ms. McKinzie has been with the Company since its inception in 2002 and with
the Bank since 1998. Ms. McKinzie began her banking career with The First National Bank of
Gatlinburg in 1974 where she served as Vice President and was a commercial lender in the Gatlinburg
market. She is a graduate of Gatlinburg Pittman High School and the Tennessee Bankers Commercial
Lending School at Vanderbilt University. Ms. McKinzie was the 2006 American Business Womens
Associate of the Year. She was a graduate of the 2007 Leadership Sevier Class.
James E. Bookstaff, age 67, is chief manager of Bookstaff, LLC, a management and consulting
firm with emphasis in the tourism industry, located in Sevier County TN. Mr. Bookstaff and his
wife, Suzann, have resided in Sevier county since 1971. He serves on several non-profit Christian
Boards. He is a graduate of the Culinary Institute of America and Michigan State University. Mr.
Bookstaff is a partner in a number of commercial and residential development projects. Mr.
Bookstaffs familiarity with the areas tourism industry is useful to
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the Companys Board. In addition, Mr. Bookstaff has small business management experience and an
extensive network of contacts in the local business community.
Gary A. Helton, age 49, has been the Owner and General Manager of Volunteer Chevrolet in
Sevierville, Tennessee since its opening in May 1994. In addition, he is also involved in many real
estate ventures, both commercial and residential. Mr. Helton is a member of the First Baptist
Church in Sevierville and a lifelong resident of Sevier County. He graduated with a B.S. Degree in
Business Management from Carson-Newman College in Jefferson City, Tennessee in 1982. He currently
serves on the Board of Trustees at Carson-Newman College and serves on the Investment, Finance and
Pension Committees. Mr. Helton has extensive experience as a successful small business owner and
also provides the Board with expertise in matters relating to commercial and residential real
estate matters.
Charlie R. Johnson, age 68, is the Owner of Johnson-Murrell and Associates, P.C., a law firm
located in Sevierville, Tennessee, since 1976. His firm is involved primarily in business law, real
estate and estate administration. Mr. Johnson was an elected member of the Board of Mayor and
Alderman for the City of Sevierville from 1995 to 2003 and previously served as the Mayor of
Sevierville from 1987 to 1995. Mr. Johnson serves as consulting attorney for Signature Title of
Tennessee, LLC, a title and escrow closing company. He is an Owner and Vice-President of Oak Haven
Resort, Inc., a log cabin rental and development company. Mr. Johnson is a member of the Walters
State Community College Sevier County Campus Development Council and a member of the Board of
Trustees at Walters State Community College and is a former member of the Advisors of the
Department of Geography at the University of Tennessee. He is a Deacon and Trustee at the First
Baptist Church of Sevierville, Tennessee. He graduated from Tennessee Technological University with
a Bachelors Degree in Political Science and a Minor in Economics. He holds a Masters Degree in
Public Administration and a Doctorate of Jurisprudence from the University of Tennessee at
Knoxville. Mr. Johnsons over 30 years of legal practice in the Sevier County, Tennessee area,
during which he has represented a broad array of corporate and municipal clients, contribute to the
breadth and depth of experience on the Board through the inclusion of a member with an
understanding of a broad range of legal and regulatory matters.
Sam L. Large, age 57, has been a promoter of the Gatlinburg Craftsmens Fairs since 1988.
Prior to that time, Mr. Large was Manager and Buyer for the Gatlinburg Craft Center and Manager of
Brookside Village. Mr. Large is the Owner of S.L.L., Inc., a real estate and promotions firm, and
Sam L. Large Construction. Mr. Large has an Associate Degree in Accounting and Computer
Programming. He has served on the Boards of Directors of the Gatlinburg Convention and Visitors
Bureau and the Gatlinburg Chamber of Commerce and has been President of both organizations. Mr.
Large has extensive experience as a small business owner in the communities that the Company serves
and is actively involved in a number of community activities in the Companys market area.
Jeffrey J. Monson, age 55, retired from TRW, a global automotive supply manufacturer, during
2006 after 27 years in various engineering and management positions in six plant locations. Mr.
Monson is a graduate of Purdue University with a Bachelors Degree in Mechanical Engineering and
served as an Officer in Purdues Mechanical Engineering Honorary Society. He also received a
Masters Degree from Purdues Krannert Graduate School of
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Management. Mr. Monson attends First United Methodist Church in Sevierville. In the past, he has
served as a member of the United Way of Sevier County Board of Directors and the Boys and Girls
Club of the Smoky Mountains Board of Directors. Mr. Monson is a graduate of the Leadership Sevier
Class of 2002 and is past President of the Sevier County High School Soccer Support Group. He is
currently a member of the Holston United Methodist Home for Children Board of Trustees. Mr. Monson
also has commercial/residential real estate interests in Greene and Sevier Counties in Tennessee.
Mr. Monsons engineering background and business experience allows him to bring to the Board a
broad understanding of a number of industries in which many of the Companys clients operate. He is
also actively involved in a number of community activities in the Companys market area.
Linda N. Ogle, age 64, has been President of Riverside Motor Lodge, Inc. and Riverside Towers,
LLC for the past fourteen years. Ms. Ogle is involved in all aspects of the daily operations of her
businesses and has served in numerous civic and professional capacities. She is currently a member
of the Pigeon Forge United Methodist Church. Previously, she was a member of the Board of Directors
for the Boys and Girls Club of the Smoky Mountains and past Chairperson for the Hotel Division of
the United Way Campaign. She is currently Campaign Chairperson for Fort Sanders Sevier Hospital,
and is a graduate of Leadership Sevier Class of 1998, Leadership Knoxville, and East Tennessee
Regional Leadership. Ms. Ogle is also a member of the Board of Directors for the Fort Sanders
Foundation, Friends of the Great Smoky Mountains, the Dr. Robert F. Thomas Foundation and Covenant
Health and serves as Secretary for the Pigeon Forge Library. She also serves on the executive
committee of Walters State Community College. Ms. Ogle has extensive experience as a successful
small business owner and is actively involved in a number of community activities in the Companys
market area.
Michael C. Ownby, age 59, has been President of Ownby Insurance Service, Inc., an insurance
agency in Sevierville, Tennessee, since 1973. He is also Chief Manager of MSP Enterprises LLC,
which invests in various real estate ventures and stock investments. He is a 1973 graduate of the
University of Tennessee with a B.S. in Business Administration. Mr. Ownby is a member of First
Baptist Church in Sevierville, Tennessee where he has served as Sunday School Director, taught
Sunday School, and has served on various committees of the church. He is a past member of the
Sevierville Rotary Club. Mr. Ownby was previously a Director of the Sevierville Chamber of
Commerce; a Director of the Dr. Robert F. Thomas Foundation; a member of the Sevier County Kiwanis
Club; member of the Sevier County Jaycees; on the Board of Directors of the Insurors of Tennessee
and on the Board of Directors of the Sevier County Chapter of the Salvation Army. Mr. Ownbys
experience provides the Board with critical experience in insurance matters. In addition, Mr. Ownby
provides the Board with his financial expertise as a successful small business owner.
John M. Parker, Sr., age 62, is a native of East Tennessee. Since arriving in the Sevier and
Jefferson County areas, he has participated in many business ventures including being one of the
original founders of Smoky Mountain Knife Works in Sevierville, Tennessee. Mr. Parker has also been
very involved in real estate development of several residential subdivisions in Sevier County and
many surrounding counties contributing to the growth of these areas. Mr. Parker has extensive
experience as a successful small business owner. In addition, Mr. Parker provides the Board with
additional expertise in matters relating to commercial and consumer real estate matters.
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Ruth A. Reams, age 70, is retired from Reams Drug Store where she assisted her husband in the
operation of the family business for many years. She currently is serving as a Board Member on the
Dr. Robert F. Thomas Foundation Board, is a member of the Pigeon Forge Library Board and the Pigeon
Forge Lions Club, and is a graduate of Leadership Sevier Class of 2001. Ms. Reams has extensive
experience as a successful small business owner and is actively involved in a number of community
activities in the Companys market area.
DESCRIPTION OF OUR CAPITAL STOCK
We have the authority to issue 10,000,000 shares of common stock and 1,000,000 shares of
preferred stock. As of July 15, 2010, 2,631,611 shares of our common stock were outstanding and no
shares of preferred stock were outstanding.
The following summary descriptions of selected provisions of our charter, bylaws, common stock
and Tennessee Business Corporation Act are not complete. The summaries are subject to, and are
qualified entirely by, the provisions of our charter and bylaws, all of which are included or
incorporated by reference as exhibits to the registration statement of which this prospectus is a
part and the Tennessee Business Corporation Act. You are encouraged to read our charter and bylaws.
Common Stock
The holders of our common stock are entitled to one vote per share on all matters to be voted
on by shareholders. Notwithstanding the foregoing, at any shareholder meeting where directors are
to be elected, each shareholder entitled to vote shall have the right to multiply the number of
votes he or she is entitled to cast by the number of vacancies being filled and cast the product
for a single candidate or distribute the product among two or more candidates. This feature is
referred to as cumulative voting. Holders of common stock have no preemptive rights, and there are
no conversion rights or redemption or sinking fund provisions with respect to shares of our common
stock. All shares of our common stock being offered under this prospectus will be fully paid and
not liable for further calls or assessment by us.
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Preferred Stock
Our Board of Directors, without further action by the shareholders, is authorized to issue up
to 1,000,000 shares of preferred stock in one or more classes or series, to establish from time to
time the number of shares to be included in each such class or series, to fix the rights,
preferences, and privileges of the shares of each such class or series and any qualifications,
limitations, or restrictions thereon.
Preemptive Rights
No holder of our shares has any preemptive rights to purchase, subscribe for or otherwise
acquire any additional shares of our common stock or any securities exercisable for or convertible
into our shares.
Tennessees Anti-takeover Provisions
Provisions in Tennessee law could make it harder for someone to acquire us through a tender
offer, proxy contest or otherwise.
Tennessee Business Combination Act. The Tennessee Business Combination Act provides
that a party owning shares equal to 10% or more of the voting power of any class or series of the
then outstanding voting stock of a resident domestic corporation is an interested shareholder.
An interested shareholder also includes a party that is an affiliate or associate, as defined in
the Tennessee Business Combination Act, of a resident domestic corporation. We are currently a
resident domestic corporation within the meaning of this act. An interested shareholder cannot
engage in a business combination with the resident domestic corporation unless the combination:
| takes place at least five years after the interested shareholder first acquired 10% or more of the voting power of any class or series of the then outstanding voting stock of the resident domestic corporation; and | ||
| either is approved by at least two-thirds of the non-interested voting shares of the resident domestic corporation or satisfies fairness conditions specified in the Tennessee Business Combination Act. |
These provisions apply unless one of the following exemptions is available:
| a business combination with an entity can proceed without delay when approved by the target corporations board of directors before that entity becomes an interested shareholder; | ||
| a business combination is exempt, if in its original charter or original bylaws, the resident domestic corporation elects not to be governed by the Tennessee Business Combination Act; | ||
| unless the charter of the resident domestic corporation provides otherwise, the Tennessee Business Combination Act does not apply to a business combination of a resident domestic corporation with, or proposed by or on behalf of, an interested shareholder if the resident domestic corporation did not have, on such interested |
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shareholders share acquisition date, a class of voting stock registered or traded on a national securities exchange or registered with the Commission pursuant to Section 12(g) of the Exchange Act; or | |||
| the resident corporation may enact a charter or bylaw amendment to remove itself entirely from the Tennessee Business Combination Act that must be approved by a majority of the shareholders who have held shares for more than one year before the vote and which cannot become operative until two years after the vote. |
We have not adopted a charter amendment or bylaw to remove ourselves from the Tennessee
Business Combination Act.
Tennessee Greenmail Act. The Tennessee Greenmail Act prohibits us from purchasing or
agreeing to purchase any of our securities, at a price higher than fair market value, from a holder
of 3% or more of any class of its securities who has beneficially owned the securities for less
than two years. We can, however, make this purchase if the majority of the outstanding shares of
each class of voting stock issued by us approves the purchase or if we make an offer of at least
equal value per share to all holders of shares of the same class of securities as those held by the
prospective seller.
Tennessee Control Share Acquisition Act. The Tennessee Control Share Acquisition Act
strips a purchasers shares of voting rights any time an acquisition of shares in a Tennessee
corporation which has elected to be covered by the Tennessee Control Share Acquisition Act (which
the Company at this time has not) brings the purchasers voting power to one-fifth, one-third or a
majority of all voting power. The purchasers voting rights can be restored only by a majority vote
of the other shareholders. The purchaser may demand a meeting of shareholders to conduct such a
vote. The purchaser can demand a meeting for this purpose before acquiring shares in excess of the
thresholds described above, which we refer to as a control share acquisition, only if it holds at
least 10% of the outstanding shares and announces a good faith intention to make the acquisition of
shares having voting power in excess of the thresholds stated above. If a target corporation so
elects prior to the date on which a purchaser makes a control share acquisition, a target
corporation may redeem the purchasers shares if the shares are not granted voting rights.
The effect of these provisions may make a change of control of the Company harder by delaying,
deferring or preventing a tender offer or takeover attempt that you might consider to be in your
best interest, including those attempts that might result in the payment of a premium over the
market price for our shares. They may also promote the continuity of our management by making it
harder for you to remove or change the incumbent members of the board of directors.
Limitations on Liability and Indemnification of Directors and Officers.
The Tennessee Business Corporation Act provides that a corporation may indemnify any of its
directors and officers against liability incurred in connection with a proceeding if:
| the director or officer acted in good faith; |
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| in the case of conduct in his or her official capacity with the corporation, the director or officer reasonably believed such conduct was in the corporations best interest; | ||
| in all other cases, the director or officer reasonably believed that his or her conduct was not opposed to the best interest of the corporation; and | ||
| in connection with any criminal proceeding, the director or officer had no reasonable cause to believe that his or her conduct was unlawful. |
In actions brought by or in the right of the corporation, however, the Tennessee Business
Corporation Act provides that no indemnification may be made if the director or officer was
adjudged to be liable to the corporation. In cases where the director or officer is wholly
successful, on the merits or otherwise, in the defense of any proceeding instituted because of his
or her status as an officer or director of a corporation, the Tennessee Business Corporation Act
mandates that the corporation indemnify the director or officer against reasonable expenses
incurred in the proceeding. The Tennessee Business Corporation Act also provides that in connection
with any proceeding charging improper personal benefit to an officer or director, no
indemnification may be made if the officer or director is adjudged liable on the basis that
personal benefit was improperly received. Notwithstanding the foregoing, the Tennessee Business
Corporation Act provides that a court of competent jurisdiction, upon application, may order that
an officer or director be indemnified for reasonable expenses if, in consideration of all relevant
circumstances, the court determines that the individual is fairly and reasonably entitled to
indemnification, notwithstanding the fact that:
| the officer or director was adjudged liable to the corporation in a proceeding by or in the right of the corporation; | ||
| the officer or director was adjudged liable on the basis that personal benefit was improperly received by him or her; or | ||
| the officer or director breached his or her duty of care to the corporation. |
Our charter and bylaws provide that to the extent permitted by the Tennessee Business
Corporation Act, we may indemnify, hold harmless and advance expenses to each person who was or is
made a party or is threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he
or she is or was a director, officer or employee of ours or is or was serving at our request as a
director, officer or employee of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director, officer, or employee or in
any other capacity while serving as a director, officer or employed.
Our charter and bylaws also allow us to purchase and maintain insurance to protect our
directors, officers, agents and employees against any expense, liability or loss asserted against
them or incurred by them. The insuring of the directors, officers, agents and employees is
permitted whether or not we would have the power to indemnify that director, officer, agent or
employee under our charter or the terms of the Tennessee Business Corporation Act.
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PLAN OF DISTRIBUTION
We will sell shares directly to investors on our behalf acting through our employees, officers
and directors, each of whom performs substantial duties on our behalf other than in connection with
this offering. None of these officers will be separately compensated either directly or indirectly
for his or her services in connection with this offering. We will, however, pay all of the expenses
incident to the offering and sale of our shares. We will not compensate any brokers or sales agents
in connection with this offering.
This offer is contingent upon the sale of a minimum of 10,000 shares and all proceeds from the
sale of any shares offered hereby will be immediately available for our use following the sale by
us of the minimum number of shares. See Use of Proceeds. There can be no assurance that any of
the shares offered under this offering will be sold. If we are unable to sell the minimum number of
shares being offered by this prospectus, we will return all subscription amounts to the
subscribers, without interest.
We are first offering the shares to our existing shareholders as of the close of business on
July ___, 2010. If after August ___, 2010, our existing shareholders have not
purchased all of the shares we are offering, we will offer any unsold shares to persons who were
not existing shareholders of ours as of the close of business on July ___, 2010. We reserve the
right, in our sole discretion, to extend the initial period in which only our existing
shareholders are allowed to purchase shares in the offering if our
board of directors determines to do so.
We will begin accepting subscriptions at 8:00 a.m. eastern daylight time on ___, August
___, 2010, and the offering period for the shares will end when all of the shares of the common
stock are sold or 5:00 p.m., Sevierville time, on September 30, 2010, whichever will occur first.
We may extend this date at our discretion for additional periods not exceeding a total of thirty
(30) additional days (i.e., until October 30, 2010). We will promptly notify subscribers of any
extensions.
We will have the sole right to accept offers to purchase shares and may reject any proposed
purchase of shares in whole or in part. We reserve the right to withdraw, cancel or modify the
offering of the shares at any time, without notice. For more information on the distribution of our
shares see How to Participate in this Offering.
EXPERTS
The consolidated financial statements of Mountain National Bancshares, Inc. as of December 31,
2009 and 2008, and for each of the three years in the period ended December 31, 2009, appearing in
this prospectus and registration statement have been audited by Crowe Horwath LLP, independent
registered public accounting firm, as set forth in its reports thereon included elsewhere herein.
Such consolidated financial statements are included in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
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LEGAL MATTERS
The validity of the shares of our common stock to be issued in this offering will be passed
upon by Bass, Berry & Sims PLC, Nashville, Tennessee.
WHERE YOU CAN FIND MORE INFORMATION
We file certain reports with the Commission, including annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K. The public may read and copy any materials we
file with the Commission at the Commissions Public Reference Room at 100 F Street, N.E.,
Washington, DC 20549. The public may obtain information on the operation of the Public Reference
Room by calling the Commission at 1-800-SEC-0330. We are an electronic filer, and the Commission
maintains an Internet site at http://www.sec.gov that contains the reports, proxy and information
statements and other information we file electronically with the Commission. Our website address is
www.mountainnationalbank.com. Please note that our website address is provided as an inactive
textual reference only. We make available free of charge, through our website, our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as
reasonably practicable after such material is electronically filed with or furnished to the
Commission. The information provided on our website is not part of this prospectus, and is
therefore not incorporated by reference unless such information is specifically referenced
elsewhere in this prospectus.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We have elected to incorporate by reference certain information into this prospectus. By
incorporating by reference, we can disclose important information to you by referring you to
another document we have filed separately with the Commission. The information incorporated by
reference is deemed to be part of this prospectus, except for information incorporated by reference
that is superseded by information contained in this prospectus, any prospectus supplement or any
document we subsequently file with the Commission that is incorporated or deemed to be incorporated
by reference into this prospectus. Likewise, any statement in this prospectus or any document which
is incorporated or deemed to be incorporated by reference herein will be deemed to have been
modified or superseded to the extent that any statement contained in any document that we
subsequently file with the Commission that is incorporated or deemed to be incorporated by
reference herein modifies or supersedes that statement. This prospectus incorporates by reference
the documents set forth below that we have previously filed with the Commission:
| Our Annual Report on Form 10-K for the fiscal year ended December 31, 2009; | ||
| Our definitive proxy statement on Schedule 14A, filed with the Commission on April 6, 2010; | ||
| Our Quarterly Report on Form 10-Q, filed with the Commission on May 17, 2010; and | ||
| Our Current Reports on Form 8-K, filed with the Commission on March 31, 2010 and May 20, 2010. |
Nothing in this prospectus shall be deemed to incorporate information furnished but not filed
with the Commission pursuant to Item 2.01 or Item 7.01 of Form 8-K.
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We will provide to each person a copy of any or all of the information that we have
incorporated by reference into this prospectus but not delivered with this prospectus. To receive a
free copy of any of the documents incorporated by reference in this prospectus, other than
exhibits, unless they are specifically incorporated by reference in those documents, call or write
to our Corporate Secretary, Mountain National Bancshares, Inc., 300 East Main Street, Sevierville,
Tennessee 37862 (telephone (865) 428-7990). The information contained in this prospectus does not
purport to be comprehensive and should be read together with the information contained in the
documents incorporated or deemed to be incorporated by reference in this prospectus.
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, 2010
Until , 2010, all dealers that buy, sell or trade the common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This is in addition to
the dealers obligation to deliver a prospectus when acting as an underwriter and with respect to
their unsold allotments or subscriptions.
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses to be paid by us in connection with the distribution of the securities being
registered are as set forth in the following table:
Securities and Exchange Commission Fee |
$ | 189 | ||
*Blue Sky Fees |
$ | 2,500 | ||
*Legal Fees and Expenses |
$ | 50,000 | ||
*Accounting Fees and Expenses |
$ | 7,500 | ||
*Miscellaneous |
$ | 2,500 | ||
*Total |
$ | 62,689 | ||
* | Estimated |
Item 14. Indemnification of Directors and Officers.
The Tennessee Business Corporation Act (TBCA) provides that a corporation may indemnify any
of its directors and officers against liability incurred in connection with a proceeding if (i) the
director or officer acted in good faith, (ii) in the case of conduct in his or her official
capacity with the corporation, the director or officer reasonably believed such conduct was in the
corporations best interests, (iii) in all other cases, the director or officer reasonably believed
that his or her conduct was not opposed to the best interest of the corporation, and (iv) in
connection with any criminal proceeding, the director or officer had no reasonable cause to believe
that his or her conduct was unlawful. In actions brought by or in the right of the corporation,
however, the TBCA provides that no indemnification may be made if the director or officer was
adjudged to be liable to the corporation. In cases where the director or officer is wholly
successful, on the merits or otherwise, in the defense of any proceeding instigated because of his
or her status as an officer or director of a corporation, the TBCA mandates that the corporation
indemnify the director or officer against reasonable expenses incurred in the proceeding. The TBCA
also provides that in connection with any proceeding charging improper personal benefit to an
officer or director, no indemnification may be made if such officer or director is adjudged liable
on the basis that personal benefit was improperly received. Notwithstanding the foregoing, the TBCA
provides that a court of competent jurisdiction, upon application, may order that an officer or
director be indemnified for reasonable expenses if, in consideration of all relevant circumstances,
the court determines that such individual is fairly and reasonably entitled to indemnification,
whether or not the standard of conduct set forth above was met.
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The Registrants charter and bylaws provide that the Registrant shall to the fullest extent
allowed by the laws of the State of Tennessee, both as now in effect or hereafter adopted,
indemnify and advance expenses to each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she is or was a
director, officer or employee of the corporation or is or was serving at the request of the
corporation as a director, officer or employee of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee benefit plans,
whether the basis of such proceeding is alleged action in an official capacity as a director,
officer, or employee or in any other capacity while serving as a director, officer or employed.
The Registrants bylaws also provide that the indemnification rights contained in the bylaws
shall not be exclusive of any other right which any person may have or hereafter acquire under any
statute, bylaw, agreement, vote of shareholders, disinterested directors, or otherwise.
The Registrant believes that its charter and bylaw provisions are necessary to attract and
retain qualified persons as directors and officers.
The Registrants charter and bylaws also allow it to purchase and maintain insurance to
protect its directors, officers, agents and employees against any liability asserted against them
or incurred by them. The insuring of the directors, officers, agents and employees is permitted
whether or not the Registrant would have the power to indemnify that director, officer, agent or
employee under its charter or the terms of the Tennessee Business Corporation Act.
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit | ||
Number | Description | |
2.1
|
Plan of Reorganization dated March 28, 2003, by and between the Company and Mountain National Bank (included as Exhibit 2.1 to the Report on Form 8-K12G3 of the Company, dated July 12, 2003 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference). | |
2.2
|
Amendment to Plan of Reorganization dated July 1, 2003 (included as Exhibit 2.2 to the Report on Form 8-K12G3 of the Company, dated July 12, 2003 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference). | |
3.1
|
Charter of Incorporation of the Company, as amended (Restated for Commission filing purposes only). | |
3.2
|
Amended and Restated Bylaws of the Company, as amended (included as Exhibit 3.1 to the Report on Form 8-K of the Company, dated March 31, 2010 (File No. |
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Exhibit | ||
Number | Description | |
000-49912), previously filed with the Commission and incorporated herein by reference). | ||
4.1
|
Specimen Common Stock Certificate (included as Exhibit 4.1 to the Registration Statement on Form SB-2, dated July 11, 2005 (File No. 333-126524), previously filed with the Commission and incorporated herein by reference) | |
5.1
|
Opinion of Bass, Berry & Sims PLC | |
10.1
|
Stock Option Plan of the Company, as amended (included as Exhibit 10.1 to the Report on Form 8-K of the Company, dated May 19, 2006 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference)* | |
10.2
|
Stock Option Agreement of Dwight B. Grizzell (assumed by Company) (included as Exhibit 10.3 to the Companys Form 10-KSB for the year ended December 31, 2002 and incorporated herein by reference)* | |
10.3
|
Summary Description of Director and Named Executive Officer Compensation Arrangements (included as Exhibit 10.3 to the Companys Form 10-K for the year ended December 31, 2009 and incorporated herein by reference)* | |
10.4
|
Form of Warrant Agreement (included as Exhibit 10.5 to the Companys Form SB-2/A filed with the Commission on August 23, 2005) | |
10.5
|
Employment Agreement dated as of May 15, 2009 by and among Mountain National Bank, Mountain National Bancshares, Inc. and Grace McKinzie (included as Exhibit 10.1 to the Report on Form 8-K of the Company, dated March 31, 2010 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference)* | |
10.6
|
Employment Agreement dated as of May 28, 2009 by and among Mountain National Bank, Mountain National Bancshares, Inc. and Michael Brown (included as Exhibit 10.2 to the Report on Form 8-K of the Company, dated March 31, 2010 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference)* | |
10.7
|
Employment Agreement dated as of May 18, 2009 by and among Mountain National Bank, Mountain National Bancshares, Inc. and Richard Hubbs (included as Exhibit 10.3 to the Report on Form 8-K of the Company, dated March 31, 2010 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference)* | |
10.8
|
Amended and Restated Salary Continuation Agreement, dated January 19, 2007, by and between Mountain National Bank and Dwight Grizzell. (included as Exhibit 10.8 to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | |
10.9
|
Amendment, dated November 19, 2007, to Amended and Restated Salary Continuation Agreement, by and between Mountain National Bank and Dwight Grizzell. (included as Exhibit 10.9 to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | |
10.10
|
Amended and Restated Salary Continuation Agreement, dated January 19, 2007, by and between Mountain National Bank and Michael Brown. (included as Exhibit 10.10 to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | |
10.11
|
Amendment, dated November 19, 2007, to Amended and Restated Salary Continuation Agreement, by and between Mountain National Bank and Michael Brown. (included as Exhibit 10.11 to the Companys Form 10-K for the year ended |
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Exhibit | ||
Number | Description | |
December 31, 2007 and incorporated herein by reference)* | ||
10.12
|
Amended and Restated Salary Continuation Agreement, dated January 19, 2007, by and between Mountain National Bank and Grace McKinzie. (included as Exhibit 10.12 to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | |
10.13
|
Amendment, dated November 19, 2007, to Amended and Restated Salary Continuation Agreement, by and between Mountain National Bank and Grace McKinzie. (included as Exhibit 10.13 to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | |
10.14
|
Agreement, dated June 2, 2009, by and between Mountain National Bank and the Office of the Comptroller of the Currency (included as Exhibit 10.1 to the Report on Form 8-K of the Company, dated June 5, 2009, (File No. 000-49912), previously filed with the Commission and incorporated herein by reference) | |
21.1
|
Subsidiaries of the Registrant (included as Exhibit 21.1 to the Registrants Form 10-K for the year ended December 31, 2009 and incorporated herein by reference) | |
23.1
|
Consent of Independent Registered Public Accounting Firm | |
23.2
|
Consent of Bass, Berry and Sims PLC (included in Exhibit 5.1) | |
24.1
|
Power of Attorney (contained on signature page of this registration statement) |
* | Denotes management contract or compensatory plan or arrangement. |
Item 17. Undertakings.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
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question whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sevierville, State of Tennessee, on
July 22, 2010.
MOUNTAIN NATIONAL BANCSHARES, INC. |
||||
By: | /s/ Dwight B. Grizzell | |||
Dwight B. Grizzell | ||||
President and Chief Executive Officer | ||||
SIGNATURE PAGE AND POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby
constitutes and appoints Dwight B. Grizzell and Richard A. Hubbs, and each of them, the true and
lawful attorneys-in-fact and agents of the undersigned, with full power of substitution and
resubstitution, for and in the name, place and stead of the undersigned, to sign in any and all
capacities (including, without limitation, the capacities listed below), the registration
statement, any and all amendments (including post-effective amendments) to the registration
statement and any and all successor registration statements of Mountain National Bancshares, Inc.,
including any filings pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and to
file the same, with all exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, and hereby grants to such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and anything necessary
to be done to enable Mountain National Bancshares, Inc. to comply with the provisions of the
Securities Act and all the requirements of the Securities and Exchange Commission, as fully to all
intents and purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her
substitute, or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates indicated.
Signature | Title | Date | ||
/s/ Dwight B. Grizzell
|
President, Chief Executive Officer, and Director (Principal Executive Officer) | July 22, 2010 | ||
/s/ Richard A. Hubbs
|
Senior Vice President and Chief Financial Officer (Principal Accounting and Financial) | July 22, 2010 | ||
/s/ James E. Bookstaff
|
Director | July 22, 2010 |
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Table of Contents
Signature | Title | Date | ||
/s/ Gary A. Helton
|
Director | July 22, 2010 | ||
Gary A. Helton |
||||
/s/ Charlie R. Johnson
|
Director | July 22, 2010 | ||
Charlie R. Johnson |
||||
/s/ Sam L. Large
|
Director | July 22, 2010 | ||
Sam L. Large |
||||
/s/ Jeffrey J. Monson
|
Director | July 22, 2010 | ||
Jeffrey J. Monson |
||||
Director | ||||
Linda N. Ogle |
||||
/s/ Michael C. Ownby
|
Director | July 22, 2010 | ||
Michael C. Ownby |
||||
Director | ||||
John M. Parker |
||||
/s/ Ruth A. Reams
|
Director | July 22, 2010 | ||
Ruth a. Reams |
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EXHIBIT INDEX
Exhibit | ||
Number | Description | |
2.1
|
Plan of Reorganization dated March 28, 2003, by and between the Company and Mountain National Bank (included as Exhibit 2.1 to the Report on Form 8-K12G3 of the Company, dated July 12, 2003 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference). | |
2.2
|
Amendment to Plan of Reorganization dated July 1, 2003 (included as Exhibit 2.2 to the Report on Form 8-K12G3 of the Company, dated July 12, 2003 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference). | |
3.1
|
Charter of Incorporation of the Company, as amended (Restated for Commission filing purposes only). | |
3.2
|
Amended and Restated Bylaws of the Company, as amended (included as Exhibit 3.1 to the Report on Form 8-K of the Company, dated March 31, 2010 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference). | |
4.1
|
Specimen Common Stock Certificate (included as Exhibit 4.1 to the Registration Statement on Form SB-2, dated July 11, 2005 (File No. 333-126524), previously filed with the Commission and incorporated herein by reference) | |
5.1
|
Opinion of Bass, Berry & Sims PLC | |
10.1
|
Stock Option Plan of the Company, as amended (included as Exhibit 10.1 to the Report on Form 8-K of the Company, dated May 19, 2006 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference)* | |
10.2
|
Stock Option Agreement of Dwight B. Grizzell (assumed by Company) (included as Exhibit 10.3 to the Companys Form 10-KSB for the year ended December 31, 2002 and incorporated herein by reference)* | |
10.3
|
Summary Description of Director and Named Executive Officer Compensation Arrangements (included as Exhibit 10.3 to the Companys Form 10-K for the year ended December 31, 2009 and incorporated herein by reference)* | |
10.4
|
Form of Warrant Agreement (included as Exhibit 10.5 to the Companys Form SB-2/A filed with the Commission on August 23, 2005) | |
10.5
|
Employment Agreement dated as of May 15, 2009 by and among Mountain National Bank, Mountain National Bancshares, Inc. and Grace McKinzie (included as Exhibit 10.1 to the Report on Form 8-K of the Company, dated March 31, 2010 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference)* | |
10.6
|
Employment Agreement dated as of May 28, 2009 by and among Mountain National Bank, Mountain National Bancshares, Inc. and Michael Brown (included as Exhibit 10.2 to the Report on Form 8-K of the Company, dated March 31, 2010 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference)* | |
10.7
|
Employment Agreement dated as of May 18, 2009 by and among Mountain National Bank, Mountain National Bancshares, Inc. and Richard Hubbs (included as Exhibit 10.3 to the Report on Form 8-K of the Company, dated March 31, 2010 (File No. 000-49912), previously filed with the Commission and incorporated herein by reference)* | |
10.8
|
Amended and Restated Salary Continuation Agreement, dated January 19, 2007, by and between Mountain National Bank and Dwight Grizzell. (included as Exhibit 10.8 |
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Table of Contents
Exhibit | ||
Number | Description | |
to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | ||
10.9
|
Amendment, dated November 19, 2007, to Amended and Restated Salary Continuation Agreement, by and between Mountain National Bank and Dwight Grizzell. (included as Exhibit 10.9 to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | |
10.10
|
Amended and Restated Salary Continuation Agreement, dated January 19, 2007, by and between Mountain National Bank and Michael Brown. (included as Exhibit 10.10 to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | |
10.11
|
Amendment, dated November 19, 2007, to Amended and Restated Salary Continuation Agreement, by and between Mountain National Bank and Michael Brown. (included as Exhibit 10.11 to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | |
10.12
|
Amended and Restated Salary Continuation Agreement, dated January 19, 2007, by and between Mountain National Bank and Grace McKinzie. (included as Exhibit 10.12 to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | |
10.13
|
Amendment, dated November 19, 2007, to Amended and Restated Salary Continuation Agreement, by and between Mountain National Bank and Grace McKinzie. (included as Exhibit 10.13 to the Companys Form 10-K for the year ended December 31, 2007 and incorporated herein by reference)* | |
10.14
|
Agreement, dated June 2, 2009, by and between Mountain National Bank and the Office of the Comptroller of the Currency (included as Exhibit 10.1 to the Report on Form 8-K of the Company, dated June 5, 2009, (File No. 000-49912), previously filed with the Commission and incorporated herein by reference) | |
21.1
|
Subsidiaries of the Registrant (included as Exhibit 21.1 to the Registrants Form 10-K for the year ended December 31, 2009 and incorporated herein by reference) | |
23.1
|
Consent of Independent Registered Public Accounting Firm | |
23.2
|
Consent of Bass, Berry and Sims PLC (included in Exhibit 5.1) | |
24.1
|
Power of Attorney (contained on signature page of this registration statement) |
* | Denotes management contract or compensatory plan or arrangement. |
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