April 6, 2006
Mail Stop 4561
By U.S. Mail and Facsimile (404) 572-6999
Mark A. Stevens
President and Chief Executive Officer
Atlantic Southern Financial Group, Inc.
4077 Forsyth Road
Macon, Georgia 31210
Re: Atlantic Southern Financial Group, Inc.
Amendment No. 1 to Registration Statement on Form S-1
Filed March 24, 2006
File No. 333-130542
Form 10-K for Fiscal Year Ended
December 31, 2005
Filed March 27, 2006
File No. 0-51112
Dear Mr. Stevens:
We have reviewed your amendment and have the following
comments. Where indicated, we think you should revise your
document
in response to these comments. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a
revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with information so we may better understand your disclosure.
After
reviewing this information, we may or may not raise additional
comments.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We welcome any questions
you
may have about our comments or on any other aspect of our review.
Feel free to call us at the telephone numbers listed at the end of
this letter.
Summary, page 1
1. We note your response to our prior comment no. 2. Please
revise
or delete the second sentence in the introductory paragraph to
avoid
the qualifications the summary is "incomplete" and cannot be
relied
upon without reading the entire prospectus.
There has been no active market for our common stock..., page 13
2. Please revise to clarify that current trading volume on the
OTCBB
is light.
Use of Proceeds, page 21
3. We note your response to prior comment 12. Please clarify to
the
staff why you do not address your plans to open three new branches
and purchase additional land in the near future.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 26
Asset Quality, page 38
4. We refer to your response to Comment 23 regarding your revised
discussion of how additions to the allowance for loan losses are
determined in which you eliminated the reference to establishing
the
additions by maintaining a ratio of the allowance for loan losses
to
total loans in the range of 1% to 1.25%. In this regard, please
reconcile your revised disclosure in this section to the last
paragraph of the "Provision for Loan Losses" section on page 33
which
states that additions to the allowance are primarily based on
maintaining a ratio of the allowance for loan losses to total
loans
in a range of 1.00% to 1.25%.
Provision for Loan Losses, page 39
5. We refer to your response to Comment 33 in which you state you
have revised this section to describe your methodology for
determining the amount of your allowance for loan loses. Please
tell
us where you have provided the revised disclosure, considering
this
section in your amendment does not appear to have been revised to
include the following information:
a. Provide a discussion of how you determine each element of the
allowance based on a credit classification process that
categorizes
loans into risk categories, such as loan segmentation and rating
into
standard, doubtful and loss categories.
b. Explain your methodology for evaluating loans individually and
as
groups, considering the requirements of SFAS 5, as amended by SFAS
114.
c. Describe how you determined the loss factors that you applied
to
graded loans to develop a general allowance; and
d. Reconcile this methodology with the statement in the last
paragraph on page 39 that states the additions to the reserve are
based on maintaining a ratio of the allowance to total loans in a
range of 1.00% to 1.25%.
Liquidity, page 45
6. We refer to your response to comment 25 and to the updated
disclosure which shows your liquid assets as a percentage of
deposits
decreased to 1.69% in 2005 as compared to 4.44% in 2004 and 7.78%
in
2003. As requested previously, please discuss in this section the
reasons for this significant decrease in this liquidity ratio in
the
last two fiscal years. State if this decrease is indicative of a
trend which is expected to recur in future fiscal periods and, if
so,
consider discussing this trend as a risk factor in the "Risks
Related
to our Business" section on page 7.
Note A.4, Loans Held for Sale, page F-8
7. We refer to your response to comment 51 in which you state that
the comment is no longer applicable considering the financial
statements as of September 30, 2005 are no longer included in the
registration statement. Considering that the consolidated
balance
sheet as of December 31, 2005 shows you have loans held for sale
of
$1.226 million as compared to $1.186 million for 2004, please tell
us
and state in the income statement for each period the gains or
losses
realized on sales of loans for each period. In addition, discuss
in
Management`s Discussion and Analysis the following:
a. Explain why your statements of cash flows for 2005 and 2004
does
not show any adjustments to cash flow for gains or losses
recognized
on loans sold during these periods.
b. Disclose any concerns regarding the creditworthiness of any
loans
held for sale and of your ability to sell them during the next
twelve
months.
c. Explain how you consider impairments to the carrying value of
loans held for sale in your analysis of the reasonability of the
allowance for loan losses.
Financial Statements of NSB Holdings, Inc. for the nine-month
period
ended September 31, 2005
Note (6), Interest Rate Floors, page F-32
8. We refer to your response to comment 57 and to the new note
A.3,
"Derivative Instruments and Hedging Activities" on page F-7 of the
financial statement for the year ended December 31, 2005.
Considering
63% of the Company`s loans have contractual floors, please revise
the
note to provide the following information regarding the interest
caps
and floors:
a) Disclose the specific terms of the each material interest
contract, including the notional principal amount and the
contractual
terms of the floors which serve as cash flow hedges. Describe the
type of loans being hedged and the quantitative terms of the
floors
used as a hedge.
b) Considering you state that no hedge ineffectiveness from cash
flow
hedges was recognized in the income statement, for the interest
rate
cap contracts that qualify as hedging instruments under SFAS 133,
please include in MD&A the following information:
* Describe the quantitative measures of correlation you use to
assess
effectiveness of each hedge both at inception and on an ongoing
basis.
* Please tell us whether you use the long-haul and/or the short
cut
application of hedge accounting for each major type of derivative
contract that you have entered into and compare and contrast each
treatment and how it complies with paragraphs 68-70 of SFAS No.
133.
* Disclose when you perform these assessments on an interim or
annual
basis.
* Provide an expanded discussion of how your derivative
instruments
qualify for hedge accounting under SFAS 133 and how your
accounting
policies comply with that standard.
Additional Comments
Note G, "Borrowings" , page F-19
9. Revise the disclosure of the advances from the FHLB to state
the
terms of the interest rate caps embedded in the $6 million advance
due in 2008 and the conversion features of the $5 million advance
due
in 2007. Refer to footnotes * and ** regarding the terms of these
advances in the "Liquidity" section on page 46.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
10. Include in this section the disclosure required by Item 11(i)
of
Form S-1 to provide the information regarding the change in
accounts
described in Form 8-K filed on March 15, 2004. Refer to Item 304
of
Regulation S-K.
Form 10-K for the period ended December 31, 2005
General
11. Revise to include the changes in disclosure made in the
amendment
to the Form S-1 that are applicable to the financial statements
and
Management`s Discussion and Analysis of Financial Condition and
Operations in the Form 10-K.
Change and Disagreements with Accountants on Accounting and
Financial
Disclosure, page 73
12. Revise this section to describe the dismissal of your current
independent auditors on March 9, 2006 and the engagement of your
new
auditors on that date. Incorporate by reference the Form 8-K
filed
on March 15, 2006 that provides the disclosure regarding the
change
in accountants required by Item 304 of Regulation S-K.
* * *
Closing Comments
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert this action as defense in any
proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
You may contact Edwin Adames, Staff Accountant, at (202)
551-
3447 or John Nolan, Accounting Branch Chief, at (202) 551-3492 if
you have questions regarding comments on the financial statements
and
related matters. Please contact Gregory Dundas at (202) 551-3436
or
me at (202) 551-3493 with any other questions.
Sincerely,
Todd K. Schiffman
Assistant Director
cc: M. Todd Wade, Esq.
Beth Lanier, Esq.
Powell Goldstein LLP
One Atlantic Center, Fourteenth Floor
1201 West Peachtree Street, NW
Atlanta, Georgia.
M. Todd Wade
Atlantic Southern Financial Group, Inc.
April 6, 2006
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