SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-27154
JOACHIM BANCORP, INC.
(Exact name of registrant as specified in its charter)
Missouri 43-1721475
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) I.D. Number)
Plaza Square, De Soto, Missouri 63020
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 586-8821
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share (Title of Class)
Check whether the Registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES [X] NO [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained herein, and no disclosure will be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB.
The registrant's revenues for the year ended March 31, 1996 were
$2,405,571.
As of May 17, 1996, there were issued and outstanding 760,437 shares of
the Registrant's Common Stock. The Registrant's voting stock is traded
over-the-counter and is listed on the Nasdaq SmallCap Market under the symbol
"JOAC." The aggregate market value of the voting stock held by nonaffiliates
of the Registrant, based on the closing sales price of the Registrant's
common stock as quoted on the Nasdaq SmallCap Market on May 17, 1996 of
$12.50, was $9,505,463. For the purposes of this calculation, officers and
directors of the Registrant are considered nonaffiliates of the Registrant.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Annual Report to Stockholders for the Fiscal Year Ended March
31, 1996 ("Annual Report") (Parts I and II).
2. Portions of Registrant's Definitive Proxy Statement for the 1996 Annual
Meeting of Stockholders (Part III).
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PART I
ITEM 1. BUSINESS
GENERAL
Joachim Bancorp, Inc. ("Joachim Bancorp" or the "Company"), a Missouri
corporation, was organized in August 1995 for the purpose of becoming the
holding company for Joachim Federal Savings and Loan Association ("Joachim
Federal" or the "Association") upon Joachim Federal's conversion from a
federal mutual to a federal stock savings and loan association
("Conversion"). The Conversion was completed on December 27, 1995. At March
31, 1996, the Company had total assets of $36.8 million, total deposits of
$25.6 million
and stockholders' equity of $10.8 million. Joachim Bancorp has not engaged
in any significant activity other than holding the stock of Joachim Federal
and investing its share of the net proceeds of the Conversion stock offering
less the funds used to make the ESOP loan to the Association for purchase of
shares of common stock for the Association's ESOP. Accordingly, the
information set forth in this report, including financial statements and
related data, relates primarily to Joachim Federal and its subsidiary. All
references to the Company herein include the Association where applicable.
Joachim Federal was organized in 1962. The Association is regulated by
the Office of Thrift Supervision ("OTS") and its deposits are insured up to
applicable limits under the Savings Association Insurance Fund ("SAIF") of
the Federal Deposit Insurance Corporation ("FDIC"). Joachim Federal also is
a member of the Federal Home Loan Bank ("FHLB") System. The Association
operates as a community oriented financial institution and is devoted to
serving the needs of its customers in its market area. Joachim Federal's
business consists primarily of attracting deposits from the general public
and using those funds to originate residential real estate loans.
MARKET AREA
De Soto, Missouri is a community of approximately 6,000 people located in
a rural setting in Jefferson County, approximately 40 miles southwest of St.
Louis, Missouri on the southern edge of the St. Louis metropolitan area. The
Association focuses primarily on serving customers located in Jefferson
County, Missouri and, to a lesser extent, on customers in the surrounding
counties of St. Francois, Ste. Genevieve and Washington. The population
within the zip code encompassing De Soto, which covers much of the
Association's primary market area, is currently approximately 14,000.
Because it operates in a relatively small market area, the Association's
ability to achieve loan and deposit growth is limited. The major employers
in the Association's market area include Union Pacific Railroad, which has a
car repair shop, ABZ Company, which manufactures leather binders, and the De
Soto School District. In addition, a large number of local residents are
employed in the St. Louis area by various large employers, such as Chrysler
Corporation and McDonnell Douglas, and in various construction trades.
The Association faces intense competition from many financial
institutions for deposits and loan originations. See "-- Competition."
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS AND RATES
Reference is made to the section entitled "Average Balances, Interest and
Average Yields and Rates" on page 7 of the Annual Report, which section is
incorporated herein by reference.
ASSET/LIABILITY MANAGEMENT
Reference is made to the section entitled "Asset/Liability Management" on
page 4 of the Annual Report, which section is incorporated herein by
reference.
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RATE/VOLUME ANALYSIS
Reference is made to the section entitled "Rate/Volume Analysis" on page
8 of the Annual Report, which section is incorporated herein by reference.
At or For the Year Ended March 31,
1996 1995 1994
____ ____ ____
KEY FINANCIAL RATIOS:
Performance Ratios:
Return on assets(1) . . . . . . . . . . .66% 0.79% 0.94%
Return on stockholders' equity(2) . . . 3.63 5.95 7.89
Stockholders' equity-to-assets ratio(3) 18.14 13.23 11.94
Dividend payout ratio(4). . . . . . . . 44.64 -- --
Interest rate spread (5). . . . . . . . 2.99 3.69 3.68
Net interest margin(6). . . . . . . . . 3.80 4.06 3.99
Average interest-earning assets
as a percent of average
interest-bearing liabilities . . . . . 121.94 111.60 109.73
Noninterest expense as a
percent of average total assets. . . . 2.93 2.84 2.52
(1) Net earnings divided by average total assets.
(2) Net earnings divided by average stockholders' equity.
(3) Average stockholders' equity divided by average total assets.
(4) Dividends declared per share divided by net earnings per share.
(5) Difference between weighted average yield on interest-earning assets
and weighted average rate on interest-bearing liabilities.
(6) Net interest income as a percentage of average interest-earning
assets.
LENDING ACTIVITIES
General. The principal lending activity of the Association is the
origination of conventional mortgage loans for the purpose of purchasing,
constructing or refinancing owner-occupied, one- to four-family residential
property. To a significantly lesser extent, the Association also originates
non-owner-occupied, one- to four-family residential loans, multi-family,
commercial real estate, construction, agricultural and consumer and other
loans. The Association's net loans receivable totalled approximately $22.9
million at March 31, 1996, representing approximately 62.4% of consolidated
total assets.
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Loan Portfolio Analysis. The following table sets forth the composition
of the Association's loan portfolio by type of loan at the dates indicated.
The Association had no concentration of loans exceeding 10% of total gross
loans other than as disclosed below.
At March 31,
1996 1995 1994
Amount Percent Amount Percent Amount Percent
______ _______ ______ _______ ______ _______
(Dollars in Thousands)
Mortgage loans:
One- to four-family $20,649 89.56% $20,291 91.20% $20,697 91.88%
Multi-family 34 0.15 35 0.16% 35 0.16
Construction 99 0.43 60 0.27 120 0.53
Commercial 948 4.11 605 2.72 466 2.07
Agricultural and other (1) 789 3.42 794 3.57 667 2.96
------ ----- ------ ----- ------ -----
Total mortgage loans 22,519 97.67 21,785 97.92 21,985 97.60
Consumer & other loans(2) 536 2.33 463 2.08 541 2.40
------ ----- ------ ----- ------ -----
Total gross loans 23,055 100.00% 22,248 100.00% 22,526 100.00%
Less:
Unearned discount -- 3 3
Allowance for loan losses 72 60 48
Deferred loan fees, net 51 79 101
------- --------- -------
Total loans receivable,
net $22,932 $22,106 $22,374
(1) Includes land and building lot loans.
(2) Includes unsecured consumer loans, automobile loans, student loans and
loans secured by deposit accounts.
Residential Real Estate Lending. The primary lending activity of the
Association is the origination of mortgage loans to enable borrowers to
purchase existing one- to four-family homes. Management believes that this
policy of focusing on one- to four-family residential mortgage loans located
in its market area has been successful in contributing to interest income
while keeping delinquencies and losses to a minimum. At March 31, 1996,
$20.6 million, or 89.6% of the Association's total gross loan portfolio,
consisted of loans secured by one- to four-family residential real estate.
The Association presently originates for retention in its portfolio both
adjustable rate mortgage ("ARM") loans with terms of up to 25 years and
fixed-rate mortgage loans with terms of up to 20 years. Borrower demand for
ARM loans versus fixed-rate mortgage loans is a function of the level of
interest rates, the expectations of changes in the level of interest rates
and the difference between the initial interest rates and fees charged for
each type of loan. The relative amount of fixed-rate mortgage loans and ARM
loans that can be originated at any time is largely determined by the demand
for each in a competitive environment. At March 31, 1996, $20.3 million, or
88.0%, of the Association's total gross loans were subject to periodic
interest rate adjustments.
The loan fees charged, interest rates and other provisions of the
Association's ARM loans are determined by the Association on the basis of its
own pricing criteria and competitive market conditions. The Association
originates one-year ARM loans secured by owner-occupied residences whose
interest rates and payments generally are adjusted annually to a rate
typically equal to 2.75% above the one-year constant maturity U.S. Treasury
("CMT") index and three-year ARM loans secured by owner-occupied residences
whose interest rates are adjusted every three years to a rate typically equal
to 2.75% above the three-year CMT index. The Association currently offers
ARM
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loans with initial rates below those which would prevail under the
foregoing computations, determined by the Association based on market factors
and competitive rates for loans having similar features offered by other
lenders for such initial periods. At March 31, 1996, the initial interest
rate on ARM loans offered by the Association ranged from 6.25% to 7.625% per
annum. The periodic interest rate cap (the maximum amount by which the
interest rate may be increased or decreased in a given period) on the
Association's ARM loans is generally 1%-2% per adjustment period and the
lifetime interest rate cap is generally 5% - 6% over the initial interest
rate of the loan.
The Association also offers mortgage loans for non-owner-occupied one-
to four-family homes. The rates on such loans are generally 50 basis points
higher than for a comparable loan for an owner-occupied residence and ARM
loans for non-owner-occupied homes adjust to a rate equal to 3.25% above the
one-year or three-year CMT index. Loans secured by non-owner-occupied
residences generally involve greater risks than loans secured by
owner-occupied residences. Payments on loans secured by such properties are
often dependent on successful operation or management of the properties.
Repayment of such loans may be subject to a greater extent to adverse
conditions in the real estate market or the economy. The Association requires
that borrowers with loans in excess of $50,000 that are secured by
non-owner-occupied homes submit annual financial statements.
The Association does not originate negative amortization loans. The
terms and conditions of the ARM loans offered by the Association, including
the index for interest rates, may vary from time to time. The Association
believes that the adjustment features of its ARM loans provide flexibility to
meet competitive conditions.
A significant portion of the Association's residential mortgage loans
are not readily saleable in the secondary market because they are not
originated in accordance with the purchase requirements of the Federal Home
Loan Mortgage Corporation ("FHLMC") or the Federal National Mortgage
Association ("FNMA").
Although such loans satisfy the Association's underwriting requirements, they
are "non-conforming" because they do not satisfy minimum loan amount
requirements, acreage limits, or various other requirements imposed by the
FHLMC and FNMA. Accordingly, the Association's non-conforming loans could be
sold only after incurring certain costs and/or discounting the purchase
price. The Association has historically found that its origination of
non-conforming loans has not resulted in high amounts of nonperforming loans.
In addition, the Association believes that these loans satisfy a need in the
Association's local community. As a result, the Association intends to
continue to originate such non-conforming loans.
The retention of ARM loans in the Association's loan portfolio helps
reduce the Association's exposure to changes in interest rates. There are,
however, unquantifiable credit risks resulting from the potential of
increased costs due to changed rates to be paid by the customer. It is
possible that during periods of rising interest rates the risk of default on
ARM loans may increase as a result of repricing and the increased costs to
the borrower. Furthermore, because the ARM loans originated by the
Association generally provide, as a marketing incentive, for initial rates of
interest below the rates which would apply were the adjustment index used for
pricing initially (discounting), these loans are subject to increased risks
of default or
delinquency. Another consideration is that although ARM loans allow the
Association to increase the sensitivity of its asset base to changes in the
interest rates, the extent of this interest sensitivity is limited by
the periodic and lifetime interest rate adjustment limits. Because of these
considerations, the Association has no assurance that yields on ARM loans
will be sufficient to offset increases in the Association's cost of funds.
While fixed-rate single-family residential real estate loans are
normally originated with 20 year terms, such loans typically remain
outstanding for substantially shorter periods. This is because borrowers
often prepay their loans in full upon sale of the property pledged as
security or upon refinancing the original loan. In addition, substantially
all mortgage loans in the Association's loan portfolio contain due-on-sale
clauses providing that the Association may declare the unpaid amount due and
payable upon the sale of the property securing the loan. Typically, the
Association enforces these due-on-sale clauses to the extent permitted by law
and as business judgment dictates. Thus, average loan maturity is a function
of, among other factors, the level of purchase and sale activity in the real
estate market, prevailing interest rates and the interest rates payable on
outstanding loans.
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The Association generally requires title insurance insuring the status
of its lien on all of the real estate secured loans. The Association also
requires that fire and extended coverage casualty insurance (and, if
appropriate, flood insurance) be maintained in an amount at least equal to
the outstanding loan balance.
The Association's lending policies generally limit the maximum loan-to-
value ratio on mortgage loans secured by owner-occupied properties to 90% of
the lesser of the appraised value or the purchase price, with the condition
that private mortgage insurance is generally required on loans with loan-to-
value ratios greater than 85%. The maximum loan-to-value ratio on mortgage
loans secured by non-owner-occupied properties is generally 80%.
Multi-family Real Estate Lending. The Association has historically
engaged in a limited amount of multi-family real estate lending. The
Association does not actively solicit multi-family real estate loans as there
are few multi-family properties in its market area. At March 31, 1996, the
Association had one multi-family loan in the amount of $34,000.
Loans secured by multi-family real estate generally involve greater
risks than one- to four-family residential mortgage loans. Payments on loans
secured by such properties are often dependent on successful operation or
management of the properties. Repayment of such loans may be subject to a
greater extent to adverse conditions in the real estate market or the
economy. The Association seeks to minimize these risks in a variety of ways,
including limiting the size of such loans, limiting the maximum loan-to-value
ratio to 80% and strictly scrutinizing the financial condition of the
borrower, the quality of the collateral and the management of the property
securing the loan. All of the properties securing the Association's multi-
family real estate loans are inspected by the Association's lending personnel
before the loan is made. The Association also obtains appraisals on each
property in accordance with applicable regulations.
Construction Lending. The Association occasionally originates
residential construction loans to individuals or local builders to construct
one- to four-family homes. At March 31, 1996, the Association had one
construction loan outstanding in the amount of $99,000.
Construction loans that are not made in connection with the granting of
permanent financing on the property are for terms of up to six months. Loans
to builders may be for the construction of a pre-sold home or may be a loan
to construct a speculative home (i.e., a home for which no purchaser has been
identified). The Association generally permits a builder to have only one
construction loan outstanding with the Association at a time. Construction
loans are usually disbursed through Hillsboro Title Co, Inc. ("Hillsboro
Title"), which assumes responsibility for inspections and payments to
contractors, subcontractors and suppliers. A Director of the Association is
the Chairman of Hillsboro Title Company.
Construction lending is generally considered to involve a higher level
of risk as compared to one- to four-family residential lending because of the
inherent difficulty in estimating both a property's value at completion of
the project and the estimated cost of the project. The nature of these loans
is such that they are generally more difficult to evaluate and monitor. If
the estimate of value proves to be inaccurate, the Association may be
confronted at, or prior to, the maturity of the loan, with a project whose
value is insufficient to assure full repayment. Loans for the construction
of speculative homes carry more risk because the payoff for the loan is
dependent on the builder's ability to sell the property prior to the time
that the construction loan is due.
Commercial Real Estate Lending. The Association has historically
engaged in a limited amount of commercial real estate lending. At March 31,
1996, commercial real estate loans in the Association's portfolio totalled
$948,000. The largest commercial real estate loan in the Association's
portfolio at that date was a $496,000 participation interest in a loan
secured by a retail strip center located in Columbia, Missouri, which is
performing in accordance with its terms.
The Association does not actively solicit or originate commercial real
estate loans. Loans secured by commercial real estate generally are larger
and involve greater risks than one- to four-family residential mortgage
loans.<PAGE>
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Payments on loans secured by such properties are often dependent on the
successful operation or management of the properties. Repayment of such
loans may be subject to a greater extent to adverse conditions in the real
estate market or the economy. The Association seeks to minimize these risks
in a variety of ways, including limiting the size of such loans, limiting the
maximum loan-to-value ratio to 80% and strictly scrutinizing the financial
condition of the borrower, the quality of the collateral and the management
of the property securing the loan. The Association also obtains loan
guarantees from financially capable parties based on a review of personal
financial statements. All of the properties securing the Association's
commercial real estate loans are inspected by the Association's lending
personnel before the loan is made. The Association also obtains appraisals
on each property in accordance with applicable regulations.
Agricultural and Other Real Estate Lending. The Association originates
loans secured by farm residences and combinations of farm residences and farm
real estate. The Association also originates loans for the acquisition of
land upon which the purchaser can then build or upon which the purchaser
makes improvements necessary to build upon or to sell as improved lots. At
March 31, 1996, the Association's agricultural and other real estate loan
portfolio totalled $789,000, or 3.4% of total gross loans.
Loans secured by farm real estate generally involve greater risks than
one- to four-family residential mortgage loans. Payments on loans secured by
such properties may, in some instances, be dependent on farm income from the
properties. To address this risk, the Association does not consider farm
income when qualifying borrowers. In addition, such loans are more difficult
to evaluate. If the estimate of value proves to be inaccurate, in the event
of default and foreclosure the Association may be confronted with a property
the value of which is insufficient to assure full repayment.
Consumer and Other Lending. Consumer lending has traditionally been a
small part of the Association's business. Consumer loans generally have
shorter terms to maturity and higher interest rates than mortgage loans. The
Association's consumer and other loans consist primarily of unsecured loans,
deposit account loans and automobile loans. The Association has in the past
originated student loans, though it no longer offers such loans. At March
31, 1996, the Association's consumer and other loans totalled approximately
$536,000, or 2.3% of the Association's total gross loans.
The Association makes unsecured loans to individuals for personal,
family or household purposes up to a maximum of $10,000. Generally,
unsecured loans are made only to current customers with an established
relationship with the Association. Such loans may be for a term of up to
three years. At March 31, 1996, unsecured loans totalled $229,000.
The Association makes deposit account loans with the account pledged as
collateral to secure the loan. Loans may be made up to 90% of the account
balance. Deposit account loans are payable in monthly payments of principal
and interest or in a single payment. At March 31, 1996, total loans on
deposit accounts amounted to $203,000.
Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of consumer loans which are unsecured or secured by
rapidly depreciating assets such as automobiles. In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an
adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation. The remaining
deficiency often does not warrant further substantial collection efforts
against the borrower beyond obtaining a deficiency judgment. In addition,
consumer loan collections are dependent on the borrower's continuing
financial stability, and thus are more likely to be adversely affected by job
loss, divorce, illness or personal bankruptcy. Furthermore, the application
of various federal and state laws, including federal and state bankruptcy and
insolvency laws, may limit the amount which can be recovered on such loans.
At March 31, 1996, the Association had no material delinquencies in its
consumer loan portfolio.
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Maturity of Loan Portfolio. The following table sets forth certain
information at March 31, 1996 regarding the dollar amount of principal
repayments becoming due during the periods indicated for loans. Demand loans,
loans having no stated schedule of repayments and no stated maturity, and
overdrafts are reported as becoming due within one year. The table does not
include any estimate of prepayments which significantly shorten the average
life of all loans and may cause the Association's actual repayment experience
to differ from that shown below.
<TABLE>
After After After
One Year 3 Years 5 Years
Within Through Through Through Beyond
One Year 3 Years 5 Years 10 Years 10 Years Total
(In Thousands)
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans (1) $ 879 $ 1,993 $ 2,357 $ 6,122 $11,168 $22,519
Consumer and other loans 389 147 -- -- -- 536
------- ------- -------- ------- -------- -------
Total gross loans $ 1,268 $ 2,140 $ 2,357 $ 6,122 $11,168 $23,055
</TABLE>
The following table sets forth the dollar amount of all loans due after March
31, 1997, which have fixed interest rates and have floating or adjustable
interest rates.
Fixed- Floating- or
Rates Adjustable-Rates Total
(In Thousands)
------- -------- -------
Mortgage loans (1) $ 2,134 $19,506 $21,640
Consumer and other loans 147 -- 147
------- -------- -------
Total gross loans $ 2,281 $19,506 $21,787
(1) Includes one- to four-family, multi-family, construction, commercial and
agricultural and other mortgage loans.
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Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of loans is substantially less
than their contractual terms because of prepayments. In addition,
due-on-sale clauses on loans generally give the Association the right to
declare loans
immediately due and payable in the event, among other things, that the
borrower sells the real property subject to the mortgage and the loan is not
repaid. The average life of mortgage loans tends to increase, however, when
current mortgage loan market rates are substantially higher than rates on
existing mortgage loans and, conversely, decrease when rates on existing
mortgage loans are substantially higher than current mortgage loan market
rates.
Loan Solicitation and Processing. Loan applicants come primarily through
referrals by realtors and previous and present customers of the Association.
Upon receipt of a loan application from a prospective borrower, a credit
report and other data are obtained to verify specific information relating to
the loan applicant's employment, income and credit standing. An appraisal of
the real estate offered as collateral generally is undertaken by an appraiser
employed by the Association and certified by the State of Missouri.
Mortgage loans must be approved by any three members of the Association's
Loan Committee, which consists of the President, the Senior Vice President
and five nonemployee Directors. Interest rates are subject to change if the
approved loan is not closed within the time of the commitment. Consumer and
other loans may be approved by the President or Senior Vice President up to
$10,000 for unsecured loans and $15,000 for secured loans. Larger loans are
approved by the Board of Directors. Management of the Association believes
its local decision-making capabilities and the accessibility of its senior
officers is an attractive quality to customers within its market area. The
Association's loan approval process allows consumer loans to be approved in
one to two days and mortgage loans to be approved in approximately 14 days
and closed in 30 days.
Loan Originations, Sales and Purchases. During the year ended March 31,
1996, the Association's total gross mortgage loan originations were $4.5
million. While the Association originates both adjustable-rate and
fixed-rate loans, its ability to generate each type of loan is dependent upon
relative customer demand for loans in its market.
Consistent with its asset/liability management strategy, the
Association's policy has been to retain in its portfolio nearly all of the
loans that it originates.
The Association occasionally purchases loan participation interests up to
90%, primarily during periods of reduced loan demand in its market area.
Any such purchases are made in conformance with the Association's
underwriting standards. During the year ended March 31, 1995, the
Association purchased $335,000 of loan participation interests from an
institution in Fulton, Missouri. The participation interests are in one- to
four- family mortgage loans secured by residential properties in Missouri.
During the year ended March 31, 1996, the Association purchased an additional
$1.4 million of participation interests from the same institution in Fulton,
Missouri. The participation interests are in 11 duplexes and one retail
strip center located in Columbia, Missouri. The Association acquired a 90%
interest in the one- to four-family loans and a 40% interest in the
commercial real estate loan, and the originating institution retained an
interest and the servicing rights to the loans. The Association may decide
to purchase additional one- to four-family mortgage loans in the future
depending upon the demand for mortgage credit in its market area.<PAGE>
The following table shows total loans originated, originated for sale,
purchased, sold and repaid during the periods indicated.
Year Ended March 31,
1996 1995 1994
(In Thousands)
------ ------ ------
Loans originated:
One- to four-family . . . . $ 3,479 $ 3,069 $ 3,178
Multi-family . . . . . . . -- -- 35
Construction. . . . . . . . 246 60 331
Commercial. . . . . . . . . 99 215 35
Agricultural and other. . . 228 369 231
Consumer and other. . . . . 476 367 341
------ ------ ------
Total loans originated . 4,528 4,080 4,151
Loans purchased:
One- to four-family . . . . 915 335 --
Commercial. . . . . . . . . 496 -- --
Total loans purchased. . . . 1,411 335 --
Loan principal repayments. . (5,223) (4,554) (4,219)
Increase (decrease) in
other items, net. . . . . . 110 (129) (17)
------ ------ ------
Net increase (decrease)
in loans receivable, net. . $ 826 $ (268) $ (85)
Loan Commitments. The Association issues commitments for
adjustable-rate one- to four-family residential mortgage loans conditioned
upon the occurrence of certain events. Such commitments are made in writing
on specified terms and conditions and are honored for up to 45 days from the
date of loan approval. The Association had outstanding net loan commitments
of approximately $339,000 at March 31, 1996. See Note 12 of Notes to
Consolidated Financial Statements.
Loan Origination and Other Fees. The Association, in some instances,
receives loan origination fees. Loan fees are a percentage of the principal
amount of the mortgage loan which are charged to the borrower for funding the
loan. The amount of fees charged by the Association is generally up to 1%.
Current accounting standards require fees received (net of certain loan
origination costs) for originating loans to be deferred and amortized into
interest income over the contractual life of the loan. Net deferred fees or
costs associated with loans that are prepaid are recognized as income at the
time of prepayment. The Association had $51,000 of net deferred mortgage
loan fees at March 31, 1996.
Nonperforming Assets and Delinquencies. When a mortgage loan borrower
fails to make a required payment when due, the Association institutes
collection procedures. The first notice is mailed to the borrower
at the end of the month in which the payment is due and, if necessary, a
second written notice follows within 30 days thereafter. Attempts to contact
the borrower by telephone generally begin soon after the first notice
is mailed to the borrower. If a satisfactory response is not obtained,
continuous follow-up contacts are attempted until the loan has been brought
current. Before the 90th day of delinquency, attempts to interview
the borrower, preferably in person, are made to establish (i) the cause of
the delinquency, (ii) whether the cause is temporary, (iii) the attitude of
the borrower toward the debt, and (iv) a mutually satisfactory arrangement
for curing the default.
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In most cases, delinquencies are cured promptly; however, if by the 91st
day of delinquency, or sooner if the borrower is chronically delinquent and
all reasonable means of obtaining payment on time have been exhausted,
foreclosure, according to the terms of the security instrument and applicable
law, is initiated. Interest income on loans is reduced by the full amount of
accrued and uncollected interest.
When a consumer loan borrower fails to make a required payment on a
consumer loan by the payment due date, the Association institutes collection
procedures. The first notice is mailed to the borrower ten days following
the payment due date. If payment is not promptly received, a second notice
is mailed to the borrower 20 days following the payment due date and the
customer is contacted by telephone to ascertain the cause of the delinquency.
If the delinquency remains uncured, the Association mails an additional
notice to the borrower on the 30th day of delinquency and every 30 days
thereafter and continues to contact the borrower by telephone.
In most cases, delinquencies are cured promptly; however, if, by the
91st day of delinquency the delinquency has not been cured, the Association
begins legal action to either obtain a judgment in small claims court or to
repossess the collateral.
The Association's Board of Directors is informed on a monthly basis as
to the status of all mortgage and consumer loans that are delinquent more
than 30 days, the status on all loans currently in foreclosure, and the
status of all foreclosed and repossessed property owned by the Association.
<PAGE>
<PAGE>
The following table sets forth information with respect to the
Association's nonperforming assets and restructured loans within the meaning
of Statement of Financial Accounting Standards ("SFAS") No. 15 at the dates
indicated.
At March 31,
1996 1995 1994
(Dollars in Thousands)
------ ------ ------
Loans accounted for on
a nonaccrual basis:
One- to four-family. . . . . $ -- $ 16 $ 127
Consumer . . . . . . . . . . -- -- --
------ ------ ------
Total nonaccrual loans. . -- 16 127
Accruing loans which are
contractually past due
90 days or more . . . . . . 4 -- --
------ ------- -----
Total nonaccrual and 90
days or more past
due loans. . . . . . . . 4 16 127
Foreclosed real estate held
for sale. . . . . . . . . . -- 358 253
------- ------- ----
Total nonperforming assets $ 4 $ 374 $ 380
Restructured loans . . . . . -- -- --
Nonaccrual and 90 days or more
past due loans as a percentage
of loans receivable, net. . 0.02% 0.07% 0.57%
Nonaccrual and 90 days or more
past due loans as a percentage
of total assets . . . . . . 0.01% 0.05% 0.41%
Nonperforming assets as a
percentage of total assets. 0.01% 1.25% 1.23%
Interest income which would have been recorded for the year ended March
31, 1996 had nonaccruing loans been current in accordance with their original
terms amounted to approximately $700. The amount of interest included in the
results of operations on such loans for the year ended March 31, 1996
amounted to approximately $500.
Foreclosed Real Estate. Foreclosed real estate acquired by the
Association as a result of foreclosure or by deed-in-lieu of foreclosure is
classified as foreclosed real estate until it is sold. When property is
acquired it is recorded at the lower of its cost, which is the unpaid
principal balance of the related loan plus foreclosure costs, or fair market
value. Subsequent to foreclosure, the property is carried at the lower of
the foreclosed amount or fair value, less estimated selling costs. At March
31, 1996, the Association had no foreclosed real estate.
<PAGE>
<PAGE>
Asset Classification. The OTS has adopted various regulations regarding
problem assets of savings institutions. The regulations require that each
insured institution review and classify its assets on a regular basis. In
addition, in connection with examinations of insured institutions, OTS
examiners have authority to identify problem assets and, if appropriate,
require them to be classified. There are three classifications for problem
assets: substandard, doubtful and loss. Substandard assets have one or more
defined weaknesses and are characterized by the distinct possibility that the
insured institution will sustain some loss if the deficiencies are not
corrected. Doubtful assets have the weaknesses of substandard assets with
the additional characteristic that the weaknesses make collection or
liquidation in full on the basis of currently existing facts, conditions and
values questionable, and there is a high possibility of loss. An asset
classified as loss is considered uncollectible and of such little value that
continuance as an asset of the institution is not warranted. If an asset or
portion thereof is classified as loss, the insured institution establishes
specific allowances for loan losses for the full amount of the portion of the
asset classified as loss. All or a portion of general loan loss allowances
established to cover possible losses related to assets classified substandard
or doubtful may be included in determining an institution's regulatory
capital, while specific valuation allowances for loan losses generally do not
qualify as regulatory capital. Assets that do not currently expose the
insured institution to sufficient risk to warrant classification in one of
the aforementioned categories but possess weaknesses are placed on a "watch
list" and monitored by the Association.
At March 31, 1996 and 1995, the aggregate amounts of the Association's
classified assets, and of the Association's general and specific loss
allowances at the dates indicated, were as follows:
At March 31,
1996 1995
(In Thousands)
------ ------
Loss . . . . . . . . . . . . $ -- $ --
Doubtful . . . . . . . . . . -- --
Substandard assets . . . . . 101 485
------ -------
Total classified assets. . . $ 101 $ 485
General loss allowances . . . $ 72 $ 60
------ -------
Specific loss allowances. . . -- 13
Total allowances . . . . . $ 72 $ 73
Allowance for Loan Losses. The Association has established a
systematic methodology for the determination of provisions for loan losses.
The methodology is set forth in a formal policy and takes into consideration
the need for an overall general valuation allowance as well as specific
allowances that are tied to individual loans.
In originating loans, the Association recognizes that losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term
of the loan, general economic conditions and, in the case of a secured loan,
the quality of the security for the loan. The Association increases its
allowance for loan losses by charging provisions for loan losses against the
Association's income.
The general valuation allowance is maintained to cover losses
inherent in the portfolio of performing loans. Management reviews the
adequacy of the allowance at least quarterly based on management's assessment
of current economic conditions, past loss and collection experience, and risk
characteristics of the loan portfolio. Specific valuation allowances are
established to absorb losses on loans for which full collectibility may not
be reasonably assured. The amount of the allowance is based on the estimated
value of the collateral securing the loan and other analyses pertinent to
each situation. Generally, a provision for losses is charged against income
on a quarterly basis to maintain the allowances.
<PAGE>
<PAGE>
At March 31, 1996, the Association had an allowance for loan losses
of $72,000. Management believes that the amount maintained in the allowances
will be adequate to absorb losses inherent in the portfolio. Although
management believes that it uses the best information available to make such
determinations, future adjustments to the allowance for loan losses may be
necessary and results of operations could be significantly and adversely
affected if circumstances differ substantially from the assumptions used in
making the determinations.
While the Association believes it has established its existing allowance
for loan losses in accordance with generally accepted accounting principles,
there can be no assurance that regulators, in reviewing the Association's
loan portfolio, will not request the Association to increase significantly
its allowance for loan losses. In addition, because future events affecting
borrowers and collateral cannot be predicted with certainty, there can be no
assurance that the existing allowance for loan losses is adequate or that
substantial increases will not be necessary should the quality of any loans
deteriorate as a result of the factors discussed above. Any material
increase in the allowance for loan losses may adversely affect the
Association's financial condition and results of operations.
<PAGE>
<PAGE>
The following table sets forth an analysis of the Association's allowance
for loan losses for the periods indicated. Where specific loan loss reserves
have been established, any differences between the loss allowances and the
amount of loss realized has been charged or credited to current income.
Year Ended March 31,
1996 1995 1994
(Dollars in Thousands)
------ ------ ------
Balance at beginning of year . . . $ 60 $ 49 $ 37
Charge-offs:
One- to four-family . . . . . . . -- (4) --
Multi-family. . . . . . . . . . . -- -- --
Construction. . . . . . . . . . . -- -- --
Commercial. . . . . . . . . . . . -- -- --
Agricultural and other. . . . . . -- -- --
Consumer and other loans. . . . . -- (7) (6)
-- ----- -----
Total charge-offs. . . . . . . -- (11) (6)
-- ----- -----
Recoveries:
One- to four-family . . . . . . . -- -- --
Multi-family. . . . . . . . . . . -- -- --
Construction. . . . . . . . . . . -- -- --
Commercial. . . . . . . . . . . . -- -- --
Agricultural and other. . . . . . -- -- --
Consumer and other. . . . . . . . -- 1 1
-- -- --
Total recoveries . . . . . . . -- 1 1
-- -- --
Net loan charge-offs . . . . . . . -- (10) (5)
-- ---- ---
Provision for loan losses. . . . . 12 21 17
-- --- ---
Balance at end of year . . . . . . $ 72 $ 60 $ 49
Allowance for loan losses as a
percentage of gross loans
receivable. . . . . . . . . . . . 0.31% 0.27% 0.22%
Net loan charge-offs as a
percentage of average loans
outstanding during the year . . . -- 0.04% 0.02%
Allowance for loan losses as a
percentage of nonperforming
loans at end of year. . . . . . . 1997.95% 367.66% 38.48%
<PAGE>
<PAGE>
The following table sets forth the breakdown of the allowance for loan
losses by loan category for the periods indicated. Management believes that
the allowance can be allocated by category only on an approximate basis. The
allocation of the allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses
in any other category.
At March 31,
1996 1995 1994
% of % of % of
Loans Loans Loans
in Each in Each in Each
Category Category Category
to Total to Total to Total
Amount Loans Amount Loans Amount Loans
(Dollars in Thousands)
------ ------ ------ ------ ------ ------
Mortgage loans:
One- to four-family
and multi-family $ 51 89.71% $ 44 91.36% $ 36 92.04%
Construction -- 0.43 -- 0.27 -- 0.53
Commercial 2 4.11 1 2.72 1 2.07
Agricultural and other 2 3.42 2 3.57 1 2.96
Consumer and other loans 17 2.33 13 2.08 11 2.40
Total allowance for ------ ------ ------ ------ ------ ------
loan losses $ 72 100.00% $ 60 100.00% $ 49 100.00%
INVESTMENT ACTIVITIES
The Association is permitted under federal and state law to invest in
various types of liquid assets, including U.S. Treasury obligations,
securities of various federal agencies and of state and municipal
governments, deposits at the FHLB-Des Moines, certificates of deposit of
federally insured institutions, certain bankers' acceptances and federal
funds. Subject to various restrictions, the Association may also invest a
portion of its assets in commercial paper and corporate debt securities.
Savings institutions like the Association are also required to maintain an
investment in FHLB stock.
The Association is required under federal regulations to maintain a
minimum amount of liquid assets. See "REGULATION." At March 31, 1996, the
Association's regulatory liquidity was 31% which is significantly in excess
of the 5% required by OTS regulations. It is the intention of management to
hold all securities in the Association's investment portfolio in order to
enable the Association to provide liquidity for loan funding upon maturity of
such investment securities and to match more closely the interest-rate
sensitivities of its assets and liabilities.
A committee consisting of the President, the Senior Vice President and
two Directors determines appropriate investments in accordance with the Board
of Directors' approved investment policies and procedures. The Association's
investment policies generally limit investments to U.S. Government and agency
securities, municipal bonds, certificates of deposits, marketable corporate
debt obligations and mortgage-backed securities. Corporate debt obligations
and municipal bonds must have a credit rating of AA or higher and have
maturities of no more than five years. Mortgage-backed securities must also
have contractual maturities of five years or less. Investments are made
based on certain considerations, which include the interest rate, yield,
settlement date and maturity of the investment, the Association's liquidity
position, and anticipated cash needs and sources (which in turn include
outstanding commitments, upcoming maturities, estimated deposits and
anticipated loan amortization and repayments). The
<PAGE>
<PAGE>
effect that the proposed investment would have on the Association's credit
and interest rate risk, and risk-based capital is also given consideration
during the evaluation.
At March 31, 1996, the Company's and Association's investment portfolio
totalled $7.8 million at amortized cost and consisted of certificates of
deposit, federal agency obligations, municipal bonds, corporate debt
securities, FHLB stock and mortgage-backed and related securities. The
Association's municipal bond portfolio, which totalled $744,000 at amortized
cost at March 31, 1996, was comprised of general obligation bonds (i.e.,
backed by the general credit of the issuer) and revenue bonds (i.e., backed
only by revenues from the specific project being financed) issued by various
municipalities and water and sanitation districts in several states. The
Company's and Association's corporate bond portfolio, which totaled $1.0
million at March 31, 1996, was composed of short-term, investment grade
issues.
At March 31, 1996, the Association owned one mortgage-backed security and
two collateralized mortgage obligations ("CMOs"). The mortgage-backed
security with a carrying value of $117,000 represents a participation
interest in a pool of mortgages. The principal and interest payments are
passed from the mortgage originators, through an intermediary (in this case,
the Government National Mortgage Association) that pools and resells the
participation interests in the form of securities to investors such as the
Association.
CMOs are securities created by segregating or partitioning cash flows
from mortgage pass-through securities or from pools of mortgage loans. CMOs
provide a broad range of mortgage investment vehicles by tailoring cash flows
from mortgages to meet the varied risk and return preferences of investors.
These securities enable the issuer to "carve up" the cash flow from the
underlying securities and thereby create multiple classes of securities with
different maturity and risk characteristics. CMOs are typically issued by a
special-purpose entity (the "issuer") that may be organized in a variety of
legal forms, such as a trust, a corporation, or a partnership. Accordingly,
a CMO instrument may be purchased in equity form (e.g., trust interest, stock
and partnership interests) or nonequity form (e.g., participating debt
securities). All of the Association's CMOs are nonequity interests. CMOs
are collateralized by mortgage loans or mortgage-backed securities that are
transferred to the CMO trust or pool by a sponsor. The issue is structured
so that collections from the underlying collateral provide a cash flow to
make principal and interest payments on the obligations, or "tranches," of
the issuer.
CMOs totalled $756,000 at March 31, 1996, all of which were backed by
federal agency collateral and which had fixed interest rates. The
Association does not anticipate purchasing any CMOs in the future.
Effective February 1992, the OTS adopted Thrift Bulletin 52 ("TB 52").
Among other things, TB 52 sets forth certain guidelines with respect to
depository institutions' investment in ceratin "high risk mortgage
securities." "High risk mortgage securities" are defined as any mortgage
derivative product that at the time of purchase, or at any subsequent date,
meets any of three tests that are set forth in TB 52. The Association
obtains an analysis to determine whether the CMOs meets any one of the three
TB 52 tests, and falls into the category of "high risk mortgage security."
The Association documents no less than annually whether a change in the
characteristics of any CMO causes such security to become a "high risk
mortgage security." At March 31, 1996, the Association did not hold any
"high risk" CMOs in its portfolio.
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," requires the investments be categorized as "held to maturity,"
"trading securities" or "available for sale," based on management's intent as
to the ultimate disposition of each security. SFAS No. 115 allows debt
securities to be classified as "held to maturity" and reported in financial
statements at amortized cost only if the reporting entity has the positive
intent and ability to hold those securities to maturity. Securities that
might be sold in response to changes in market interest rates, changes in the
security's prepayment risk, increases in loan demand, or other similar
factors cannot be classified as "held to maturity." Debt and equity
securities held for current resale are classified as "trading securities."
Such securities are reported at fair value, and unrealized gains and losses
on such securities would be included in earnings. Debt and equity securities
not classified as either "held to maturity" or "trading securities" are
classified as "available for sale." Such securities are reported at fair
value, and unrealized gains and losses on such securities are excluded from
earnings and reported as a net amount in a separate component of equity. The
Company's and Association's investment policy dictates that investments be
made with the intent of holding them to maturity.
<PAGE>
<PAGE>
The following table sets forth the composition of the Company's and
Association's investment portfolio at the dates indicated.
<TABLE>
At March 31,
1996 1995 1994
------ ------ ------
Carrying Percent of Carrying Percent of Carrying Percent of
Value Portfolio Value Portfolio Value Portfolio
(Dollars in Thousands)
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Securities held to maturity:
Federal agency obligations $ 3,498 45.06% $ 497 12.69% $ 2,497 45.63%
Municipal bonds 744 9.59 990 25.29 992 18.13
Corporate debt securities 1,057 13.62 1,008 25.75 1,017 18.59
--------- ------ -------- ------ -------- ------
Total securities held
to maturity(1) 5,299 68.27 2,495 63.73 4,506 82.35
FHLB stock 289 3.72 283 7.23 283 5.17
Mortgage-backed and related
securities held to maturity 874 11.26 137 3.50 183 3.34
Certificates of deposit 1,300 16.75 1,000 25.54 500 9.14
-------- -------- -------- -------- -------- --------
Total investment portfolio $ 7,762 100.00% $ 3,915 100.00% $ 5,472 100.00%
</TABLE>
<PAGE>
<PAGE>
The following table sets forth the maturities and weighted average yields
of the Company's and Association's debt securities held to maturity at March
31, 1996.
Less Than One to Due in
One Year Five Years 2017 Total
Amount Yield Amount Yield Amount Yield Amount Yield
(Dollars in Thousands)
------ ------ ------ ------ ------ ------ ------ ----
Federal agency
obligations $ 499 5.24% $2,999 5.74% $ -- --% $3,498
5.67%
Municipal
obligations(1) -- -- 494 3.78 251 3.86 745 3.81
Corporate debt 250 6.51 806 5.51 -- -- 1,056 5.75
------ ------ ------ ------ ------ ------ ------ ----
Total $ 749 5.67 $4,299 5.47 $ 251 3.86 $5,299 5.43
(1) The yields on these securities have not been computed on a
tax-equivalent basis.
DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS
General. Deposits and loan repayments are the major sources of the
Association's funds for lending and other investment purposes. Scheduled
loan repayments are a relatively stable source of funds, while deposit
inflows and outflows and loan prepayments are influenced significantly by
general interest rates and money market conditions. Borrowings through the
FHLB-Des Moines may be used on a short-term basis to compensate for
reductions in the availability of funds from other sources. Presently, the
Association has no other borrowing arrangements.
Deposit Accounts. Substantially all of the Association's depositors are
residents of the State of Missouri. Deposits are attracted from within
the Association's market area through the offering of a broad selection of
deposit instruments, including negotiable order of withdrawal ("NOW")
accounts, money market deposit accounts, regular savings accounts,
certificates of deposit and retirement savings plans. Deposit account terms
vary, according to the minimum balance required, the time periods the funds
must remain on deposit and the interest rate, among other factors. In
determining the terms of its deposit accounts, the Association considers
current market interest rates, profitability to the Association, matching
deposit and loan products and its customer preferences and concerns. The
Association reviews its deposit mix and pricing weekly.
As illustrated in the following table, the Association offers
certificates of deposit for terms not exceeding 36 months. As a result, the
Association believes that it is better able to match the repricing of its
liabilities to the repricing of its loan portfolio.
<PAGE>
<PAGE>
The following table sets forth information concerning the Association's
time deposits and other interest-bearing deposits at March 31, 1996.
Weighted Percentage
Average Checking and Minimum of Total
Interest Term Savings Deposits Amount Balance Deposits
Rate (In Thousands)
- - --------- ---- ---------------- ------- -------- --------
2.75% None Savings accounts $ 100 $ 6,917 26.97%
2.25 None NOW accounts 500 1,412 5.51
3.50 None Money market deposit 2,500 1,167 4.55
accounts
Certificates of Deposit
3.50 91 day Fixed-term, fixed-rate 2,500 60 0.23
4.82 6 months Fixed-term, fixed-rate 2,500 2,760(1) 10.77
5.53 12 months Fixed-term, fixed-rate 500 5,506 21.47
5.59 18 months Individual retirement account ("IRA")
fixed-term, fixed-rate 100 2,983 11.63
4.90 24 months Fixed-term, fixed-rate 500 776 3.03
5.09 30 months Fixed-term, fixed-rate 500 2,254 8.79
5.33 36 months Fixed-term, fixed-rate 500 1,451 5.66
7.89 Varies Fixed-term, fixed-rate Varies 358 1.39
------- ------
Total $25,644 100.00%
(1) Includes jumbo certificates of deposit.
The following table indicates the amount of the Association's jumbo
certificates of deposit by time remaining until maturity as of March 31,
1996. Jumbo certificates of deposit require minimum deposits of $100,000,
and rates paid on such accounts are negotiable.
Maturity Period Amount
(In Thousands)
Three months or less $ --
Over three through six months 217
Over six through 12 months --
Over 12 months --
-----
Total jumbo certificates of deposit $ 217
<PAGE>
<PAGE>
DEPOSIT FLOW
The following table sets forth the balances (inclusive of interest
credited) and change in dollar amount of deposits in the various types of
accounts offered by the Association between the dates indicated.
<TABLE>
At March 31,
1996 1995 1994
Percent Percent Percent
of Increase of Increase of
Amount Total (Decrease) Amount Total (Decrease) Amount Total
(Dollars in Thousands)
------ ----- ------- ------ ----- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Savings accounts $6,917 26.97% $ (30) $6,947 27.27% $(2,124) $ 9,071 34.12%
NOW accounts 1,412 5.51 152 1,260 4.95 (298) 1,558 5.86
Money market deposit accounts 1,167 4.55 308 859 3.37 (677) 1,536 5.78
91 day certificates 60 0.23 5 55 0.21 (107) 162 0.61
6 month certificates 2,543 9.92 (212) 2,755 10.81 (295) 3,050 11.48
12 month certificates 5,506 21.47 406 5,100 20.02 1,755 3,345 12.58
18 month IRA certificates 2,983 11.63 30 2,953 11.59 59 2,894 10.89
24 month certificates 776 3.03 (97) 873 3.43 376 497 1.87
30 month certificates 2,254 8.79 (438) 2,692 10.57 (562) 3,254 12.24
36 month certificates 1,451 5.66 156 1,295 5.08 465 830 3.12
Other certificates 358 1.39 (23) 381 1.50 (4) 385 1.45
Jumbo certificates 217 0.85 (88) 305 1.20 305 -- --
------ ----- ------- ------ ----- ------- ------ -----
Total deposits $25,644 100.00% $ 169 $25,475 100.00% $(1,107) $26,582 100.00%
</TABLE>
<PAGE>
<PAGE>
TIME DEPOSITS BY RATES
The following table sets forth the time deposits in the Association
categorized by rates at the dates indicated.
At March 31,
1996 1995 1994
(In Thousands)
------ ------ ------
2.99% and below $ -- $ -- $ 162
3.00 - 3.99% 60 683 6,727
4.00 - 4.99% 3,998 8,755 6,031
5.00 - 5.99% 8,561 3,299 549
6.00 - 6.99% 3,190 3,318 536
7.00 - 7.99% 195 188 236
8.00% and over 144 166 176
------ ------ ------
Total $16,148 $16,409 $14,417
The following table sets forth the amount and maturities of time
deposits at March 31, 1996.
Amount Due
Less Than 1-2 2-3 3 Years
One Year Years Years and After Total
(In Thousands)
------- ------- ------- -------- -------
3.00 - 3.99% $ 60 $ -- $ -- $ -- $ 60
4.00 - 4.99% 3,712 286 -- -- 3,998
5.00 - 5.99% 6,178 1,783 600 -- 8,561
6.00 - 6.99% 2,464 664 62 -- 3,190
7.00 - 7.99% -- 42 109 44 195
8.00% and over 27 -- 14 103 144
------- ------- ------- -------- -------
Total $12,441 $ 2,775 $ 785 $ 147 $16,148
The following table sets forth the deposit activities of the Association
for the years indicated.
Year Ended March 31,
1996 1995 1994
(In Thousands)
------ ------ ------
Net deposits (withdrawals)
before interest credited $ (736) $ (1,820) $ (1,090)
Interest credited 905 713 754
Net increase (decrease) in ------ ------- --------
deposits $ 169 $ (1,107) $ (336)
<PAGE>
<PAGE>
BORROWINGS
Savings deposits are the primary source of funds for the
Association's lending and investment activities and for its general business
purposes. The Association has the ability to use advances from the FHLB-Des
Moines to supplement its supply of lendable funds and to meet deposit
withdrawal requirements. The FHLB-Des Moines functions as a central reserve
bank providing credit for savings and loan associations and certain other
member financial institutions. As a member of the FHLB-Des Moines, the
Association is required to own capital stock in the FHLB-Des Moines and is
authorized to apply for advances on the security of such stock and certain of
its mortgage loans and other assets (principally securities which are
obligations of, or guaranteed by, the U.S. Government) provided certain
creditworthiness standards have been met. Advances are made pursuant to
several different credit programs. Each credit program has its own interest
rate and range of maturities. Depending on the program, limitations on the
amount of advances are based on the financial condition of the member
institution and the adequacy of collateral pledged to secure the credit. At
and during the year ended March 31, 1996, the Association had no borrowings
from the FHLB-Des Moines, although it may decide to make use of such
instruments in the future.
REGULATION OF THE ASSOCIATION
GENERAL
The Association is subject to extensive regulation, examination and
supervision by the OTS as its chartering agency, and the FDIC, as the insurer
of its deposits. The activities of federal savings institutions are governed
by the Home Owners' Loan Act, as amended (the "HOLA") and, in certain
respects, the Federal Deposit Insurance Act ("FDIA") and the regulations
issued by the OTS and the FDIC to implement these statutes. These laws and
regulations delineate the nature and extent of the activities in which
federal savings associations may engage. Lending activities and other
investments must comply with various statutory and regulatory capital
requirements. In addition, the Association's relationship with its
depositors and borrowers is also regulated to a great extent, especially in
such matters as the ownership of deposit accounts and the form and content of
the Association's mortgage documents. The Association must file reports with
the OTS and the FDIC concerning its activities and financial condition in
addition to obtaining regulatory approvals prior to entering into certain
transactions such as mergers with, or acquisitions of, other financial
institutions. There are periodic examinations by the OTS and the FDIC to
review the Association's compliance with various regulatory requirements.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities
and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in such policies, whether by the OTS,
the FDIC or Congress, could have a material adverse impact on the Holding
Company, the Association and their operations. The Holding Company, as a
savings and loan holding company, will also be required to file certain
reports with, and otherwise comply with the rules and regulations of, the
OTS.
FEDERAL REGULATION OF SAVINGS ASSOCIATIONS
Office of Thrift Supervision. The OTS is an office in the Department of
the Treasury subject to the general oversight of the Secretary of the
Treasury. The OTS generally possesses the supervisory and regulatory duties
and responsibilities formerly vested in the Federal Home Loan Bank Board.
Among other functions, the OTS issues and enforces regulations affecting
federally insured savings associations and regularly examines these
institutions.
Federal Home Loan Bank System. The FHLB System, consisting of 12 FHLBs,
is under the jurisdiction of the Federal Housing Finance Board ("FHFB"). The
designated duties of the FHFB are to: supervise the FHLBs; ensure that the
FHLBs carry out their housing finance mission; ensure that the FHLBs remain
adequately capitalized and able to raise funds in the capital markets; and
ensure that the FHLBs operate in a safe and sound manner.
<PAGE>
<PAGE>
The Association, as a member of the FHLB-Des Moines, is required to
acquire and hold shares of capital stock in the FHLB-Des Moines in an amount
equal to the greater of (i) 1.0% of the aggregate outstanding principal
amount of residential mortgage loans, home purchase contracts and similar
obligations at the beginning of each year, or (ii) 1/20 of its advances
(borrowings) from the FHLB-Des Moines. The Association is in compliance with
this requirement with an investment in FHLB-Des Moines stock of $289,000 at
March 31, 1996.
Among other benefits, the FHLB provides a central credit facility
primarily for member institutions. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the FHLB System.
It makes advances to members in accordance with policies and procedures
established by the FHFB and the Board of Directors of the FHLB-Des Moines.
Federal Deposit Insurance Corporation. The FDIC is an independent
federal agency established originally to insure the deposits, up to
prescribed statutory limits, of federally insured banks and to preserve the
safety and soundness of the banking industry. In 1989 the FDIC also became
the insurer, up to the prescribed limits, of the deposit accounts held at
federally insured savings associations and established two separate insurance
funds: the Bank Insurance Fund ("BIF") and the SAIF. As insurer of
deposits, the FDIC has examination, supervisory and enforcement authority
over all savings associations.
The Association's accounts are insured by the SAIF. The FDIC insures
deposits at the Association to the maximum extent permitted by law. The
Association currently pays deposit insurance premiums to the FDIC based on a
risk-based assessment system established by the FDIC for all SAIF-member
institutions. Under applicable regulations, institutions are assigned to one
of three capital groups that are based solely on the level of an
institution's capital -- "well capitalized," "adequately capitalized," and
"undercapitalized" -- which are defined in the same manner as the regulations
establishing the prompt corrective action system under Section 38 of the
FDIA, as discussed below. These three groups are then divided into three
subgroups which reflect varying levels of supervisory concern, from those
which are considered to be healthy to those which are considered to be of
substantial supervisory concern. The matrix so created results in nine
assessment risk classifications, with rates currently ranging from .23% for
well capitalized, financially sound institutions with only a few minor
weaknesses to .31% for undercapitalized institutions that pose a substantial
risk of loss to the SAIF unless effective corrective action is taken. Until
the second half of 1995, the same matrix applied to BIF-member institutions.
The FDIC is authorized to raise assessment rates in certain circumstances.
The Association's assessments expensed for the year ended March 31, 1996,
equaled $59,000.
Effective January 1, 1996, the FDIC substantially reduced deposit
insurance premiums for well-capitalized, well-managed financial institutions
that are members of the BIF. Under the new assessment schedule, rates were
reduced to a range of 0 to 27 basis points, with approximately 92% of BIF
members paying the statutory minimum annual assessment rate of $2,000. With
respect to SAIF member institutions, the FDIC has retained the existing rate
schedule of 23 to 31 basis points. The Association is, and after the
Conversion will remain, a member of the SAIF rather than the BIF.
The FDIC may terminate the deposit insurance of any insured depository
institution if it determines after a hearing that the institution has engaged
or is engaging in unsafe or unsound practices, is in an unsafe or unsound
condition to continue operations, or has violated any applicable law,
regulation, order or any condition imposed by an agreement with the FDIC. It
also may suspend deposit insurance temporarily during the hearing process for
the permanent termination of insurance, if the institution has no tangible
capital. If insurance of accounts is terminated, the accounts at the
institution at the time of termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined
by the FDIC. Management is aware of no existing circumstances that could
result in termination of the deposit insurance of the Association.
Liquidity Requirements. Under OTS regulations, each savings institution
is required to maintain an average daily balance of liquid assets (cash,
certain time deposits and savings accounts, bankers' acceptances, and
specified U.S. Government, state or federal agency obligations and certain
other investments) equal to a monthly <PAGE>
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average of not less than a specified percentage (currently 5.0%) of its net
withdrawable accounts plus short-term borrowings. OTS regulations also
require each savings institution to maintain an average daily balance of
short-term liquid assets at a specified percentage (currently 1.0%) of the
total of its net withdrawable savings accounts and borrowings payable in one
year or less. Monetary penalties may be imposed for failure to meet
liquidity requirements.
Prompt Corrective Action. Under Section 38 of the FDIA, as added by the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
each federal banking agency is required to implement a system of prompt
corrective action for institutions that it regulates. The federal banking
agencies have promulgated substantially similar regulations to implement this
system of prompt corrective action. Under the regulations, an institution
shall be deemed to be (i) "well capitalized" if it has a total risk-based
capital ratio of 10.0% or more, has a Tier I risk-based capital ratio of 6.0%
or more, has a leverage ratio of 5.0% or more and is not subject to specified
requirements to meet and maintain a specific capital level for any capital
measure; (ii) "adequately capitalized" if it has a total risk-based capital
ratio of 8.0% or more, a Tier I risk-based capital ratio of 4.0% or more and
a leverage ratio of 4.0% or more (3.0% under certain circumstances) and does
not meet the definition of "well capitalized;" (iii) "undercapitalized" if it
has a total risk-based capital ratio that is less than 8.0%, a Tier I
risk-based capital ratio that is less than 4.0% or a leverage ratio that is
less than 4.0% (3.0% under certain circumstances); (iv) "significantly
undercapitalized" if it has a total risk-based capital ratio that is less
than 6.0%, a Tier I risk-based capital ratio that is less than 3.0% or a
leverage ratio that is less than 3.0%; and (v) "critically undercapitalized"
if it has a ratio of tangible equity to total assets that is equal to or less
than 2.0%.
Section 38 of the FDIA and the implementing regulations also provide that
a federal banking agency may, after notice and an opportunity for a hearing,
reclassify a well capitalized institution as adequately capitalized and may
require an adequately capitalized institution or an undercapitalized
institution to comply with supervisory actions as if it were in the next
lower category if the institution is in an unsafe or unsound condition or has
received in its most recent examination, and has not corrected, a less than
satisfactory rating for asset quality, management, earnings or liquidity.
(The OTS may not, however, reclassify a significantly undercapitalized
institution as critically undercapitalized.)
An institution generally must file a written capital restoration plan
that meets specified requirements, as well as a performance guaranty by each
company that controls the institution, with the appropriate federal banking
agency within 45 days of the date that the institution receives notice or is
deemed to have notice that it is undercapitalized, significantly
undercapitalized or critically undercapitalized. Immediately upon becoming
undercapitalized, an institution shall become subject to the provisions of
Section 38 of the FDIA, which sets forth various mandatory and discretionary
restrictions on its operations.
At March 31, 1996, the Association was categorized as "well capitalized"
under the prompt corrective action regulations of the OTS.
Standards for Safety and Soundness. The FDIA requires the federal
banking regulatory agencies to prescribe, by regulation, standards for all
insured depository institutions relating to: (i) internal controls,
information systems and internal audit systems; (ii) loan documentation;
(iii) credit underwriting; (iv) interest rate risk exposure; (v) asset
growth; and (vi) compensation, fees and benefits. The federal banking
agencies recently adopted final regulations and Interagency Guidelines
Prescribing Standards for Safety and Soundness ("Guidelines") to implement
safety and soundness standards required by the FDIA. The Guidelines set
forth the safety and soundness standards that the federal banking agencies
use to identify and address problems at insured depository institutions
before capital becomes impaired. The agencies also proposed asset quality
and earnings standards which, if adopted in final, would be added to the
Guidelines. Under the final regulations, if the OTS determines that the
Association fails to meet any standard prescribed by the Guidelines, the
agency may require the Association to submit to the agency an acceptable plan
to achieve compliance with the standard, as required by the FDIA. The final
regulations establish deadlines for the submission and review of such safety
and soundness compliance plans.
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Qualified Thrift Lender Test. All savings associations are required to
meet a qualified thrift lender ("QTL") test set forth in Section 10(m) of the
HOLA and regulations of the OTS thereunder to avoid certain restrictions on
their operations. A savings institution that fails to become or remain a QTL
shall either become a national bank or be subject to the following
restrictions on its operations: (i) the association may not make any new
investment or engage in activities that would not be permissible for national
banks; (ii) the association may not establish any new branch office where a
national bank located in the savings institution's home state would not be
able to establish a branch office; (iii) the association shall be ineligible
to obtain new advances from any FHLB; and (iv) the payment of dividends by
the association shall be subject to the rules regarding the statutory and
regulatory dividend restrictions applicable to national banks. Also,
beginning three years after the date on which the savings institution ceases
to be a QTL, the savings institution would be prohibited from retaining any
investment or engaging in any activity not permissible for a national bank
and would be required to repay any outstanding advances to any FHLB. In
addition, within one year of the date on which a savings association
controlled by a company ceases to be a QTL, the company must register as a
bank holding company and become subject to the rules applicable to such
companies. A savings institution may requalify as a QTL if it thereafter
complies with the QTL test.
Currently, the QTL test requires that 65% of an institution's "portfolio
assets" (as defined) consist of certain housing and consumer-related assets
on a monthly average basis in nine out of every 12 months. Assets that
qualify without limit for inclusion as part of the 65% requirement are loans
made to purchase, refinance, construct, improve or repair domestic
residential housing and manufactured housing; home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); FHLB stock; and direct or
indirect obligations of the FDIC. In addition, the following assets, among
others, may be included in meeting the test subject to an overall limit of
20% of the savings institution's portfolio assets: 50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer and educational loans (limited to 10% of total portfolio assets);
and stock issued by the FHLMC or Fannie Mae. Portfolio assets consist of
total assets minus the sum of (i) goodwill and other intangible assets, (ii)
property used by the savings institution to conduct its business, and (iii)
liquid assets up to 20% of the institution's total assets. At March 31,
1996, the qualified thrift investments of the Association were approximately
83% of its portfolio assets.
Capital Requirements. Under OTS regulations a savings association must
satisfy three minimum capital requirements: core capital, tangible capital
and risk-based capital. Savings associations must meet all of the standards
in order to comply with the capital requirements. The Holding Company is not
subject to any minimum capital requirements.
OTS capital regulations establish a 3% core capital or leverage ratio
(defined as the ratio of core capital to adjusted total assets). Core
capital is defined to include common stockholders' equity, noncumulative
perpetual preferred stock and any related surplus, and minority interests in
equity accounts of consolidated subsidiaries, less (i) any intangible assets,
except for certain qualifying intangible assets; (ii) certain mortgage
servicing rights; and (iii) equity and debt investments in subsidiaries that
are not "includable subsidiaries," which is defined as subsidiaries engaged
solely in activities not impermissible for a national bank, engaged in
activities impermissible for a national bank but only as an agent for its
customers, or engaged solely in mortgage-banking activities. In calculating
adjusted total assets, adjustments are made to total assets to give effect to
the exclusion of certain assets from capital and to account appropriately for
the investments in and assets of both includable and nonincludable
subsidiaries. Institutions that fail to meet the core capital requirement
would be required to file with the OTS a capital plan that details the steps
they will take to reach compliance. In addition, the OTS's prompt corrective
action regulation provides that a savings institution that has a leverage
ratio of less than 4% (3% for institutions receiving the highest CAMEL
examination rating) will be deemed to be "undercapitalized" and may be
subject to certain restrictions. See "-- Federal Regulation of Savings
Associations -- Prompt Corrective Action."
As required by federal law, the OTS has proposed a rule revising its
minimum core capital requirement to be no less stringent than that imposed on
national banks. The OTS has proposed that only those savings associations
rated a composite one (the highest rating) under the CAMEL rating system for
savings associations will be permitted to operate at or near the regulatory
minimum leverage ratio of 3%. All other savings associations will be
required
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to maintain a minimum leverage ratio of 4% to 5%. The OTS will assess each
individual savings association through the supervisory process on a case-by-
case basis to determine the applicable requirement. No assurance can be
given as to the final form of any such regulation, the date of its
effectiveness or the requirement applicable to the Association.
Savings associations also must maintain "tangible capital" not less than
1.5% of the Association's adjusted total assets. "Tangible capital" is
defined, generally, as core capital minus any "intangible assets" other than
purchased mortgage servicing rights.
Each savings institution must maintain total risk-based capital equal to
at least 8% of risk-weighted assets. Total risk-based capital consists of
the sum of core and supplementary capital, provided that supplementary
capital cannot exceed core capital, as previously defined. Supplementary
capital includes (i) permanent capital instruments such as cumulative
perpetual preferred stock, perpetual subordinated debt and mandatory
convertible subordinated debt, (ii) maturing capital instruments such as
subordinated debt, intermediate-term preferred stock and mandatory
convertible subordinated debt, subject to an amortization schedule, and (iii)
general valuation loan and lease loss allowances up to 1.25% of risk-weighted
assets.
The risk-based capital regulation assigns each balance sheet asset held
by a savings institution to one of four risk categories based on the amount
of credit risk associated with that particular class of assets. Assets not
included for purposes of calculating capital are not included in calculating
risk-weighted assets. The categories range from 0% for cash and securities
that are backed by the full faith and credit of the U.S. Government to 100%
for repossessed assets or assets more than 90 days past due. Qualifying
residential mortgage loans (including multi-family mortgage loans) are
assigned a 50% risk weight. Consumer, commercial, home equity and
residential construction loans are assigned a 100% risk weight, as are
nonqualifying residential mortgage loans and that portion of land loans and
nonresidential construction loans that do not exceed an 80% loan-to-value
ratio. The book value of assets in each category is multiplied by the
weighing factor (from 0% to 100%) assigned to that category. These products
are then totalled to arrive at total risk-weighted assets. Off-balance sheet
items are included in risk-weighted assets by converting them to an
approximate balance sheet "credit equivalent amount" based on a conversion
schedule. These credit equivalent amounts are then assigned to risk
categories in the same manner as balance sheet assets and included
risk-weighted assets.
The OTS has incorporated an interest rate risk component into its
regulatory capital rule. Under the rule, savings associations with "above
normal" interest rate risk exposure would be subject to a deduction from
total capital for purposes of calculating their risk-based capital
requirements. A savings association's interest rate risk is measured by the
decline in the net portfolio value of its assets (i.e., the difference
between incoming and outgoing discounted cash flows from assets, liabilities
and off-balance sheet contracts) that would result from a hypothetical 200
basis point increase or decrease in market interest rates divided by the
estimated economic value of the association's assets, as calculated in
accordance with guidelines set forth by the OTS. A savings association whose
measured interest rate risk exposure exceeds 2% must deduct an interest rate
risk component in calculating its total capital under the risk-based capital
rule. The interest rate risk component is an amount equal to one-half of the
difference between the institution's measured interest rate risk and 2%,
multiplied by the estimated economic value of the association's assets. That
dollar amount is deducted from an association's total capital in calculating
compliance with its risk-based capital requirement. Under the rule, there is
a two quarter lag between the reporting date of an institution's financial
data and the effective date for the new capital requirement based on that
data. A savings association with assets of less than $300 million and
risk-based capital ratios in excess of 12% is not subject to the interest
rate risk component, unless the OTS determines otherwise. The rule also
provides that the Director of the OTS may waive or defer an association's
interest rate risk component on a case-by-case basis. Under certain
circumstances, a savings association may request an adjustment to its
interest rate risk component if it believes that the OTS-calculated interest
rate risk component overstates its interest rate risk exposure. In addition,
certain "well-capitalized" institutions may obtain authorization to use their
own interest rate risk model to calculate their interest rate risk component
in lieu of the OTS-calculated amount. The OTS has postponed the date that
the component will
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first be deducted from an institution's total capital until savings
associations become familiar with the process for requesting an adjustment to
its interest rate risk component.
The following table presents the Association's regulatory capital levels
as of March 31, 1996.
At March 31, 1996
Percent of
Amount Assets
(Dollars in thousands)
------ ------
Core capital . . . . . . . $ 729 21.50%
Minimum required core
capital . . . . . . . . . (1,016) (3.00)
--------- ------
Excess . . . . . . . . . . $ 6,263 18.50%
Tangible capital . . . . . $ 7,279 21.50%
Minimum required tangible
capital . . . . . . . . . (508) (1.50)
---------- -------
Excess . . . . . . . . . . $ 6,771 20.00%
Risk-based capital . . . . $ 7,351 44.10%
Minimum risk-based capital
requirement . . . . . . . (1,333) (8.00)
---------- ------
Excess . . . . . . . . . . $ 6,018 36.10%
Limitations On Capital Distributions. OTS regulations impose uniform
limitations on the ability of all savings associations to engage in various
distributions of capital such as dividends, stock repurchases and cash-out
mergers. In addition, OTS regulations require the Association to give the
OTS 30 days' advance notice of any proposed declaration of dividends, and the
OTS has the authority under its supervisory powers to prohibit the payment of
dividends. The regulation utilizes a three-tiered approach which permits
various levels of distributions based primarily upon a savings association's
capital level.
A Tier 1 savings association has capital in excess of its fully phased-in
capital requirement (both before and after the proposed capital
distribution). Tier 1 savings association may make (without application but
upon prior notice to, and no objection made by, the OTS) capital
distributions during a calendar year up to 100% of its net income to date
during the calendar year plus one-half its surplus capital ratio (i.e., the
amount of capital in excess of its fully phased-in requirement) at the
beginning of the calendar year or the amount authorized for a Tier 2
association. Capital distributions in excess of such amount require advance
notice to the OTS. A Tier 2 savings association has capital equal to or in
excess of its minimum capital requirement but below its fully phased-in
capital requirement (both before and after the proposed capital
distribution). Such an association may make (without application) capital
distributions up to an amount equal to 75% of its net income during the
previous four quarters depending on how close the association is to meeting
its fully phased-in capital requirement. Capital distributions exceeding
this amount require prior OTS approval. Tier 3 associations are savings
associations with capital below the minimum capital requirement (either
before or after the proposed capital distribution). Tier 3 associations may
not make any capital distributions without prior approval from the OTS.
The Association is currently meeting the criteria to be designated a Tier
1 association and, consequently, could at its option (after prior notice to,
and no objection made by, the OTS) distribute up to 100% of its net income
during the calendar year plus 50% of its surplus capital ratio at the
beginning of the calendar year less any distributions previously paid during
the year.
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Loans to One Borrower. Under the HOLA, savings institutions are
generally subject to the national bank limit on loans to one borrower.
Generally, this limit is 15% of the Association's unimpaired capital and
surplus, plus an additional 10% of unimpaired capital and surplus, if such
loan is secured by readily-marketable collateral, which is defined to include
certain financial instruments and bullion. The OTS by regulation has amended
the loans to one borrower rule to permit savings associations meeting certain
requirements, including capital requirements, to extend loans to one borrower
in additional amounts under circumstances limited essentially to loans to
develop or complete residential housing units. At March 31, 1996, the
Association's limit on loans to one borrower was $1,091,861. At March 31,
1996, the Association's largest aggregate amount of loans to one borrower was
$496,000.
Activities of Associations and Their Subsidiaries. When a savings
association establishes or acquires a subsidiary or elects to conduct any new
activity through a subsidiary that the association controls, the savings
association must notify the FDIC and the OTS 30 days in advance and provide
the information each agency may, by regulation, require. Savings
associations also must conduct the activities of subsidiaries in accordance
with existing regulations and orders.
The OTS may determine that the continuation by a savings association of
its ownership control of, or its relationship to, the subsidiary constitutes
a serious risk to the safety, soundness or stability of the association or is
inconsistent with sound banking practices or with the purposes of the FDIA.
Based upon that determination, the FDIC or the OTS has the authority to order
the savings association to divest itself of control of the subsidiary. The
FDIC also may determine by regulation or order that any specific activity
poses a serious threat to the SAIF. If so, it may require that no SAIF
member engage in that activity directly.
Transactions with Affiliates. Savings associations must comply with
Sections 23A and 23B of the Federal Reserve Act ("Sections 23A and 23B")
relative to transactions with affiliates in the same manner and to the same
extent as if the savings association were a Federal Reserve member bank. A
savings and loan holding company, its subsidiaries and any other company
under common control are considered affiliates of the subsidiary savings
association under the HOLA. Generally, Sections 23A and 23B: (i) limit the
extent to which the insured association or its subsidiaries may engage in
certain covered transactions with an affiliate to an amount equal to 10% of
such institution's capital and surplus and place an aggregate limit on all
such transactions with affiliates to an amount equal to 20% of such capital
and surplus, and (ii) require that all such transactions be on terms
substantially the same, or at least as favorable to the institution or
subsidiary, as those provided to a non-affiliate. The term "covered
transaction" includes the making of loans, the purchase of assets, the
issuance of a guarantee and similar types of transactions.
Three additional rules apply to savings associations: (i) a savings
association may not make any loan or other extension of credit to an
affiliate unless that affiliate is engaged only in activities permissible for
bank holding companies; (ii) a savings association may not purchase or
invest in securities issued by an affiliate (other than securities of a
subsidiary); and (iii) the OTS may, for reasons of safety and soundness,
impose more stringent restrictions on savings associations but may not exempt
transactions from or otherwise abridge Section 23A or 23B. Exemptions from
Section 23A or 23B may be granted only by the Federal Reserve Board, as is
currently the case with respect to all FDIC-insured banks. The Association
has not been significantly affected by the rules regarding transactions with
affiliates.
The Association's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities controlled by such
persons, is currently governed by Sections 22(g) and 22(h) of the Federal
Reserve Act, and Regulation O thereunder. Among other things, these
regulations require that such loans be made on terms and conditions
substantially the same as those offered to unaffiliated individuals and not
involve more than the normal risk of repayment. Regulation O also places
individual and aggregate limits on the amount of loans the Association may
make to such persons based, in part, on the Association's capital position,
and requires certain board approval procedures to be followed. The OTS
regulations, with certain minor variances, apply Regulation O to savings
institutions.
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REGULATION OF THE COMPANY
HOLDING COMPANY ACQUISITIONS
The HOLA and OTS regulations issued thereunder generally prohibit a
savings and loan holding company, without prior OTS approval, from acquiring
more than 5% of the voting stock of any other savings association or savings
and loan holding company or controlling the assets thereof. They also
prohibit, among other things, any director or officer of a savings and loan
holding company, or any individual who owns or controls more than 25% of the
voting shares of such holding company, from acquiring control of any savings
association not a subsidiary of such savings and loan holding company, unless
the acquisition is approved by the OTS.
HOLDING COMPANY ACTIVITIES
As a unitary savings and loan holding company, the Company generally is
not subject to activity restrictions. If the Company acquires control of
another savings association as a separate subsidiary other than in a
supervisory acquisition, it would become a multiple savings and loan holding
company. There generally are more restrictions on the activities of a
multiple savings and loan holding company than on those of a unitary savings
and loan holding company. The HOLA provides that, among other things, no
multiple savings and loan holding company or subsidiary thereof which is not
an insured association shall commence or continue for more than two years
after becoming a multiple savings and loan association holding company or
subsidiary thereof, any business activity other than: (i) furnishing or
performing management services for a subsidiary insured institution, (ii)
conducting an insurance agency or escrow business, (iii) holding, managing,
or liquidating assets owned by or acquired from a subsidiary insured
institution, (iv) holding or managing properties used or occupied by a
subsidiary insured institution, (v) acting as trustee under deeds of trust,
(vi) those activities previously directly authorized by regulation as of
March 5, 1987 to be engaged in by multiple holding companies or (vii) those
activities authorized by the Federal Reserve Board as permissible for bank
holding companies, unless the OTS by regulation, prohibits or limits such
activities for savings and loan holding companies. Those activities
described in (vii) above also must be approved by the OTS prior to being
engaged in by a multiple holding company.
QUALIFIED THRIFT LENDER TEST
The HOLA requires any savings and loan holding company that controls a
savings association that fails the QTL test, as explained under "-- Federal
Regulation of Savings Associations -- Qualified Thrift Lender Test," must,
within one year after the date on which the association ceases to be a QTL,
register as and be deemed a bank holding company subject to all applicable
laws and regulations.
TAXATION
FEDERAL TAXATION
General. The Company and the Association will report their income on a
fiscal year basis using the modified cash method of accounting and will be
subject to federal income taxation in the same manner as other corporations
with some exceptions, including particularly the Association's reserve for
bad debts discussed below. The following discussion of tax matters is
intended only as a summary and does not purport to be a comprehensive
description of the tax rules applicable to the Association or the Company.
Tax Bad Debt Reserves. Savings institutions such as the Association
which meet certain definitional tests primarily relating to their assets and
the nature of their business ("qualifying thrifts") are permitted to
establish a reserve for bad debts and to make annual additions thereto, which
additions may, within specified formula limits, be deducted in arriving at
their taxable income. The Association's deduction with respect to
"qualifying loans," which are generally loans secured by certain interests in
real property, may be computed using an amount based on
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the Association's actual loss experience, or a percentage equal to 8% of the
Association's taxable income, computed with certain modifications and reduced
by the amount of any permitted additions to the non-qualifying reserve. The
Association's deduction with respect to non-qualifying loans must be computed
under the experience method which essentially allows a deduction based on the
Association's actual loss experience over a period of several years. Each
year the Association selects the most favorable way to calculate the
deduction attributable to an addition to the tax bad debt reserve. Due to
the limitation based on the level of deposits outstanding and retained
earnings, the Association used the experience method bad debt deduction for
the years ended March 31, 1996, 1995 and 1994.
The Association currently satisfies the qualifying thrift definitional
tests. If the Association failed to satisfy such tests in any taxable year,
it would be unable to make additions to its bad debt reserve. Instead, the
Association would be required to deduct bad debts as they occur and would
additionally be required to recapture its bad debt reserve deductions ratably
over a multi-year period. Among other things, the qualifying thrift
definitional tests require the Association to hold at least 60% of its assets
as "qualifying assets." Qualifying assets generally include cash,
obligations of the United States or any agency or instrumentality thereof,
certain obligations of a state or political subdivision thereof, loans
secured by interests in improved residential real property or by savings
accounts, student loans and property used by the Association in the conduct
of its banking business. The Association's ratio of qualifying assets to
total assets exceeded 60% through March 31, 1996. Although there can be no
assurance that the Association will continue to satisfy the 60% test,
management believes that this level of qualifying assets can be maintained by
the Association.
The amount of the addition to the reserve for losses on qualifying real
property loans under the percentage-of-taxable-income method cannot exceed
the amount necessary to increase the balance of the reserve for losses on
qualifying real property loans at the close of the taxable year to 6% of the
balance of the qualifying real property loans outstanding. Also, if the
qualifying thrift uses the percentage of taxable income method, then the
qualifying thrift's aggregate addition to its reserve for losses on
qualifying real property loans cannot, when added to the addition to the
reserve for losses on nonqualifying loans, exceed the amount by which: (i)
12% of the amount that the total deposits or withdrawable accounts of
depositors of the qualifying thrift at the close of the taxable year exceeds
(ii) the sum of the qualifying thrift's surplus, undivided profits and
reserves at the beginning of such year. At March 31, 1996, the Association's
total bad debt reserve for tax purposes was approximately $1.1 million.
Proposed legislation would eliminate future bad debt deductions and would
require thrifts to recapture into income over a six-year period their
post-1987 additions to their bad debt tax reserves, thereby generating
additional tax payments, but no additional tax liability. The Association
has previously provided for such liability under the provisions of SFAS No.
109. Under this proposal, the bad debt recapture would be suspended in each
year that a thrift meets a residential loan requirement. It is uncertain
when or if the proposed legislation will be passed, and, if passed, in what
form the legislation would be passed.
Distributions. To the extent that the Association makes "nondividend
distributions" to the Company that are considered as made: (i) from the
reserve for losses on qualifying real property loans, to the extent the
reserve for such losses exceeds the amount that would have been allowed under
the experience method; or (ii) from the supplemental reserve for losses on
loans ("Excess Distributions"), then an amount based on the amount
distributed will be included in the Association's taxable income.
Nondividend distributions include distributions in excess of the
Association's current and accumulated earnings and profits, distributions in
redemption of stock, and distributions in partial or complete liquidation.
However, dividends paid out of the Association's current or accumulated
earnings and profits, as calculated for federal income tax purposes, will not
be considered to result in a distribution from the Association's bad debt
reserve. Thus, any dividends to the Company that would reduce amounts
appropriated to the Association's bad debt reserve and deducted for federal
income tax purposes would create a tax liability for the Association. The
amount of additional taxable income attributable to an Excess Distribution is
an amount that, when reduced by the tax attributable to the income, is equal
to the amount of the distribution. Thus, if, after the Conversion, the
Association makes a "nondividend distribution," then approximately one and
one-half times the amount so used would be includable in gross income for
federal income tax purposes, assuming a 35% corporate income tax rate
(exclusive of state and local taxes). See "REGULATION" for limits on the
payment of dividends
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by the Association. The Association does not intend to pay dividends that
would result in a recapture of any portion of its tax bad debt reserve.
Corporate Alternative Minimum Tax. The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20%. The excess of the tax bad
debt reserve deduction using the percentage of taxable income method over the
deduction that would have been allowable under the experience method is
treated as a preference item for purposes of computing the AMTI. In
addition, only 90% of AMTI can be offset by net operating loss carryovers.
AMTI is increased by an amount equal to 75% of the amount by which the
Association's adjusted current earnings exceeds its AMTI (determined without
regard to this preference and prior to reduction for net operating losses).
For taxable years beginning after December 31, 1986, and before January 1,
1996, an environmental tax of .12% of the excess of AMTI (with certain
modification) over $2.0 million is imposed on corporation, including the
Association, whether or not an Alternative Minimum Tax ("AMT") is paid.
Dividends-Received Deduction and Other Matters. The Company may exclude
from its income 100% of dividends received from the Association as a member
of the same affiliated group of corporations. The corporate
dividends-received deduction is generally 70% in the case of dividends
received from unaffiliated corporations with which the Company and the
Association will not file a consolidated tax return, except that if the
Company or the Association owns more than 20% of the stock of a corporation
distributing a dividend, then 80% of any dividends received may be deducted.
Other Federal Tax Matters. There have not been any Internal Revenue
Service audits of the Association's federal income tax returns during the
past five years.
MISSOURI TAXATION
Missouri-based thrift institutions, such as the Association, are subject
to a special financial institutions tax, based on net income without regard
to net operating loss carryforwards, at the rate of 7% of net income. This
tax is in lieu of certain other state taxes on thrift institutions, on their
property, capital or income, except taxes on tangible personal property owned
by the Association and held for lease or rental to others and on real estate,
contributions paid pursuant to the Unemployment Compensation Law of Missouri,
social security taxes, sales taxes and use taxes. In addition, the
Association is entitled to credit against this tax all taxes paid to the
State of Missouri or any political subdivision, except taxes on tangible
personal property owned by the Association and held for lease or rental to
others and on real estate, contributions paid pursuant to the Unemployment
Compensation Law of Missouri, social security taxes, sales and use taxes, and
taxes imposed by the Missouri Financial Institutions Tax Law. Missouri
thrift institutions are not subject to the regular corporate income tax.
COMPETITION
Due to the close proximity of De Soto to the St. Louis metropolitan area,
the Association operates in a intensely competitive market for the attraction
of savings deposits (its primary source of lendable funds) and in the
origination of loans. Its most direct competition for savings deposits has
historically come from local commercial banks and other large banks operating
in its market area. As of March 31, 1996, there were two commercial banks in
De Soto, Missouri. Particularly in times of high interest rates, the
Association has faced additional significant competition for investors' funds
from short-term money market securities and other corporate and government
securities. The Association's competition for loans comes principally from
mortgage bankers and commercial banks. Such competition for deposits and the
origination of loans may limit the Association's growth in the future.
SUBSIDIARY ACTIVITIES
Federal savings associations may invest up to 3% of their assets in
service corporations, provided that at least one-half of any amount in excess
of 1% is used primarily for community, inner-city and community development
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projects. The Association's investment in its service corporation, JSLA
Service Corp. ("Service Corporation"), did not exceed these limits at March
31, 1996.
The Service Corporation is a wholly owned subsidiary of the Association.
The Service Corporation was established in 1980 for the purpose of collecting
appraisal fees and commissions on the sale of mortgage life and credit life
insurance. At March 31, 1996, the Association's investment in the Service
Corporation was $8,000.
PERSONNEL
As of March 31, 1996, the Association had 13 full-time and two part-time
employees. The employees are not represented by a collective bargaining unit
and the Association believes its relationship with its employees to be good.
Executive Officers. The following table sets forth certain information
regarding the executive officers of the Company.
Name Age(1) Position
Bernard R. Westhoff 54 President and Chief Executive
Officer
Lee Ellen Hogan 46 Senior Vice President, Treasurer
and Secretary
Melvin L. Yarbrough 48 Vice President
______________
(1) At March 31, 1996.
Bernard R. Westhoff has served as President of the Association since
1988. Prior to joining the Association, Mr. Westhoff was affiliated with
Boatmens Bank of De Soto for 14 years. Mr. Westhoff has served as a Director
of the Association since 1993. He currently serves on the Loan, Investment
and Asset and Liability Committees.
Lee Ellen Hogan is Senior Vice President, Treasurer and Secretary of the
Association. She has been associated with the Association since 1968 and has
been involved in all areas of operations and lending. Mrs. Hogan is
currently a member of the Loan, Investment and Asset and Liability
Committees.
Melvin L. Yarbrough is currently the Senior Loan Officer responsible for
mortgage lending. Mr. Yarbrough joined the Association in 1991.
ITEM 2. PROPERTIES
Joachim Federal operates out of one office, which it owns. This office
was opened in 1973. The net book value of the Association's investment in
office, properties and equipment totalled $365,000 at March 31, 1996. See
Note 6 of the Notes to the Consolidated Financial Statements in the Annual
Report.
ITEM 3. LEGAL PROCEEDINGS
Periodically, there have been various claims and lawsuits involving the
Association, mainly as a defendant, such as claims to enforce liens,
condemnation proceedings on properties in which the Association holds
security interests, claims involving the making and servicing of real
property loans and other issues incident to the
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Association's business. The Association is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of the Association.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information contained under the section captioned "Common Stock
Information" on page 2 of the Annual Report is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information contained under the section captioned "Selected Financial
Highlights" on page 3 of the Annual Report is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
beginning on page 4 of the Annual Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets as of March 31, 1996 and 1995
Consolidated Statements of Earnings for the Years Ended
March 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity for the Years
Ended
March 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1996, 1995 and 1994
Notes to the Consolidated Financial Statements*
* Included in the Annual Report attached as Exhibit 13 hereto and
incorporated herein by reference. All schedules have been omitted
as
the required information is either inapplicable or included in the
Consolidated Financial Statements or related Notes contained in the
Annual Report.
(b) Supplementary Data
Not applicable.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the section captioned "Proposal I -
Election of Directors" contained in the Association's Proxy Statement, and
"Part I -- Business -- Personnel -- Executive Officers" of this report,
is incorporated herein by reference. Reference is made to the cover page of
this report for information regarding compliance with Section 16(a) of the
Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the sections captioned "Executive
Compensation," "Directors' Compensation" and "Benefits" under "Proposal I -
Election of Directors" in the Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by
reference to the section captioned "Security Ownership of Certain
Beneficial Owners and Management" of the Proxy Statement
(b) Security Ownership of Management
The information required by this item is incorporated herein by
reference to the sections captioned "Proposal I - Election of
Directors" and "Security Ownership of Certain Beneficial
Owners and Management" of the Proxy Statement.
(c) Changes in Control
The Association is not aware of any arrangements, including any
pledge by any person of securities of the Association, the operation
of which may at a subsequent date result in a change in control of
the Association.
The information required by this item is incorporated herein by reference
to the sections captioned "Proposal I - Election of Directors" and "Security
Ownership of Certain Beneficial Owners and Management" of the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the section captioned "Proposal I -
Election of Directors - Certain Transactions with the Association" in the
Proxy Statement is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Exhibits
3(a) Articles of Incorporation of the Registrant*
3(b) Bylaws of the Registrant*
10(a) Employment Agreement with Bernard R. Westhoff
10(b) Employment Agreement with Lee Ellen Hogan
10(c) Severance Agreement with Melvin L. Yarbrough
(13) Annual Report to Stockholders
(21) Subsidiaries of the Registrant
(27) Financial Data Schedule
___________________
* Incorporated by reference to the Registrant's Registration Statement on
Form S-1, (File No. 33-96790).
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the quarter ended March 31,
1996.
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SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
JOACHIM BANCORP, INC.
Date: June 25, 1996 By:/s/ Bernard R. Westhoff
-------------------------
BERNARD R. WESTHOFF
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
- - ----------------------- --------------------- -----
/s/ Bernard R. Westhoff June 25, 1996
- - ----------------------- President, Chief
Bernard R. Westhoff Executive Officer and
Director (Principal
Executive Officer)
/s/ Lee Ellen Hogan
- - ----------------------- Senior Vice President, June 25, 1996
Lee Ellen Hogan Treasurer and Secretary
(Principal Financial
and Accounting Officer)
/s/ Andrew H. England
- - ----------------------- Chairman of the Board June 25, 1996
Andrew H. England of Directors
/s/ Adolph J. Schatzle
- - ----------------------- Vice Chairman of the Board June 25, 1996
Adolph J. Schatzle of Directors
/s/ Melvin L. Yarbrough
- - ----------------------- Vice President June 25, 1996
Melvin L. Yarbrough
/s/ Douglas G. Draper
- - ----------------------- Director June 25, 1996
Douglas G. Draper
/s/ Margaret F. Smith
- - ----------------------- Director June 25, 1996
Margaret F. Smith
/s/ James H. Wilkins
- - ----------------------- Director June 25, 1996
James H. Wilkins
/s/ Stokely R. Wischmeier
- - ------------------------- Director June 25, 1996
Stokely R. Wischmeier
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EXHIBIT 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of December 27, 1995, by and between
JOACHIM FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"), De Soto,
Missouri; JOACHIM BANCORP, INC. (the "Company"), a Missouri corporation; and
BERNARD R. WESTHOFF (the "Executive").
WHEREAS, the Association wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, the Executive is willing to serve in the employ of the
Association on a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of his employment hereunder, Executive agrees to serve
as President and Chief Executive Officer of the Association. During said
period, Executive also agrees to serve, if elected, as an officer and
director of the Company or any subsidiary or affiliate of the Company or the
Association.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of
the date first above written and shall continue for a period of thirty-six
(36) full calendar months thereafter. Commencing on the first anniversary
date, and continuing at each anniversary date thereafter, the Board of
Directors of the Association (the "Board") may extend the Agreement for an
additional year. Prior to the extension of the Agreement as provided herein,
the Board of Directors of the Association will conduct a formal performance
evaluation of the Executive for purposes of determining whether to extend the
Agreement, and the results thereof shall be included in the minutes of the
Board's meeting.
(b) During the period of his employment hereunder, except for periods
of absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business
time, attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Association; provided, however, that, with
the approval of the Board, as evidenced by a resolution of such Board, from
time to time, Executive may serve, or continue to serve, on the boards of
directors of, and hold any other offices or positions in, companies or
organizations, which, in such Board's judgment, will not present any conflict
of interest with the Association, or materially affect the performance of
Executive's duties pursuant to this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Sections 1 and 2.
The Association shall pay Executive as compensation a salary of $70,000 per
year ("Base Salary"). Such Base Salary shall be payable in accordance with
the customary payroll practices of the Association. During the period of
this Agreement, Executive's Base Salary shall be reviewed at least annually;
the first such review will be made no later than one year from the date of
this Agreement. Such review shall be conducted by a Committee designated by
the Board, and the Board may increase Executive's Base Salary. In addition
to the Base Salary provided in this Section 3(a), the Association shall
provide Executive at no cost to Executive with all such other benefits as are
provided uniformly to permanent full-time employees of the Association.
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(b) The Association will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from
immediately prior to the beginning of the term of this Agreement, and the
Association will not, without Executive's prior written consent, make any
changes in such plans, arrangements or perquisites which would adversely
affect Executive's rights or benefits thereunder. Without limiting the
generality of the foregoing provisions of this Subsection (b), Executive will
be entitled to participate in or receive benefits under any employee benefit
plans including, but not limited to, retirement plans, supplemental
retirement plans, pension plans, profit-sharing plans, health-and-accident
plan, medical coverage or any other employee benefit plan or arrangement made
available by the Association in the future to its senior executives and key
management employees, subject to, and on a basis consistent with, the terms,
conditions and overall administration of such plans and arrangements.
Executive will be entitled to incentive compensation and bonuses as provided
in any plan, or pursuant to any arrangement of the Association, in which
Executive is eligible to participate. Nothing paid to the Executive under
any such plan or arrangement will be deemed to be in lieu of other
compensation to which the Executive is entitled under this Agreement, except
as provided under Section 5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of
this Section 3, the Association shall pay or reimburse Executive for all
reasonable travel and other obligations under this Agreement and may provide
such additional compensation in such form and such amounts as the Board may
from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event
of Termination" shall mean and include any one or more of the following: (i)
the termination by the Association of Executive's full-time employment
hereunder for any reason other than a Change in Control, as defined in
Section 5(a) hereof; disability, as defined in Section 6(a) hereof; death;
retirement, as defined in Section 7 hereof; or for Cause, as defined in
Section 8 hereof; (ii) Executive's resignation from the Association's employ,
upon (A) unless consented to by the Executive, a material change in
Executive's function, duties, or responsibilities, which change would cause
Executive's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof described in Sections 1 and 2,
above, (any such material change shall be deemed a continuing breach of this
Agreement), (B) a relocation of Executive's principal place of employment by
more than 35 miles from its location at the effective date of this Agreement,
or a material reduction in the benefits and perquisites to Executive from
those being provided as of the effective date of this Agreement, (C) the
liquidation or dissolution of the Association, or (D) any breach of this
Agreement by the Association. Upon the occurrence of any event described in
clauses (A), (B),
(C), or (D), above, Executive shall have the right to elect to terminate his
employment under this Agreement by resignation upon not less than sixty (60)
days prior written notice given within a reasonable period of time not to
exceed, except in case of a continuing breach, four calendar months after the
event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the Association
shall pay Executive, or, in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, as severance
pay or liquidated damages, or both, a sum equal to the payments due to the
Executive for the remaining term of the Agreement, including Base Salary,
bonuses, and any other cash or deferred compensation paid or to
be paid (including the value of employer contributions that would have been
made on the Executive's behalf over the remaining term of the agreement to
any tax-qualified retirement plan sponsored by the Association as of the Date
of Termination), to the Executive for the term of the Agreement provided,
however, that if the Association is not in compliance with its minimum
capital requirements or if such payments would cause the Association's
capital to be reduced below its minimum capital requirements, such payments
shall be deferred until such time as the Association is in capital
compliance. All payments made pursuant to this Section 4(b) shall be paid in
substantially equal monthly installments over the remaining term of this
Agreement following the Executive's termination; provided, however, that if
the remaining term of
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the Agreement is less than one (1) year (determined as of the Executive's
Date of Termination), such payments and benefits shall be paid to the
Executive in a lump sum within 30 days of the Date of Termination.
(c) Upon the occurrence of an Event of Termination, the Association
will cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the Association for
Executive prior to his termination. Such coverage shall cease upon the
expiration of the remaining term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall
have occurred a Change in Control of the Company or the Association. For
purposes of this Agreement, a "Change in Control" of the Company or the
Association shall be deemed to occur if and when (a) an offeror other than
the Company purchases shares of the common stock of the Company or the
Association pursuant to a tender or exchange offer for such shares, (b) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company or the Association representing 25%
or more of the combined voting power of the Company's then outstanding
securities, (c) the membership of the board of directors of the Company or
the Association changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four month
period (whether commencing before or after the date of adoption of this Plan)
do not constitute a majority of the Board at the end of such period, or (d)
shareholders of the Company or the Association approve a merger,
consolidation, sale or disposition of all or substantially all of the
Company's or the Association's assets, or a plan of partial or complete
liquidation.
(b) If any of the events described in Section 5(a) hereof constituting
a Change in Control have occurred or the Board of the Association or the
Company has reasonably determined that a Change in Control has occurred,
Executive shall be entitled to the benefits provided in paragraphs (c), (d)
and (e) of this Section 5 upon his subsequent involuntary termination within
twelve (12) months of the effective date of the Change in Control (or
voluntary termination within twelve (12) months of the effective date of the
Change in Control following any demotion, loss of title, office or
significant authority, reduction in his annual compensation or benefits
(other than a reduction affecting the Bank's personnel generally), or
relocation of his principal place of employment by more than 35 miles from
its location immediately prior to the Change in Control), unless such
termination is because of his death, retirement as provided in Section 7,
termination for Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by the
Executive's termination of employment, the Association shall pay Executive,
or in the event of his subsequent death, his beneficiary or beneficiaries, or
his estate, as the case may be, as severance pay or liquidated damages, or
both, a sum equal to 2.99 times the Executive's "base amount," within the
meaning of Section 280G(b)(3) of the Internal Revenue Code of 1986 ("Code"), as
amended. Such payment shall be made in a lump sum paid within ten (10) days
of the Executive's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by the
Executive's termination of employment, the Association will cause to be
continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Association for Executive prior
to his severance. In addition, Executive shall be entitled to receive the
value of employer contributions that would have been made on the Executive's
behalf over the remaining term of the agreement to any tax-qualified
retirement plan sponsored by the Association as of the Date of Termination.
Such coverage and payments shall cease upon the expiration of thirty-six (36)
months.
(e) Upon the occurrence of a Change in Control, the Executive shall be
entitled to receive benefits due him under, or contributed by the Company or
the Association on his behalf, pursuant to any retirement, incentive, profit
sharing, bonus, performance, disability or other employee benefit plan
maintained by the Association or the Company on the Executive's behalf to the
extent that such benefits are not otherwise paid to the Executive upon a
Change in Control.
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(f) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to the
Executive under this Section would be deemed to include an "excess parachute
payment" under Section 280G of the Code, such payments or benefits shall be
payable or provided to Executive over the minimum period necessary to reduce the
present value of such payments or benefits to an amount which is one dollar
($1.00) less than three (3) times the Executive's "base amount" under
Section 280G(b)(3) of the Code.
6. TERMINATION FOR DISABILITY.
(a) If the Executive shall become disabled as defined in the
Association's then current disability plan (or, if no such plan is then in
effect, if the Executive is permanently and totally disabled within the
meaning of Section 22(e)(3) of the Code as determined by a physician
designated by the Board), the Association may terminate Executive's
employment for "Disability."
(b) Upon the Executive's termination of employment for Disability, the
Association will pay Executive, as disability pay, a bi-weekly payment equal
to three-quarters (3/4) of Executive's bi-weekly rate of Base Salary on the
effective date of such termination. These disability payments shall
commence on the effective date of Executive's termination and will end on the
earlier of (i) the date Executive returns to the full-time employment of the
Association in the same capacity as he was employed prior to his termination
for Disability and pursuant to an employment agreement between Executive and
the Association; (ii) Executive's full-time employment by another employer;
(iii) Executive attaining the age of 65; or (iv) Executive's death;
or (v) the expiration of the term of this Agreement. The disability pay
shall be reduced by the amount, if any, paid to the Executive under any plan
of the Association providing disability benefits to the Executive.
(c) The Association will cause to be continued life, medical, dental
and disability coverage substantially identical to the coverage maintained by
the Association for Executive prior to his termination for Disability. This
coverage and payments shall cease upon the earlier of (i) the date Executive
returns to the full-time employment of the Association, in the same capacity
as he was employed prior to his termination for Disability and pursuant to an
employment agreement between Executive and the Association; (ii) Executive's
full-time employment by another employer; (iii) Executive's attaining the age
of 65; or (iv) the Executive's death; or (v) the expiration of the term of
this Agreement.
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of
temporary disability.
7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.
Termination by the Association of Executive based on "Retirement" shall
mean retirement at age 65 or in accordance with any retirement arrangement
established with Executive's consent with respect to him. Upon termination
of Executive upon Retirement, Executive shall be entitled to all benefits
under any retirement plan of the Association or the Company and other plans
to which Executive is a party. Upon the death of the Executive during the
term of this Agreement, the Association shall pay to Executive's estate the
compensation due to the Executive through the last day of the calendar month
in which his death occurred.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of the Executive's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provision of this
Agreement. For purposes of this Section, no act, or the failure to act, on
Executive's part shall be "willful" unless done, or omitted to be done, not
in good faith and without reasonable belief that the action or omission was
in the best interest of the Association or its affiliates. Notwithstanding
the foregoing, Executive shall not be deemed to have been terminated for
Cause
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unless and until there shall have been delivered to him a copy of a
resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to Executive and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying termination for Cause and specifying the reasons thereof.
The Executive shall not have the right to receive compensation or other
benefits for any period after termination for Cause. Any stock options
granted to Executive under any stock option plan or any unvested awards
granted under any other stock benefit plan of the Association, the Company,
or any subsidiary or affiliate thereof, shall become null and void effective
upon Executive's receipt of Notice of Termination for Cause pursuant to
Section 9 hereof, and shall not be exercisable by Executive at any time
subsequent to such Termination for Cause.
9. REQUIRED PROVISIONS.
(a) The Association may terminate Executive's employment at any time,
but any termination by the Association, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement. Executive shall not have the right to receive compensation
or other benefits for any period after Termination for Cause as defined in
Section 8 herein.
(b) If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice served
under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act
("FDIA") (12 U.S.C. 1818(e)(3) and (g)(1)), the Association's obligations
under the Agreement shall be suspended as of the date of service, unless
stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Association may, in its discretion, (i) pay Executive all or
part of the compensation withheld while its contract obligations were
suspended and (ii) reinstate (in whole or in part) any of its obligations
that were suspended.
(c) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or
(g)(1)), all obligations of the Association under the Agreement shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.
(d) If the Association is in default (as defined in Section 3(x)(1)
of the FDIA), all obligations under this Agreement shall terminate as of the
date of default, but this paragraph shall not affect any vested rights of the
parties.
(e) All obligations under this Agreement shall be terminated (except
to the extent determined that continuation of the Agreement is necessary for
the continued operation of the Association): (i) by the Director of the
Office of Thrift Supervision (the "Director") or his or her designee at the
time the Federal Deposit Insurance Corporation or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Association under the authority contained in Section 13(c) of the FDIA or
(ii) by the Director, or his or her designee at the time the Director or such
designee approves a supervisory merger to resolve problems related to
operation of the Association or when the Association is determined by the
Director to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such action.
(f) Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
10. NOTICE.
(a) Any purported termination by the Association or by Executive shall
be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
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(b) "Date of Termination" shall mean (A) if Executive's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day period), and (B) if
his employment is terminated for any other reason, the date specified in the
Notice of Termination (which, in the case of a Termination for Cause, shall
not be less than thirty (30) days from the date such Notice of Termination is
given).
(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, except upon the
occurrence of a Change in Control and voluntary termination by the Executive
in which case the Date of Termination shall be the date specified in the
Notice, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court
of competent jurisdiction (the time for appeal there from having expired and
no appeal having been perfected) and provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution
of such dispute with reasonable diligence. Notwithstanding the pendency of
any such dispute, the Association will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, Base Salary) and continue him as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the dispute is
finally resolved in accordance with this Agreement. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.
11. NON-COMPETITION.
(a) Upon any termination of Executive's employment hereunder pursuant
to an Event of Termination as provided in Section 4 hereof, Executive agrees
not to compete with the Association and/or the Company for a period of one
(1) year following such termination in any city, town or county in which the
Association and/or the Company has an office or has filed an application for
regulatory approval to establish an office, determined as of the effective
date of such termination. Executive agrees that during such period and
within said cities, towns and counties, Executive shall not work for or
advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Association and/or the Company. The parties
hereto, recognizing that irreparable injury will result to the Association
and/or the Company, its business and property in the event of Executive's
breach of this Subsection 11(a) agree that in the event of any such breach by
Executive, the Association and/or the Company will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by Executive, Executive's partners, agents, servants,
employers, employees and all persons acting for or with Executive. Executive
represents and admits that in the event of the termination of his employment
pursuant to Section 8 hereof, Executive's experience and capabilities are
such that Executive can obtain employment in a business engaged in other
lines and/or of a different nature than the Association and/or the Company,
and that the enforcement of a remedy by way of injunction will not prevent
Executive from earning a livelihood. Nothing herein will be construed as
prohibiting the Association and/or the Company from pursuing any other
remedies available to the Association and/or the Company for such breach or
threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Association and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the business of the Association. Executive will not,
during or after the term of his employment, disclose any knowledge of the
past, present, planned or considered business activities of the Association
or affiliates thereof to any person, firm, corporation, or other entity for
any reason or purpose whatsoever. Notwithstanding the foregoing, Executive
may disclose any knowledge of banking, financial and/or economic principles,
concepts or ideas which are not solely and exclusively derived from the
business plans and activities of the Association. In the event of a breach
or threatened breach by the Executive of the provisions of this Section, the
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Association will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present, planned
or considered business activities of the Association or affiliates thereof,
or from rendering any services to any person, firm, corporation, other entity
to whom such knowledge, in whole or in part, has been disclosed or is
threatened to be disclosed. Nothing herein will be construed as prohibiting
the Association from pursuing any other remedies available to the Association
for such breach or threatened breach, including the recovery of damages from
Executive.
12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Association. The Company, however,
guarantees all payments and the provision of all amounts and benefits due
hereunder to Executive and, if such payments are not timely paid or provided
by the Association, such amounts and benefits shall be paid or provided by
the Company.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Association
or any predecessor of the Association and Executive, except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the Executive of a kind elsewhere provided. No provision of this
Agreement shall be interpreted to mean that Executive is subject to receiving
fewer benefits than those available to him without reference to this
Agreement.
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and
any attempt, voluntary or involuntary, to affect any such action shall be
null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Association, the Company and their respective successors and
assigns.
15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be deemed
a continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act
other than that specifically waived.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so
invalid, and each such other provision and part thereof shall to the full
extent consistent with law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
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18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Missouri,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or
state law or regulation, the provisions of such law or regulation shall
prevail.
19. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a
panel of three arbitrators sitting in a location selected by the employee
within one hundred (100) miles from the location of the Association, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction; provided, however, that Executive shall be entitled to
seek specific performance of his right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under
or in connection with this Agreement.
20. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be
paid or reimbursed by the Association, if successful pursuant to a legal
judgment, arbitration or settlement.
21. INDEMNIFICATION.
The Association shall provide Executive (including his heirs, executors
and administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall
indemnify Executive (and his heirs, executors and administrators) to the
fullest extent permitted under law against all expenses and liabilities
reasonably incurred by him in connection with or arising out of any action,
suit or proceeding in which he may be involved by reason of his having been a
director or officer of the Association (whether or not he continues to be a
directors or officer at the time of incurring such expenses or liabilities),
such expenses and liabilities to include, but not be limited to, judgment,
court costs and attorneys' fees and the cost of reasonable settlements.
22. SUCCESSOR TO THE ASSOCIATION OR THE COMPANY.
The Association and the Company shall require any successor or assignee,
whether direct or indirect, by purchase, merger, consolidation or otherwise,
to all or substantially all the business or assets of the Association or the
Company, expressly and unconditionally to assume and agree to perform the
Association's or the Company's obligations under this Agreement, in the same
manner and to the same extent that the Association or the Company would be
required to perform if no such succession or assignment had taken place.
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IN WITNESS WHEREOF, the Association and the Company hereto have caused
this Agreement to be executed and their seal to be affixed hereunto by a duly
authorized officer or director, and Executive has signed this Agreement, all
on the 27th day of December, 1995.
ATTEST: JOACHIM FEDERAL SAVINGS
AND LOAN ASSOCIATION
/s/ Lee Ellen Hogan BY: /s/ Andrew England
- - -------------------- -------------------
[SEAL]
ATTEST: JOACHIM BANCORP, INC.
/s/ Lee Ellen Hogan BY: /s/ Andrew England
- - -------------------- -------------------
[SEAL]
WITNESS:
/s/ Melvin L. Yarbrough /s/ Bernard R. Westhoff
- - ------------------------ -----------------------
MELVIN L. YARBROUGH BERNARD R. WESTHOFF
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EXHIBIT 10(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of December 27, 1995, by and between
Joachim FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"), JOACHIM
BANCORP, INC. (the "Company"), a Missouri corporation; and LEE ELLEN HOGAN
(the "Executive").
WHEREAS, the Association wishes to assure itself of the services of
Executive for the period provided in this Agreement; and
WHEREAS, the Executive is willing to serve in the employ of the
Association on a full-time basis for said period.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:
1. POSITION AND RESPONSIBILITIES.
During the period of her employment hereunder, Executive agrees to serve
as Senior Vice President/Treasurer/Secretary of the Association. During said
period, Executive also agrees to serve, if elected, as an officer of the
Company or any subsidiary or affiliate of the Company or the Association.
2. TERMS AND DUTIES.
(a) The term of this Agreement shall be deemed to have commenced as of
the date first above written and shall continue for a period of thirty-six
(36) full calendar months thereafter. Commencing on the first anniversary
date, and continuing at each anniversary date thereafter, the Board of
Directors of the Association (the "Board") may extend the Agreement for an
additional year. Prior to the extension of the Agreement as provided herein,
the Board of Directors of the Association will conduct a formal performance
evaluation of the Executive for purposes of determining whether to extend the
Agreement, and the results thereof shall be included in the minutes of the
Board's meeting.
(b) During the period of his employment hereunder, except for periods
of absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all her business
time, attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Association; provided, however, that, with
the approval of the Board, as evidenced by a resolution of such Board, from
time to time, Executive may serve, or continue to serve, on the boards of
directors of, and hold any other offices or positions in, companies or
organizations, which, in such Board's judgment, will not present any conflict
of interest with the Association, or materially affect the performance of
Executive's duties pursuant to this Agreement.
3. COMPENSATION AND REIMBURSEMENT.
(a) The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Sections 1 and 2.
The Association shall pay Executive as compensation a salary of $52,000 per
year ("Base Salary"). Such Base Salary shall be payable in accordance with
the customary payroll practices of the Association. During the period of
this Agreement, Executive's Base Salary shall be reviewed at least annually;
the first such review will be made no later than one year from the date of
this Agreement. Such review shall be conducted by a Committee designated by
the Board, and the Board may increase Executive's Base Salary. In addition
to the Base Salary provided in this Section 3(a), the Association shall
provide Executive at no cost to Executive with all such other benefits as are
provided uniformly to permanent full-time employees of the Association.
(b) The Association will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately
prior to the beginning of the term of this Agreement, and the Association
will not, without Executive's prior written consent, make any changes in such
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plans, arrangements or perquisites which would adversely affect Executive's
rights or benefits thereunder. Without limiting the generality of the
foregoing provisions of this Subsection (b), Executive will be entitled to
participate in or receive benefits under any employee benefit plans
including, but not limited to, retirement plans, supplemental retirement
plans, pension plans, profit-sharing plans, health-and-accident plan, medical
coverage or any other employee benefit plan or arrangement made available by
the Association in the future to its senior executives and key management
employees, subject to, and on a basis consistent with, the terms, conditions
and overall administration of such plans and arrangements. Executive will be
entitled to incentive compensation and bonuses as provided in any plan, or
pursuant to any arrangement of the Association, in which Executive is
eligible to participate. Nothing paid to the Executive under any such plan
or arrangement will be deemed to be in lieu of other compensation to which
the Executive is entitled under this Agreement, except as provided under
Section 5(e).
(c) In addition to the Base Salary provided for by paragraph (a) of
this Section 3, the Association shall pay or reimburse Executive for all
reasonable travel and other obligations under this Agreement and may provide
such additional compensation in such form and such amounts as the Board may
from time to time determine.
4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.
(a) Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event
of Termination" shall mean and include any one or more of the following: (i)
the termination by the Association of Executive's full-time employment
hereunder for any reason other than a Change in Control, as defined in
Section 5(a) hereof; disability, as defined in Section 6(a) hereof; death;
retirement, as defined in Section 7 hereof; or for Cause, as defined in
Section 8 hereof; (ii) Executive's resignation from the Association's employ,
upon (A) unless consented to by the Executive, a material change in
Executive's function, duties, or responsibilities, which change would cause
Executive's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof described in Sections 1 and 2,
above, (any such material change shall be deemed a continuing breach of this
Agreement), (B) a relocation of Executive's principal place of employment by
more than 35 miles from its location at the effective date of this Agreement,
or a material reduction in the benefits and perquisites to Executive from
those being provided as of the effective date of this Agreement, (C) the
liquidation or dissolution of the Association, or (D) any breach of this
Agreement by the Association. Upon the occurrence of any event described in
clauses (A), (B), (C), or (D), above, Executive shall have the right to elect
to terminate her employment under this Agreement by resignation upon not less
than sixty (60) days prior written notice given within a reasonable period of
time not to exceed, except in case of a continuing breach, four calendar
months after the event giving rise to said right to elect.
(b) Upon the occurrence of an Event of Termination, the Association
shall pay Executive, or, in the event of her subsequent death, her
beneficiary or beneficiaries, or her estate, as the case may be, as severance
pay or liquidated damages, or both, a sum equal to the payments due to the
Executive for the remaining term of the Agreement, including Base Salary,
bonuses, and any other cash or deferred compensation paid or to be paid
(including the value of employer contributions that would have been made on
the Executive's behalf over the remaining term of the agreement to any
tax-qualified retirement plan sponsored by the Association as of the Date of
Termination), to the Executive for the term of the Agreement provided,
however, that if the Association is not in compliance with its minimum
capital requirements or if such payments would cause the Association's
capital to be reduced below its minimum capital requirements, such payments
shall be deferred until such time as the Association is in capital
compliance. All payments made pursuant to this Section 4(b) shall be paid in
substantially equal monthly installments over the remaining term of this
Agreement following the Executive's termination; provided, however, that if
the remaining term of the Agreement is less than one (1) year (determined as
of the Executive's Date of Termination), such payments and benefits shall be
paid to the Executive in a lump sum within 30 days of the Date of
Termination.
(c) Upon the occurrence of an Event of Termination, the Association
will cause to be continued life, medical, dental and disability coverage
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substantially identical to the coverage maintained by the Association for
Executive prior to her termination. Such coverage shall cease upon the
expiration of the remaining term of this Agreement.
5. CHANGE IN CONTROL.
(a) No benefit shall be paid under this Section 5 unless there shall
have occurred a Change in Control of the Company or the Association. For
purposes of this Agreement, a "Change in Control" of the Company or the
Association shall be deemed to occur if and when (a) an offeror other than
the Company purchases shares of the common stock of the Company or the
Association pursuant to a tender or exchange offer for such shares, (b) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company or the Association representing 25%
or more of the combined voting power of the Company's then outstanding
securities, (c) the membership of the board of directors of the Company or
the Association changes as the result of a contested election, such that
individuals who were directors at the beginning of any twenty-four month
period (whether commencing before or after the date of adoption of this Plan)
do not constitute a majority of the Board at the end of such period, or (d)
shareholders of the Company or the Association approve a merger,
consolidation, sale or disposition of all or substantially all of the
Company's or the Association's assets, or a plan of partial or complete
liquidation.
(b) If any of the events described in Section 5(a) hereof constituting
a Change in Control have occurred or the Board of the Association or the
Company has reasonably determined that a Change in Control has occurred,
Executive shall be entitled to the benefits provided in paragraphs (c), (d)
and (e) of this Section 5 upon her subsequent involuntary termination within
twelve (12) months of the effective date of the Change in Control (or
voluntary termination within twelve (12) months of the effective date of the
Change in Control following any demotion, loss of title, office or
significant authority, reduction in her annual compensation or benefits
(other than a reduction affecting the Bank's personnel generally), or
relocation of her principal place of employment by more than 35 miles from
its location immediately prior to the Change in Control), unless such
termination is because of her death, retirement as provided in Section 7,
termination for Cause, or termination for Disability.
(c) Upon the occurrence of a Change in Control followed by the
Executive's termination of employment, the Association shall pay Executive,
or in the event of her subsequent death, her beneficiary or beneficiaries, or
her estate, as the case may be, as severance pay or liquidated damages, or
both, a sum equal to 2.99 times the Executive's "base amount," within the
meaning of Section 280G(b)(3) of the Internal Revenue Code of 1986 ("Code"), as
amended. Such payment shall be made in a lump sum paid within ten (10) days
of the Executive's Date of Termination.
(d) Upon the occurrence of a Change in Control followed by the
Executive's termination of employment, the Association will cause to be
continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Association for Executive prior
to her severance. In addition, Executive shall be entitled to receive the
value of employer contributions that would have been made on the Executive's
behalf over the remaining term of the agreement to any tax-qualified
retirement plan sponsored by the Association as of the Date of Termination.
Such coverage and payments shall cease upon the expiration of thirty-six (36)
months.
(e) Upon the occurrence of a Change in Control, the Executive shall be
entitled to receive benefits due her under, or contributed by the Company or
the Association on her behalf, pursuant to any retirement, incentive, profit
sharing, bonus, performance, disability or other employee benefit plan
maintained by the Association or the Company on the Executive's behalf to the
extent that such benefits are not otherwise paid to the Executive upon a
Change in Control.
(f) Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to the
Executive under this Section would be deemed to include an "excess parachute
payment" under Section 280G of the Code, such payments or benefits shall be
payable or provided to Executive over the minimum period necessary to reduce the
present value of such payments or benefits to an amount which is one dollar
($1.00) less than three (3) times the Executive's "base amount" under
Section 280G(b)(3) of the Code.
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6. TERMINATION FOR DISABILITY.
(a) If the Executive shall become disabled as defined in the
Association's then current disability plan (or, if no such plan is then in
effect, if the Executive is permanently and totally disabled within the
meaning of Section 22(e)(3) of the Code as determined by a physician
designated by the Board), the Association may terminate Executive's
employment for "Disability."
(b) Upon the Executive's termination of employment for Disability, the
Association will pay Executive, as disability pay, a bi-weekly payment equal
to three-quarters (3/4) of Executive's bi-weekly rate of Base Salary on the
effective date of such termination. These disability payments shall
commence on the effective date of Executive's termination and will end on the
earlier of (i) the date Executive returns to the full-time employment of the
Association in the same capacity as she was employed prior to her termination
for Disability and pursuant to an employment agreement between Executive and
the Association; (ii) Executive's full-time employment by another employer;
(iii) Executive attaining the age of 65; or (iv) Executive's death; or (v)
the expiration of the term of this Agreement. The disability pay shall be
reduced by the amount, if any, paid to the Executive under any plan of the
Association providing disability benefits to the Executive.
(c) The Association will cause to be continued life, medical, dental
and disability coverage substantially identical to the coverage maintained by
the Association for Executive prior to her termination for Disability. This
coverage and payments shall cease upon the earlier of (i) the date Executive
returns to the full-time employment of the Association, in the same capacity
as she was employed prior to her termination for Disability and pursuant to
an employment agreement between Executive and the Association; (ii)
Executive's full-time employment by another employer; (iii) Executive's
attaining the age of 65; or (iv) the Executive's death; or (v) the expiration
of the term of this Agreement.
(d) Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to Executive during any period during which
Executive is incapable of performing her duties hereunder by reason of
temporary disability.
7. TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.
Termination by the Association of Executive based on "Retirement" shall
mean retirement at age 65 or in accordance with any retirement arrangement
established with Executive's consent with respect to her. Upon termination
of Executive upon Retirement, Executive shall be entitled to all benefits
under any retirement plan of the Association or the Company and other plans
to which Executive is a party. Upon the death of the Executive during the
term of this Agreement, the Association shall pay to Executive's estate the
compensation due to the Executive through the last day of the calendar month
in which her death occurred.
8. TERMINATION FOR CAUSE.
For purposes of this Agreement, "Termination for Cause" shall include
termination because of the Executive's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provision of this
Agreement. For purposes of this Section, no act, or the failure to act, on
Executive's part shall be "willful" unless done, or omitted to be done, not
in good faith and without reasonable belief that the action or omission was
in the best interest of the Association or its affiliates. Notwithstanding
the foregoing, Executive shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to him a copy of a
resolution duly adopted by the affirmative vote of not less than three-
fourths of the members of the Board at a meeting of the Board called and held
for that purpose (after reasonable notice to Executive and an opportunity for
him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, Executive was guilty of conduct
justifying termination for Cause and specifying the reasons thereof. The
Executive shall not have the right to receive compensation or other benefits
for any
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period after termination for Cause. Any stock options granted to Executive
under any stock option plan or any unvested awards granted under any other
stock benefit plan of the Association, the Company, or any subsidiary or
affiliate thereof, shall become null and void effective upon Executive's
receipt of Notice of Termination for Cause pursuant to Section 9 hereof, and
shall not be exercisable by Executive at any time subsequent to such
Termination for Cause.
9. REQUIRED PROVISIONS.
(a) The Association may terminate Executive's employment at any time,
but any termination by the Association, other than Termination for Cause,
shall not prejudice Executive's right to compensation or other benefits under
this Agreement. Executive shall not have the right to receive compensation
or other benefits for any period after Termination for Cause as defined in
Section 8 herein.
(b) If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice served
under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(3) and (g)(1)), the Association's obligations under the
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
Association may, in its discretion, (i) pay Executive all or part of the
compensation withheld while its contract obligations were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.
(c) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or
(g)(1)), all obligations of the Association under the Agreement shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.
(d) If the Association is in default (as defined in Section 3(x)(1)
of the FDIA), all obligations under this Agreement shall terminate as of the
date of default, but this paragraph shall not affect any vested rights of the
parties.
(e) All obligations under this Agreement shall be terminated (except
to the extent determined that continuation of the Agreement is necessary for
the continued operation of the Association): (i) by the Director of the
Office of Thrift Supervision (the "Director") or his or her designee at the
time the Federal Deposit Insurance Corporation or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Association under the authority contained in Section 13(c) of the FDIA or
(ii) by the Director, or his or her designee at the time the Director or such
designee approves a supervisory merger to resolve problems related to
operation of the Association or when the Association is determined by the
Director to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such action.
(f) Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
10. NOTICE.
(a) Any purported termination by the Association or by Executive shall
be communicated by Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(b) "Date of Termination" shall mean (A) if Executive's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his
duties on a full-time basis during such thirty (30) day period), and (B) if
his employment is terminated for any other reason, the date specified in the
Notice of Termination (which, in the case of a Termination for Cause, shall
not be less than thirty (30) days from the date such Notice of Termination is
given).
PAGE
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(c) If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, except upon the
occurrence of a Change in Control and voluntary termination by the Executive
in which case the Date of Termination shall be the date specified in the
Notice, the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court
of competent jurisdiction (the time for appeal there from having expired and
no appeal having been perfected) and provided further that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution
of such dispute with reasonable diligence. Notwithstanding the pendency of
any such dispute, the Association will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, Base Salary) and continue him as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the dispute is
finally resolved in accordance with this Agreement. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.
11. NON-COMPETITION.
(a) Upon any termination of Executive's employment hereunder pursuant
to an Event of Termination as provided in Section 4 hereof, Executive agrees
not to compete with the Association and/or the Company for a period of one
(1) year following such termination in any city, town or county in which the
Association and/or the Company has an office or has filed an application for
regulatory approval to establish an office, determined as of the effective
date of such termination. Executive agrees that during such period and
within said cities, towns and counties, Executive shall not work for or
advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Association and/or the Company. The parties
hereto, recognizing that irreparable injury will result to the Association
and/or the Company, its business and property in the event of Executive's
breach of this Subsection 11(a) agree that in the event of any such breach by
Executive, the Association and/or the Company will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by Executive, Executive's partners, agents, servants,
employers, employees and all persons acting for or with Executive. Executive
represents and admits that in the event of the termination of his employment
pursuant to Section 8 hereof, Executive's experience and capabilities are
such that Executive can obtain employment in a business engaged in other
lines and/or of a different nature than the Association and/or the Company,
and that the enforcement of a remedy by way of injunction will not prevent
Executive from earning a livelihood. Nothing herein will be construed as
prohibiting the Association and/or the Company from pursuing any other
remedies available to the Association and/or the Company for such breach or
threatened breach, including the recovery of damages from Executive.
(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Association and
affiliates thereof, as it may exist from time to time, is a valuable,
special and unique asset of the business of the Association. Executive will
not, during or after the term of his employment, disclose any knowledge of
the past, present, planned or considered business activities of the
Association or affiliates thereof to any person, firm, corporation, or other
entity for any reason or purpose whatsoever. Notwithstanding the foregoing,
Executive may disclose any knowledge of banking, financial and/or economic
principles, concepts or ideas which are not solely and exclusively derived
from the business plans and activities of the Association. In the event of a
breach or threatened breach by the Executive of the provisions of this
Section, the Association will be entitled to an injunction restraining
Executive from disclosing, in whole or in part, the knowledge of the past,
present, planned or considered business activities of the Association or
affiliates thereof, or from rendering any services to any person, firm,
corporation, other entity to whom such knowledge, in whole or in part, has
been disclosed or is threatened to be disclosed. Nothing herein will be
construed as prohibiting the Association from pursuing any other remedies
available to the Association for such breach or threatened breach, including
the recovery of damages from Executive.
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12. SOURCE OF PAYMENTS.
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Association. The Company, however,
guarantees all payments and the provision of all amounts and benefits due
hereunder to Executive and, if such payments are not timely paid or provided
by the Association, such amounts and benefits shall be paid or provided by
the Company.
13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Association
or any predecessor of the Association and Executive, except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the Executive of a kind elsewhere provided. No provision of this
Agreement shall be interpreted to mean that Executive is subject to receiving
fewer benefits than those available to him without reference to this
Agreement.
14. NO ATTACHMENT.
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and
any attempt, voluntary or involuntary, to affect any such action shall be
null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Association, the Company and their respective successors and
assigns.
15. MODIFICATION AND WAIVER.
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be deemed
a continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act
other than that specifically waived.
16. SEVERABILITY.
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so
invalid, and each such other provision and part thereof shall to the full
extent consistent with law continue in full force and effect.
17. HEADINGS FOR REFERENCE ONLY.
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
18. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Missouri,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or
state law or regulation, the provisions of such law or regulation shall
prevail.
19. ARBITRATION.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a
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<PAGE>
panel of three arbitrators sitting in a location selected by the employee
within one hundred (100) miles from the location of the Association, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction; provided, however, that Executive shall be entitled to
seek specific performance of his right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under
or in connection with this Agreement.
20. PAYMENT OF LEGAL FEES.
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be
paid or reimbursed by the Association, if successful pursuant to a legal
judgment, arbitration or settlement.
21. INDEMNIFICATION.
The Association shall provide Executive (including his heirs, executors
and administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall
indemnify Executive (and his heirs, executors and administrators) to the
fullest extent permitted under law against all expenses and liabilities
reasonably incurred by him in connection with or arising out of any action,
suit or proceeding in which he may be involved by reason of his having been a
director or officer of the Association (whether or not he continues to be a
directors or officer at the time of incurring such expenses or liabilities),
such expenses and liabilities to include, but not be limited to, judgment,
court costs and attorneys' fees and the cost of reasonable settlements.
22. SUCCESSOR TO THE ASSOCIATION OR THE COMPANY.
The Association and the Company shall require any successor or assignee,
whether direct or indirect, by purchase, merger, consolidation or otherwise,
to all or substantially all the business or assets of the Association or the
Company, expressly and unconditionally to assume and agree to perform the
Association's or the Company's obligations under this Agreement, in the same
manner and to the same extent that the Association or the Company would be
required to perform if no such succession or assignment had taken place.
<PAGE>
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IN WITNESS WHEREOF, the Company and the Association have caused this
Agreement to be executed by their duly authorized officers, and Executive has
signed this Agreement, on the day and date first above written.
ATTEST: JOACHIM FEDERAL SAVINGS
AND LOAN ASSOCIATION
/s/ Lee Ellen Hogan BY: /s/ Andrew England
- - -------------------- -------------------
[SEAL]
ATTEST: JOACHIM BANCORP, INC.
/s/ Lee Ellen Hogan BY: /s/ Andrew England
- - --------------------- ------------------
[SEAL]
WITNESS:
/s/ Bernard R. Westhoff /s/ Lee Ellen Hogan
- - ------------------------ --------------------
BERNARD R. WESTHOFF LEE ELLEN HOGAN
<PAGE>
<PAGE>
EXHIBIT 10(c)
AGREEMENT
This AGREEMENT is made effective as of December 27, 1995 by and between
JOACHIM FEDERAL SAVINGS AND LOAN ASSOCIATION (the "Association"); JOACHIM
BANCORP, INC. ("Company"); and MELVIN L. YARBROUGH (the "Executive").
WHEREAS, the Association recognizes the substantial contribution
Executive has made to the Association and wishes to protect his position
therewith for the period provided in this Agreement; and
WHEREAS, Executive serves in the position of Vice President of the
Association, a position of substantial responsibility;
NOW, THEREFORE, in consideration of the foregoing and upon the other
terms and conditions hereinafter provided, the parties hereto agree as
follows:
1. Term Of Agreement
The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for a period of thirty-six (36)
full calendar months thereafter. Commencing on the first anniversary date of
this Agreement and continuing at each anniversary date thereafter, the Board
of Directors of the Association ("Board") may extend the Agreement for an
additional year. The Board will conduct a performance evaluation of the
Executive for purposes of determining whether to extend the Agreement, and
the results thereof shall be included in the minutes of the Board's meeting.
2. Payments To Executive Upon Change In Control.
(a) Upon the occurrence of a Change in Control (as herein defined) of
the Association followed within twelve (12) months of the effective date of a
Change in Control by the voluntary or involuntary termination of Executive's
employment, other than for Cause, as defined in Section 2(c) hereof, the
provisions of Section 3 shall apply. For purposes of this Agreement,
"voluntary termination" shall be limited to the circumstances in which the
Executive elects to voluntarily terminate his employment within twelve (12)
months of the effective date of a Change in Control following any demotion,
loss of title, office or significant authority, reduction in his annual
compensation or benefits (other than a reduction affecting the Bank's
personnel generally), or relocation of his principal place of employment by
more than 35 miles from its location immediately prior to the Change in
Control.
(b) A "Change in Control" of the Company or the Association shall be
deemed to occur if and when (a) an offeror other than the Company purchases
shares of the common stock of the Company or the Association pursuant to a
tender or exchange offer for such shares, (b) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
is or becomes the beneficial owner, directly or indirectly, of securities of
the Company or the Association representing 25% or more of the combined
voting power of the Company's then outstanding securities, (c) the membership
of the board of directors of the Company or the Association changes as the
result of a contested election, such that individuals who were directors at
the beginning of any twenty-four month period (whether commencing before or
after the date of adoption of this Plan) do not constitute a majority of the
Board at the end of such period, or (d) shareholders of the Company or the
Association approve a merger, consolidation, sale or disposition of all or
substantially all of the Company's or the Association's assets, or a plan of
partial or complete liquidation.
(c) Executive shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term
"Termination for Cause" shall mean termination because of the Executive's
intentional failure to perform stated duties, personal dishonesty,
incompetence, willful misconduct, any breach of fiduciary duty involving
personal profit, willful violation of any law, rule, regulation (other than
traffic violations or similar offenses) or final cease and desist order, or
any material breach of any material provision of this Agreement. In
determining incompetence, the acts or omissions shall be measured against
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standards generally prevailing in the savings institution industry.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him
a copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to Executive and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Executive was guilty of
conduct justifying Termination for Cause and specifying the particulars
thereof in detail. The Executive shall not have the right to receive
compensation or other benefits for any period after Termination for Cause.
3. Termination
(a) Upon the occurrence of a Change in Control, followed within twelve
(12) months of the effective date of a Change in Control by the voluntary or
involuntary termination of the Executive's employment other than for
Termination for Cause, the Association shall be obligated to pay the
Executive, or in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay, a sum
equal to 2.99 times the Executive's "base amount" within the meaning of
Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended. Such
amount shall be paid to the Executive in a lump sum no later than thirty (30)
days after the date of his termination.
(b) Upon the occurrence of a Change in Control of the Association
followed within twelve (12) months of the effective date of a Change in
Control by the Executive's voluntary or involuntary termination of
employment, other than for Termination for Cause, the Association shall cause
to be continued life, medical, dental and disability coverage substantially
identical to the coverage maintained by the Association for the Executive
prior to his severance. Such coverage and payments shall cease upon
expiration of thirty-six (36) months from the date of the Executive's
termination.
(c) Notwithstanding the preceding paragraphs of this Section 3, in the
event that the aggregate payments or benefits to be made or afforded to the
Executive under this Section would be deemed to include an "excess parachute
payment" under Section 280G of the Code, such payments or benefits shall be
payable or provided to Executive in equal monthly installments over the minimum
period necessary to reduce the present value of such payments or benefits to
an amount which is one dollar ($1.00) less than three (3) times the
Executive's "base amount" under Section 280G(b)(3) of the Code.
(d) Any payments made to the Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.
4. Effect On Prior Agreements And Existing Benefit Plans
This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the Association and
Executive, except that this Agreement shall not affect or operate to
reduce any benefit or compensation inuring to Executive of a kind elsewhere
provided. No provision of this Agreement shall be interpreted to mean that
Executive is subject to receiving fewer benefits than those available to him
without reference to this Agreement.
5. No Attachment
(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and
any attempt, voluntary or involuntary, to affect any such action shall be
null, void, and of no effect.
(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Company, the Association and their respective successors and
assigns.
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6. Modification And Waiver
(a) This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.
(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by an estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be deemed
a continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
7. Required Provisions
(a) The Association may terminate the Executive's employment at any
time, but any termination by the Association, other than Termination for
Cause, shall not prejudice Executive's right to compensation or other
benefits under this Agreement. Executive shall not have the right to receive
compensation or other benefits for any period after Termination for Cause as
defined in Section 2(c) herein.
(b) If the Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice served
under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(3) and (g)(1)), the Association's obligations under the
Agreement shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
Association may, in its discretion, (i) pay the Executive all or part of the
compensation withheld while its contract obligations were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.
(c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)),
all obligations of the Association under the Agreement shall terminate as of
the effective date of the order, but vested rights of the contracting parties
shall not be affected.
(d) If the Association is in default (as defined in Section 3(x)(1)
of the FDIA), all obligations under this Agreement shall terminate as of the
date of default, but this paragraph shall not affect any vested rights of the
parties.
(e) All obligations under this Agreement may be terminated: (i) by
the Director of the Office of Thrift Supervision (the "Director") or his or
her designee at the time the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide assistance
to or on behalf of the Association under the authority contained in Section
13(c) of the FDIA and (ii) by the Director, or his or her designee at the
time the Director or such designee approves a supervisory merger to resolve
problems related to operation of the Association or when the Association is
determined by the Director to be in an unsafe or unsound condition. Any
rights of the parties that have already vested, however, shall not be
affected by such action.
8. Severability
If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other
provision of this Agreement or any part of such provision not held so
invalid, and each such other provision and part thereof shall to the full
extent consistent with law continue in full force and effect.
9. Headings For Reference Only
The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
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10. Governing Law
The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Missouri, unless
preempted by Federal law as now or hereafter in effect.
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a
panel of three arbitrators sitting in a location selected by the employee
within fifty (50) miles from the location of the Association, in accordance
with the rules of the American Arbitration Association then in effect.
11. Source of Payments
All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Association. The Company, however,
guarantees all payments and the provision of all amounts and benefits due
hereunder to Executive and, if such payments are not timely paid or provided
by the Association, such amounts and benefits shall be paid or provided by
the Company.
12. Payment Of Legal Fees
All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be
paid or reimbursed by the Association if Executive is successful on the
merits pursuant to a legal judgment, arbitration or settlement.
13. Successor To The Association
The Association and the Company shall require any successor or assignee,
whether direct or indirect, by purchase, merger, consolidation or otherwise,
to all or substantially all the business or assets of the Association or the
Company, expressly and unconditionally to assume and agree to perform the
Association's or the Company's obligations under this Agreement, in the same
manner and to the same extent that the Association or the Company would be
required to perform if no such succession or assignment had taken place.
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14. Signatures
IN WITNESS WHEREOF, the Company and the Association have caused this
Agreement to be executed by a duly authorized officer, and Executive has
signed this Agreement, on the day and date first above written.
ATTEST: JOACHIM BANCORP, INC
/s/ Lee Ellen Hogan By: /s/ Andrew England
-------------------- ------------------
ATTEST: JOACHIM FEDERAL SAVINGS AND LOAN ASSOCIATION
/s/ Lee Ellen Hogan By: /s/ Andrew England
-------------------- --------------------
WITNESS:
/s/ Bernard R. Westhoff By: /s/ Melvin L. Yarbrough
- - ------------------------ ------------------------
BERNARD R. WESTHOFF MELVIN L. YARBROUGH
<PAGE>
<PAGE>
EXHIBIT 13
1996 Annual Report to Stockholders
To our stockholders:
It is a pleasure to present the first annual report to stockholders of
Joachim Bancorp, Inc. The Company earned $208,536 for the year ended March
31, 1996 compared to $235,765 for the year ended March 31, 1995. The
Company's recognition of employee stock ownership plan expense and lower
noninterest income exceeded higher net interest income and lower income taxes.
Net earnings for 1996 were down compared to 1995 since the benefits of
investment of the proceeds of common stock for approximately three months were
more than offset by twelve months of ESOP expense. The employee stock
ownership plan became effective April 1, 1995. Joachim Bancorp, Inc.
significantly increased its capital ratios as a result of completion of the
offering of common stock. The Association's capital ratios are over five
times that required by present regulations.
The Company declared its first cash dividend of $.125 per share payable
March 31, 1996 to stockholders of record March 15, 1996.
On behalf of the Board of Directors, officers and staff of Joachim
Bancorp, Inc., we want to express our appreciation to our stockholders and
customers for their continued loyalty.
Sincerely,
/s/ Bernard R. Westhoff
-------------------------
BERNARD R. WESTHOFF
PRESIDENT
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BUSINESS OF THE COMPANY AND THE ASSOCIATION
On December 27, 1995, Joachim Federal Savings and Loan Association
(Association) converted from mutual to stock form and became a wholly-owned
subsidiary of a newly formed Missouri holding company, Joachim Bancorp, Inc.
(Company). The Company sold 760,437 shares of common stock at $10 per share
in conjunction with the subscription offering to the Association's Employee
Stock Ownership Plan (ESOP), eligible account holders and other members.
Proceeds of the sale of common stock of the Company were $6,465,575, after
deducting conversion costs of $530,445, and unearned compensation related to
shares issued to the ESOP. The Company retained 50% of the net conversion
proceeds less the funds used to make the ESOP loan to the Association for
purchase of shares of common stock for the Association's ESOP and used the
balance of the net proceeds to purchase all of the stock of the Association
issued in the conversion.
The Company has no significant assets other than the common stock of the
Association, the loan to the ESOP and net proceeds retained by the Company
following the conversion. The Company's principal business is the business of
the Association.
The Association operates as a federally-chartered stock savings and loan
association, originally chartered by the State of Missouri in 1962. The
Association's deposit accounts are insured up to a maximum of $100,000 by the
Savings Association Insurance Fund (SAIF), which is administered by the
Federal Deposit Insurance Corporation (FDIC).
The Association's primary business, as conducted through its office located in
DeSoto, Missouri, is the origination of mortgage loans secured by one- to
four-family residences located primarily in Jefferson County, Missouri.
Lending activities are funded through attraction of deposit accounts,
consisting of certificate accounts, money-market deposit accounts, savings
accounts and NOW accounts. To a lesser extent, the Association originates
mortgage loans on commercial and agricultural real estate as well as consumer
loans.
COMMON STOCK
The Company's common stock is traded on the Nasdaq Small Cap Market under the
symbol "JOAC". The following table sets forth the market price and dividend
information on the Company's common stock:
Quarter Ended High Low Dividend
- - -------------- ------ ------ --------
December 31, 1995 $14.00 $10.00 $.00
March 31, 1996 $13.75 $11.50 $.125
Dividend declaration and payment decisions are made after considering a
variety of factors, including earnings, financial condition, market
considerations and regulatory restrictions. Restrictions on dividend payments
are described in note 11 of the Notes to Consolidated Financial Statements.
As of March 31, 1996, the Company had approximately 348 stockholders of record
(which includes nominees for beneficial owners holding shares in "street
name").
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SELECTED FINANCIAL HIGHLIGHTS
FINANCIAL CONDITION DATA:
At March 31,
1996 1995 1994 1993 1992
(Dollars in Thousands)
------ ------ ------ ------ ------
Assets $ 36,779 30,011 30,955 31,024 31,914
Cash and cash equivalents 5,385 2,979 2,227 2,364 4,868
Securities, certificates of
deposit and FHLB stock 6,888 3,778 5,289 5,067 4,775
Loans receivable, net 22,932 22,106 22,374 22,459 21,291
Mortgage-backed and related
securities 874 137 183 195 206
Deposits 25,644 25,475 26,582 26,918 28,167
Stockholders' equity (1) 10,751 4,083 3,847 3,553 3,280
OPERATING DATA:
For the Year Ended March 31,
1996 1995 1994 1993 1992
(Dollars in Thousands)
------ ------ ------ ------ ------
Interest income $ 2,349 2,058 2,139 2,356 2,614
Interest expense (1,158) (903) (957) (1,201) (1,728)
Net interest income 1,191 1,155 1,182 1,155 886
Provision for loan losses (12) (21) (17) (42) (5)
Net interest income after
provision for loan losses 1,180 1,134 1,165 1,113 881
Noninterest income 57 71 82 77 63
Noninterest expense (929) (852) (785) (762) (731)
Earnings before income taxes 308 353 462 428 213
Income taxes (99) (117) (168) (155) (67)
Net earnings $ 209 236 294 273 146
Earnings per share $ .28 - - - -
Dividends per share $ .125 - - - -
(1) Stockholders' equity at March 31, 1996 includes $6.5 million from the net
proceeds of the sale of common stock in connection with the conversion
from mutual to stock form and the formation of a holding company.
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The business of the Association is that of a financial intermediary consisting
primarily of attracting deposits from the general public and using such
deposits to originate mortgage loans secured by one to four family residences
and, to a lesser extent, commercial and agricultural real estate loans, and
consumer loans. The Association's revenues are derived principally from
interest earned on loans and, to a lesser extent, from interest earned on
investments. The operations of the Association are influenced significantly
by general economic conditions and by policies of financial institution
regulatory agencies, including the Office of Thrift Supervision (OTS) and the
Federal Deposit Insurance Corporation (FDIC). The Association's cost of funds
is influenced by interest rates on competing investments and general market
interest rates. Lending activities are affected by the demand for financing
of real estate and other types of loans, which in turn is affected by the
interest rates at which such financing may be offered.
The Association's net interest income is dependent primarily upon the
difference or spread between the average yield earned on loans and investments
and the average rate paid on deposits, as well as the relative amounts of such
assets and liabilities. Joachim Federal, as other financial institutions, is
subject to interest rate risk to the degree that its interest-bearing
liabilities mature or reprice at different times, or on a different basis,
than its interest-earning assets.
ASSET/LIABILITY MANAGEMENT
The Association's principal financial objective is to achieve long-term
profitability while reducing its exposure to fluctuating interest rates. The
Association has sought to reduce exposure of its earnings to changes in market
interest rates by managing the mismatch between asset and liability maturities
and interest rates. The principal element in achieving this objective is to
increase the interest-rate sensitivity of the Association's assets by
originating loans with interest rates subject to periodic adjustment to
market conditions. Accordingly, when possible, the Association has emphasized
the origination of adjustable-rate mortgage (ARM) loans for retention in its
portfolio. In addition, the Association maintains an investment portfolio
with laddered maturities in shorter-term securities. The Association
relies on retail deposits as its primary source of funds. Management believes
retail deposits, compared to brokered deposits, reduce the effects of interest
rate fluctuations because they generally represent a more stable source of
funds. As part of its interest rate risk management strategy, the Association
promotes transaction accounts and one- to three-year certificates of deposit.
The OTS provides a net market value methodology to measure the interest rate
risk exposure of thrift institutions. This exposure is a measure of the
potential decline in the net portfolio value (NPV) of the institution based
upon the effect of an assumed 200 basis point increase or decrease in interest
rates. NPV is the present value of the expected net cash flows from the
institution's assets, liabilities and off-balance sheet contracts. Under OTS
regulations, an institution's normal level of interest rate risk in the
event of this assumed change in interest rates is a decrease in the
institution's NPV in an amount not exceeding 2% of the present value of its
assets. This procedure for measuring interest rate risk was developed by the
OTS to replace the gap analysis (the difference between interest-earning
assets and interest-bearing liabilities that mature or reprice within a
specific time period).
<PAGE>
<PAGE>
The following table sets forth as of December 31, 1995 the estimated changes
in market value of equity based on the indicated interest rate environments:
Change
(In Basis Points) Estimated Change In
in Interest Rates Net Portfolio Value
(Dollars in Thousands)
----------------- --------------------
+400 $(122) (2) %
+300 73 1
+200 172 2
+100 142 2
0 - -
-100 (106) (1)
-200 (114) (1)
-300 (35) -
-400 82 1
As with any method of measuring interest rate risk, certain shortcomings are
inherent in the method of analysis presented in the foregoing table. For
example, although certain assets and liabilities may have similar maturities
or periods to repricing, they may react in different degrees to changes in
market interest rates. Also, the interest rates on certain types of assets
and liabilities may fluctuate in advance of changes in market interest rates,
while interest rates on other types may lag behind changes in market rates.
Additionally, certain assets, such as ARM loans, have features which restrict
changes in interest rates on a short term basis and over the life of the
asset. Further, in the event of a change in interest rates, expected rates of
prepayments on loans and early withdrawals from certificates could likely
deviate significantly from those assumed in calculating the table.
LIQUIDITY AND CAPITAL RESOURCES
The Association's principal sources of funds are cash receipts from deposits,
loan repayments by borrowers, proceeds from maturing securities, and net
earnings. The Association has an agreement with the FHLB of Des Moines to
provide cash advances, should the Association need additional funds. For
regulatory purposes, liquidity is measured as a ratio of cash and certain
investments to withdrawable deposits. The minimum level of liquidity required
by regulation is presently 5%. The Association's liquidity ratio at March 31,
1996 was approximately 31%. The Association maintains a higher level of
liquidity than required by regulation as a matter of management philosophy in
order to more closely match interest-sensitive assets with interest-sensitive
liabilities.
The Association has $12.4 million in certificates due within one year and $9.5
million in other deposits without specific maturity at March 31, 1996.
Management estimates that most of the deposits will be retained or replaced by
new deposits.
Assets increased from $30.0 million at March 31, 1995 to $36.8 million at
March 31, 1996. Securities, cash and cash equivalents, as well as
certificates of deposit, increased as a result of investment of proceeds from
sale of common stock. Foreclosed real estate held for sale decreased
primarily due to the sale of the Association's interest in an office building.
Accrued interest on securities and certificates of deposit increased due to a
higher portfolio balance. Accrued interest on loans receivable increased
as a result of repricing of adjustable-rate loans due to higher interest
rates. Advances by borrowers for taxes and insurance decreased from $210,000
at March 31, 1995 to $128,000 at March 31, 1996. Advances by borrowers for
taxes and insurance decreased due to rebate of escrow surplus to borrowers in
accordance with new industry regulations.
<PAGE>
<PAGE>
Commitments to originate loans are legally binding agreements to lend to the
Association's customers. Commitments to originate adjustable-rate and
fixed-rate mortgage loans at March 31, 1996, which generally expire in 90 days
or less, were $141,000 and $198,000, respectively.
Proposals have been introduced in the U.S. Congress which, if adopted, would
overhaul the savings and loan industry. The most significant of these
proposals would recapitalize the SAIF through a one-time special assessment of
approximately 85 basis points on the amount of deposits held by the
institution. Should the Association be required to pay such special
assessment, the Association's capital would be reduced by approximately
$144,000 based on deposits of $25.7 million as of March 31, 1996 and a tax
rate of approximately 34%. In the event the assessment is not deductible for
tax purposes, capital would be reduced by approximately $218,000. Management
cannot predict whether the special assessment proposal will be enacted, or, if
enacted, the amount of any one-time fee or the date to be used for determining
deposits on which the assessment would be based.
The following table presents the Association's capital position relative to
its regulatory capital requirements at March 31, 1996:
Regulatory Capital
Tangible Core Risk-Based
-------- ------ ----------
Stockholders' equity per consolidated
financial statements $10,751,345 10,751,345 10,751,345
Stockholders' equity of the Company not
available for regulatory
capital purposes (3,472,272) (3,472,272) (3,472,272)
GAAP capital, as adjusted 7,279,073 7,279,073 7,279,073
General valuation allowances - - 72,000
Regulatory capital 7,279,073 7,279,073 7,351,073
Regulatory capital requirement (507,819) (1,015,638) (1,333,440)
Regulatory capital - excess $ 6,771,254 6,263,435 6,017,633
Regulatory capital ratio 21.50% 21.50% 44.10%
Regulatory capital requirement (1.50) (3.00) (8.00)
Regulatory capital ratio - excess 20.00% 18.50% 36.10%
<PAGE>
<PAGE>
AVERAGE BALANCES, INTEREST AND AVERAGE YIELDS AND RATES
The following table presents for the years indicated the total dollar amount
of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates. No tax equivalent
adjustments were made. All average balances are monthly average balances.
Nonaccruing loans have been included in the table as loans carrying a zero
yield.
<TABLE>
Year Ended March 31,
1996 1995 1994
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
------- -------- ------- ------- -------- ------- ------- -------- -------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable $ 22,144 1,822 8.23% 22,364 1,743 7.79% 22,889 1,809 7.90%
Mortgage-backed and related
securities 193 13 7.01% 158 11 7.32% 189 14 7.34%
Securities and FHLB stock 3,118 168 5.38% 3,861 207 5.35% 4,194 250 5.96%
Other interest-earning assets 5,877 346 5.89% 2,065 97 4.69% 2,331 66 2.86%
Total interest-earning assets 31,332 2,349 7.50% 28,448 2,058 7.23% 29,603 2,139 7.23%
Interest-bearing liabilities:
NOW and money market
accounts 2,270 66 2.88% 2,625 69 2.61% 3,159 87 2.78%
Savings accounts 6,683 198 2.96% 8,209 226 2.76% 9,036 268 2.96%
Certificates 16,740 894 5.34% 14,658 608 4.15% 14,784 602 4.07%
Total interest-bearing
liabilities $ 25,693 1,158 4.51% 25,492 903 3.54% 26,979 957 3.55%
Net interest income before
provision for loan losses $ 1,191 1,155 1,182
Interest rate spread 2.99% 3.69% 3.68%
Net earning assets $ 5,639 2,956 2,624
Net yield on average
interest-earning assets 3.80% 4.06% 3.99%
Ratio of average interest-earning
assets to average interest-
bearing liabilities 121.94% 111.60% 109.73%
</TABLE>
<PAGE>
<PAGE>
RATE/VOLUME ANALYSIS
The following table sets forth certain information regarding changes in interest
income and interest expense of the Company for the years indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes in volume (changes in volume multiplied by
prior year's rate), rates (changes in rate multiplied by prior year's volume)
and rate/volume (changes in rate multiplied by the changes in volume).
<TABLE>
Year Ended March 31,
1996 vs. 1995 1995 vs. 1994
Increase (Decrease) Due To Increase (Decrease) Due To
Rate/ Rate/
Volume Rate Volume Total Volume Rate Volume Total
(Dollars in Thousands)
------ ---- ------ ----- ------ ---- ------ -----
Interest income:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable $ (18) 98 (1) 79 (41) (25) - (66)
Mortgage-backed and related
securities 3 (1) - 2 (2) - - (2)
Securities and FHLB stock (40) 1 - (39) (20) (26) 3 (43)
Other interest-earning assets 179 25 45 249 (8) 43 (5) 30
Total interest-
earning assets 124 123 44 291 (71) (8) (2) (81)
Interest expense:
Deposits 7 247 1 255 (53) (3) 2 (54)
Total interest-
bearing liabilities 7 247 1 255 (53) (3) 2 (54)
Net interest income $ 117 (124) 43 36 (18) (5) (4) (27)
</TABLE>
RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED MARCH 31, 1996 TO THE YEAR ENDED MARCH 31, 1995
NET EARNINGS
Net earnings decreased by $27,000 from $236,000 for the year ended March 31,
1995 to $209,000 for the year ended March 31, 1996. The decrease in net
earnings was due to expenses associated with the employee stock ownership plan
(ESOP) and lower noninterest income, which was offset by higher net interest
income and lower income taxes. Proceeds from the sale of common stock
completed in December, 1995 of $6.5 million were invested for three months.
However, ESOP expense was the equivalent of a full year of expense since it
was retroactive to April 1, 1995.
NET INTEREST INCOME
Net interest income increased by $36,000 from $1,155,000 for 1995 to $1,191,000
for 1996. The increase in net interest income was due to a higher ratio of
average interest-earning assets to average interest-bearing liabilities which
more than offset the effect of a declining interest rate spread. The ratio of
average interest-earning assets to average interest-bearing liabilities
increased from 111.60% for 1995 to 121.94% for 1996 due, in part, to proceeds
from the sale of common stock. The interest rate spread decreased from 3.69%
for 1995 to 2.99% for 1996 due primarily to a higher weighted-average rate paid
on deposits. Interest on loans receivable increased due to a higher weighted-
average yield, which more than offset a lower average balance. The weighted-
average yield increased from 7.79% for 1995 to 8.23% for 1996 as a result of
loan originations, refinances and repricing of ARM loans at market interest
rates higher than the average yield on the existing loan portfolio.
<PAGE>
<PAGE>
Interest on securities decreased as a result of a lower average balance. The
average balance on securities decreased from $3.8 million for 1995 to $3.1
million for 1996. Interest on other interest-earning assets increased due to
a higher average balance and weighted-average yield. The average balance on
other interest-earning assets, increased from $2.0 million for 1995 to $5.9
million for 1996 due, in part, to investment of proceeds from sale of common
stock. Other interest-earning assets consist primarily of FHLB daily time
accounts and time deposits. Management expects to reinvest a significant
portion of cash equivalents into loans, securities and mortgage-backed
securities meeting the risk guidelines of the Association. The weighted-
average yield on other interest-earning assets increased from 4.69% for 1995
to 5.89% for 1996. Interest on deposits increased as a result of a higher
weighted-average rate. The weighted average rate on deposits increased from
3.54% for 1995 to 4.51% for 1996 due to rising market interest rates.
PROVISION FOR LOAN LOSSES
Provision for loan losses decreased from $21,000 for 1995 to $12,000 for 1996.
Net loan charge-offs were $10,000 for 1995 compared to net loan recoveries of
$200 for 1996. The provision for loan losses was based upon management's
consideration of existing and anticipated economic conditions which may affect
the ability of borrowers to repay the loans. Management also reviews
individual loans for which full collectibility may not be reasonably assured
and considers, among other matters, the risks inherent in the Association's
portfolio and the estimated fair value of the underlying collateral. This
evaluation is ongoing and results in variations in the Association's provision
for loan losses.
NONINTEREST INCOME
Noninterest income decreased from $71,000 for 1995 to $57,000 for 1996 due
primarily to lower rental income on foreclosed real estate offset, in part, by
a patronage dividend received from the Association's data processor. The
Association had a 23.33% interest in an office building in the St. Louis area
which was foreclosed upon in 1992. The lease with the building's only tenant
expired on December 31, 1994. The building was sold in November, 1995.
NONINTEREST EXPENSE
Noninterest expense increased from $853,000 for 1995 to $929,000 for 1996 due
primarily to the implementation of the Association's employee stock ownership
plan. ESOP expense was $88,000 for 1996 compared to none for 1995. Under
generally accepted accounting principles, expense of the ESOP is affected by
changes in the market price of the Company's common stock and ESOP shares
committed to be released. Management expects professional fees and other
noninterest expense will increase in the future as a result of the Company
operating as a public company.
INCOME TAXES
Income taxes decreased from $117,000 for 1995 to $99,000 for 1996 as a result
of lower earnings.
COMPARISON OF THE YEAR ENDED MARCH 31, 1995 TO THE YEAR ENDED MARCH 31, 1994
NET EARNINGS
Net earnings decreased by $58,000 to $236,000 for the year ended March 31,
1995 from $294,000 for the year ended March 31, 1994. The decrease in net
earnings was due primarily to higher compensation and benefits, professional
fees and other expenses.
NET INTEREST INCOME
Net interest income decreased by $27,000 to $1,155,000 for 1995 from
$1,182,000 for 1994. Generally, net interest income declined due to lower
average balances of interest-earning assets and interest-bearing liabilities
as the Association's interest rate spread increased only 1 basis point to
3.69% for 1995 from 3.68% for 1994. Interest on loans receivable decreased
due to a lower average balance and to a lower average yield. Average yields
decreased to 7.79% for 1995 from 7.90% for 1994 as a result of loan
originations, refinances and repricing of ARM loans at market interest rates
lower than the average yield on the existing loan portfolio. Interest on
securities decreased due to a lower average balance, as maturing securities
were reinvested in cash and cash equivalents, and to a lower average yield,
which decreased to 5.35% for 1995 from 5.96% for 1994. Interest on other
interest-earning assets increased as a result of a higher average yield, which
increased to 4.69% for 1995 from 2.86% for 1994 due to higher yields earned on
the FHLB daily time account and certificates of deposit. The decrease in
total interest income was partially offset by a decrease in total interest
expense. The decrease in total interest expense was due to a lower average
balance of deposits.
PROVISION FOR LOAN LOSSES
The Association's provision for loan losses was $21,000 for 1995 and $17,000
for 1994. Net loan charge-offs were $10,000 and $6,000 for 1995 and 1994,
respectively.
NONINTEREST INCOME
Noninterest income decreased to $71,000 for 1995 from $83,000 for 1994, due
primarily to a decline in net rental income on foreclosed real estate.
NONINTEREST EXPENSE
Noninterest expense increased to $853,000 for 1995 from $785,000 for 1994.
Noninterest expense increased primarily as a result of higher compensation and
benefits expense, professional fees, and other noninterest expenses and the
absence of gain on foreclosed real estate. Compensation and benefits
increased due to cost of living salary increases which were partially offset
by the effect of a lower number of employees. Professional fees increased due
to legal fees incurred in conjunction with a proposed merger-conversion with
another financial institution and with changing from a state-chartered to a
federally-chartered mutual association. Other noninterest expense increased
due to higher advertising expenses and attendance by officers and directors at
an industry conference. In 1994, the Association realized a gain of $7,000 on
foreclosed real estate with no comparable gain in 1995.
INCOME TAXES
Income taxes decreased to $117,000 for 1995 from $168,000 for 1994 due
primarily to lower earnings. In addition, the effective tax rate for 1995 was
lower as compared to 1994 as a result of tax-exempt interest received on
municipal bonds.
IMPACT OF INFLATION
The financial statements and related data presented herein have been prepared
in accordance with generally accepted accounting principles which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation. The primary impact of inflation on the operations
of the Association is reflected in increased operating costs. Unlike most
industrial companies, virtually all of the assets and liabilities of a
financial institution are monetary in nature. As a result, interest rates,
generally, have a more significant impact on a financial institution's
performance than does inflation. Interest rates do not necessarily move in
the same direction or to the same extent as the prices of goods and services.
In the current interest rate environment, liquidity and the maturity structure
of the Association's assets and liabilities are critical to the maintenance of
acceptable performance levels.
<PAGE>
<PAGE>
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In May, 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage Servicing
Rights." SFAS No. 122 requires mortgage banking enterprises to recognize the
rights to service mortgage loans for others as separate assets regardless of
whether such rights were purchased or originated. SFAS No. 122 is not
expected to affect the Company's financial position or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 requires that compensation cost for stock-based
employee compensation plans be measured at the grant date based on the fair
value of the award and recognized over the service period, which is usually
the vesting period. Stock-based employee compensation plans include stock
purchase plans, stock options, restricted stock and stock appreciation rights.
Employee stock ownership plans are not covered by this statement. SFAS No.
123 is effective for transactions entered into in fiscal years that begin
after December 15, 1995, with earlier application permitted. The Company is
awaiting stockholder approval of its management recognition plan and stock
option plan. Management cannot determine the effect of the compensation plans
on the financial position or results of operations.
<PAGE>
<PAGE>
MICHAEL TROKEY & COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
10411 CLAYTON ROAD
ST. LOUIS, MISSOURI 63131
(314) 432-0996
Report of Independent Auditors
The Board of Directors
Joachim Bancorp, Inc.
DeSoto, Missouri
We have audited the accompanying consolidated balance sheets of Joachim
Bancorp, Inc. and subsidiary (Company) as of March 31, 1996 and 1995, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended March 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Joachim
Bancorp, Inc. and subsidiary as of March 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended March 31, 1996 in conformity with generally accepted accounting
principles.
/s/Michael Trokey & Company, P.C.
St. Louis, Missouri
April 19, 1996
<PAGE>
<PAGE>
JOACHIM BANCORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31, 1996 and 1995
Assets 1996 1995
------ ------ ------
Cash and cash equivalents $ 5,384,802 2,978,861
Certificates of deposit 1,300,242 1,000,000
Securities held to maturity, at amortized
cost (market value of $5,266,825 and
$2,457,393, respectively) 5,298,854 2,495,433
Stock in Federal Home Loan Bank of Des Moines 288,500 282,800
Mortgage-backed and related securities held
to maturity, at amortized cost (market value
of $861,705 and $130,789, respectively) 873,599 136,639
Loans receivable, net 22,932,379 22,106,161
Premises and equipment, net 365,101 388,748
Foreclosed real estate held for sale, net - 358,214
Accrued interest receivable:
Securities and certificates of deposit 120,420 53,010
Mortgage-backed and related securities 4,850 844
Loans receivable 126,240 116,794
Other assets, including prepaid income taxes
of $34,580 and $53,692, respectively 84,364 93,334
------ ------ ------
Total assets $36,779,351 30,010,838
Liabilities and Stockholders' Equity
Deposits $25,644,434 25,475,115
Accrued interest on deposits 26,644 20,167
Advances from borrowers for taxes and insurance 128,166 209,641
Other liabilities 80,762 103,005
Deferred tax liability 148,000 120,000
Total liabilities 26,028,006 25,927,928
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; none issued and outstanding - -
Common stock, $.01 par value; 5,000,000 shares
authorized; 760,437 shares issued
and outstanding 7,604 -
Additional paid-in capital 7,077,876 -
Common stock acquired by ESOP (538,130) -
Retained earnings-substantially restricted 4,203,995 4,082,910
Total stockholders' equity 10,751,345 4,082,910
---------- ---------
Total liabilities and stockholders'
equity $36,779,351 30,010,838
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
JOACHIM BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Earnings
Years Ended March 31, 1996, 1995, and 1994
1996 1995 1994
Interest income: ------ ------ ------
Loans receivable $ 1,821,537 1,743,197 1,808,751
Mortgage-backed and related securities 13,504 11,535 13,891
Securities 167,616 206,646 249,907
Other interest-earning assets 346,100 96,802 66,608
Total interest income 2,348,757 2,058,180 2,139,157
Interest expense:
Deposits:
NOW accounts 30,287 30,510 38,859
Money market deposit accounts 35,092 37,880 48,921
Savings accounts 198,097 226,268 267,797
Certificates 894,074 608,112 601,552
Total interest expense 1,157,550 902,770 957,129
Net interest income 1,191,207 1,155,410 1,182,028
Provision for loan losses 11,587 21,147 17,300
Net interest income after provision
for loan losses 1,179,620 1,134,263 1,164,728
Noninterest income:
Loan service charges 21,151 22,508 22,867
NOW service charges 23,611 26,801 27,212
Rental income (expense) from foreclosed
real estate (8,936) 15,337 24,708
Other 20,988 6,560 7,913
Total noninterest income 56,814 71,206 82,700
Noninterest expense:
Compensation and benefits 627,156 545,909 513,154
Occupancy expense 24,465 21,799 23,492
Equipment and data processing expense 78,735 80,549 79,344
Loss (gain) on foreclosed real estate, net (2,204) 45 (6,958)
SAIF deposit insurance premium 58,927 59,963 54,704
Professional fees 42,831 44,903 31,613
Other 98,988 99,536 89,867
Total noninterest expense 928,898 852,704 785,216
Earnings before income taxes 307,536 352,765 462,212
Income taxes:
Current 77,000 111,000 191,000
Deferred 22,000 6,000 (23,000)
Total income taxes 99,000 117,000 168,000
Net earnings $ 208,536 235,765 294,212
Net earnings per common share $ .28 - -
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
JOACHIM BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years Ended March 31, 1996, 1995 and 1994
Common
Additional Stock Total
Common Paid-in Acquired Retained Stockholders'
Stock Capital by ESOP Earnings Equity
----- ------- -------- -------- ------
Balance at
March 31, 1993 $ - - - 3,552,933 3,552,933
Net earnings - - - 294,212 294,212
Balance at
March 31, 1994 - - - 3,847,145 3,847,145
Net earnings - - - 235,765 235,765
Balance at
March 31, 1995 - - - 4,082,910 4,082,910
Proceeds from sale
of common stock 7,604 7,066,321 (608,350) - 6,465,575
Amortization of ESOP
awards - 17,555 70,220 - 87,775
Tax effect on
amortization
of ESOP awards - (6,000) - - (6,000)
Cash dividends
of $.125
per share - - - (87,451) (87,451)
Net earnings - - - 208,536 208,536
Balance at
March
31, 1996 $ 7,604 7,077,876 (538,130) 4,203,995 10,751,345
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
JOACHIM BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended March 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from ------- ------- -------
operating activities:
Net earnings $ 208,536 235,765 294,212
Adjustments to reconcile net
earnings to netcash provided by
(used for) operating activities:
Depreciation 30,455 30,661 32,662
ESOP expense 87,775 - -
Amortization of premiums, net of
securities and mortgage-backed
and related securities 9,969 11,206 32,364
Provision for loan losses 11,587 21,147 17,300
Loss (gain) on foreclosed real
estate, net (2,204) 45 (6,958)
FHLB stock dividends (5,700) - (5,500)
Decrease (increase) in:
Accrued interest receivable (80,862) (1,683) 55,117
Other assets 8,970 (40,338) (6,304)
Increase (decrease) in:
Accrued interest on deposits 6,477 3,333 (3,189)
Other liabilities (22,243) (10,807) 37,772
Accrued income taxes - (55,152) (79,025)
Deferred tax liability 22,000 6,000 (23,000)
Other, net (242) - -
Net cash provided by (used for)
operating activities 274,518 200,177 345,451
Cash flows from investing activities:
Loans receivable:
Originated (4,528,241) (4,080,439) (4,150,837)
Purchased (1,411,120) (334,620) -
Principal collections 5,223,306 4,553,965 4,218,818
Purchase of mortgage-related
securities held to maturity (756,250) - -
Principal collections on mortgage-
backed securities held to maturity
or for investment 19,035 46,645 11,514
Securities held to maturity or
for investment:
Purchased (3,808,135) - (1,999,652)
Proceeds from maturity 995,000 2,000,000 1,750,000
Certificates of deposit:
Purchased (2,050,000) (1,000,000) (500,000)
Proceeds from maturity 1,750,000 500,000 500,000
Proceeds from sale of
foreclosed real estate, net 238,668 2,140 7,211
Purchases of premises and equipment (6,808) (12,460) (23,869)
<PAGE>
<PAGE>
(Continued)
Net cash provided by/(used for)
investing activities $ (4,334,545) 1,675,231 (186,815)
<PAGE>
<PAGE>
JOACHIM BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended March 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from
financing activities:
Net increase (decrease) in:
Deposits $ 169,319 (1,107,316) (335,897)
Advances from
borrowers for taxes
and insurance (81,475) (16,329) 40,171
Proceeds from sale
of common stock 6,465,575 - -
Cash dividends (87,451) - -
Net cash provided
by (used for)
financing
activities 6,465,968 (1,123,645) (295,726)
Net increase (decrease)
in cash and cash
equivalents 2,405,941 751,763 (137,090)
Cash and cash
equivalents at
beginning of year 2,978,861 2,227,098 2,364,188
Cash and cash
equivalents at end
of year $ 5,384,802 2,978,861 2,227,098
Supplemental disclosures
of cash flow information:
Cash paid (received) during
the year for:
Interest on
deposits $ 1,151,073 899,437 960,318
Federal income
taxes 31,307 200,440 244,461
State income taxes 8,928 19,404 25,564
Real estate acquired
in settlement of loans - 114,187 30,603
See accompanying notes to consolidated financial statements.
<PAGE>
<PAGE>
March 31, 1996 and 1995 and
Years Ended March 31, 1996, 1995 and 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On December 27, 1995, Joachim Federal Savings and Loan Association
(Association) converted from mutual to stock form and became a
wholly-owned subsidiary of a newly formed Missouri holding company,
Joachim Bancorp, Inc. (Company). The following comprise the significant
accounting policies which the Company and Association follow in preparing
and presenting their consolidated financial statements:
a. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Joachim Federal Savings and
Loan Association. The consolidated financial statements also include
the operations of JSLA Service Corp., a subsidiary of Joachim Federal
Savings and Loan Association. JSLA Service Corp. was established for
the purpose of collecting appraisal fees and commissions on sale of
mortgage life and credit life insurance. The Company has no
significant assets other than common stock of the Association, and the
loan to the ESOP, and net proceeds retained by the Company following
the conversion. The Company's principal business is the business of
the Association. All significant intercompany accounts and
transactions have been eliminated.
b. For purposes of reporting cash flows, cash and cash equivalents include
cash and due from depository institutions and interest-bearing deposits
in other depository institutions with original maturities of three
months or less. Interest-bearing deposits in other depository
institutions were $4,758,224 and $2,312,985 at March 31, 1996 and 1995,
respectively.
c. Certificates of deposit are carried at cost, and have original
maturities of more than three months.
d. Securities and mortgage-backed and related securities that the
Association has the positive intent and ability to hold to maturity are
classified as held to maturity securities and reported at cost,
adjusted for amortization of premiums and accretion of discounts over
the life of the security using the interest method. Securities and
mortgage-backed and related securities not classified as held to
maturity securities are classified as available for sale securities and
reported at fair value, with unrealized gains and losses excluded from
net earnings and reported in a separate component of stockholders'
equity. The Association does not purchase securities and
mortgage-backed and related securities for trading purposes. The cost
of securities sold is determined by specific identification.
Collateralized mortgage obligations (CMOs) are mortgage derivatives and
the type owned by the Association are classified as "low-risk" under
regulatory guidelines. CMOs are subject to normal effects of interest
rate risk. The Association does not purchase CMOs at any significant
premium over par value to limit certain prepayment risks, and purchases
only CMOs issued by U.S. government agencies in order to minimize
credit risk.
e. Loans receivable, net are carried at unpaid principal balances, less
unearned discount on loans, allowance for losses and net deferred loan
fees. Loan origination and commitment fees and certain direct loan
origination costs are deferred and amortized to interest income over
the contractual life of the loan using the interest method.
<PAGE>
<PAGE>
f. Effective April 1, 1995, the Association adopted the provisions of
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" and
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures." Specific valuation allowances
are established for impaired loans for the difference between the
loan amount and the fair value of collateral less estimated selling
costs. The Association considers a loan to be impaired when, based
on current information and events, it is probable that the
Association will be unable to collect all amounts due according to
the contractual terms of the loan agreement on a timely basis. The
types of loans for which impairment is measured under SFAS No. 114
and 118 include nonaccrual income property loans (excluding those
loans included in the homogenous portfolio which are collectively
reviewed for impairment), large, nonaccrual single family loans and
troubled debt restructurings. Such loans are placed on nonaccrual
status at the point they become contractually delinquent more than 90
days. Impairment losses are recognized through an increase in the
allowance for loan losses. There were no impaired loans under SFAS
No. 114 and 118 at March 31, 1996.
g. Allowances for losses are available to absorb losses incurred on loans
receivable and foreclosed real estate held for sale and represents
additions charged to expense, less net charge-offs. In determining the
allowance for losses to be maintained, management evaluates current
economic conditions, past loss and collection experience, fair value of
the underlying collateral and risk characteristics of the loan
portfolio and foreclosed real estate held for sale. Management believes
that allowances for losses on loans receivable and foreclosed real
estate are adequate.
h. Premises and equipment, net are carried at cost, less accumulated
depreciation. Depreciation of premises and equipment is computed using
the straight-line method based on the estimated useful lives of the
related assets. Estimated lives are forty years for the office
building and five to ten years for furniture and equipment.
i. Foreclosed real estate held for sale is carried at the lower of cost or
fair value less estimated selling costs. Costs relating to improvement
of foreclosed real estate are capitalized.
j. Interest on securities, certificates of deposit, mortgage-backed and
related securities and loans receivable is accrued as earned. Interest
on loans receivable contractually delinquent more than ninety days is
excluded from income until collected.
k. Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future based
on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets
to the amount that will more likely than not be realized. Income tax
expense is the tax payable or refundable for the period plus or minus
the net change in the deferred tax assets and liabilities.
l. Earnings per share for 1996 are based upon the weighted-average shares
outstanding during the year. Earnings for the period April 1, 1995 to
December 31, 1995 of $157,587 have been excluded from the calculation
of earnings per share. Earnings for the period December 28, 1995 to
December 31, 1995 were not significant. ESOP shares which have been
committed to be released are considered outstanding.
<PAGE>
<PAGE>
m. The following paragraphs summarize the impact of new accounting
pronouncements:
In May 1995, the FASB issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights." SFAS No. 122 requires mortgage banking enterprises
to recognize the rights to service mortgage loans for others as a
separate asset regardless of whether such rights were purchased or
originated. SFAS No. 122 is not expected to affect the Company's
financial position or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". SFAS No. 123 requires that compensation
cost for stock-based employee compensation plans be measured at the
grant date based on the fair value of the award and recognized over the
service period, which is usually the vesting period. Stock-based
employee compensation plans include stock purchase plans, stock
options, restricted stock and stock appreciation rights. Employee
stock ownership plans are not covered by this Statement. SFAS No. 123
is effective for transactions entered into in fiscal years that begin
after December 15, 1995, with earlier application permitted. The
Company is awaiting stockholder approval of its management recognition
plan and stock option plan. Management of the Association cannot
determine the effect of the compensation plans on the financial
position or results of operations.
(2) RISKS AND UNCERTAINTIES
The Association is a community oriented financial institution which
provides traditional financial services within the areas it serves. The
Association is engaged primarily in the business of attracting deposits
from the general public and using these funds to originate one- to
four-family residential mortgage loans located primarily in Jefferson
County, Missouri.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the consolidated
financial statements, management is required to make estimates and
assumptions which affect the reported amounts of assets and liabilities as
of the balance sheet dates and income and expenses for the periods
covered. Actual results could differ significantly from these estimates
and assumptions.
The Association's operations are affected by interest rate risk, credit
risk, market risk and regulations by the Office of Thrift Supervision
(OTS). The Association is subject to interest rate risk to the degree
that its interest-bearing liabilities mature or reprice more rapidly, or
on a different basis, than its interest-earning assets. To better control
the impact of changes in interest rates, the Association has sought to
improve the match between asset and liability maturities or repricing
periods and rates by emphasizing the origination of one and three year,
adjustable-rate mortgage loans, offering certificates of deposit with
terms of up to three years and maintaining a securities portfolio with
laddered maturities of up to three years. The Association uses a net
market value methodology provided by the OTS to measure its interest rate
risk exposure. This exposure is a measure of the potential decline in
the net portfolio value of the Association based upon the effect of an
assumed 200 basis point increase or decrease in interest rates. Net
portfolio value is the expected net cash flows from the institution's
assets, liabilities and off-balance-sheet contracts. Credit risk is the
risk of default on the Association's loan portfolio that results from the
borrowers' inability or unwillingness to make contractually required
payments. Market risk reflects changes in the value of collateral
underlying loans receivable and the valuation of real estate held by the
Association. The Association is subject to periodic examination by
regulatory agencies which may require the Association to record increases
in the allowances based on their evaluation of available information.
There can be no assurance that the Association's regulators will not
require further increases to the allowances.
PAGE
<PAGE>
(3) SECURITIES
Securities are summarized as follows:
1996
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Debt securities
held to maturity:
Federal agency
obligations $ 3,498,467 3,640 (16,076) 3,486,031
Municipal
obligations 743,794 - (2,594) 741,200
Corporate debt 1,056,59 217 (17,216) 1,039,594
$ 5,298,854 3,857 (35,886) 5,266,825
Weighted-average
rate 5.43%
1995
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
Debt securities
held to maturity:
Federal agency
obligations $ 496,771 - (13,568) 483,203
Municipal
obligations 990,599 - (23,284) 967,315
Corporate debt 1,008,063 - (1,188) 1,006,875
$ 2,495,433 - (38,040) 2,457,393
Weighted-average rate 5.15%
Securities with a carrying value of $498,826 were pledged to secure public
deposits at March 31, 1996.
Maturities of debt securities held to maturity at March 31, 1996 are
summarized as follows:
Amortized Market
Cost Value
Due in one year or less $ 749,078 747,891
Due after one year through five years 4,298,923 4,268,465
Due in year 2017 250,853 250,469
$ 5,298,854 5,266,825
<PAGE>
<PAGE>
(4) MORTGAGE-BACKED AND RELATED SECURITIES
Mortgage-backed and related securities held to maturity are summarized as
follows:
1996
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
GNMA participating
certificate $ 117,468 - (1,857) 115,611
Collateralized
mortgage obligations:
FHLMC 251,845 - (3,876) 247,969
FNMA 504,286 - (6,161) 498,125
756,131 - (10,037) 746,094
$ 873,599 - (11,894) 861,705
Weighted-average rate 6.49%
1995
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
GNMA participating
certificate $ 136,639 - (5,850) 130,789
Weighted-average rate 7.34%
(5) LOANS RECEIVABLE, NET
Loans receivable, net are summarized as follows:
1996 1995
Real estate loans:
Single-family, 1-4 units $ 20,649,338 20,290,914
Multi-family, 5 or more units 33,977 34,527
Construction 98,800 60,000
Commercial 948,354 605,514
Agricultural 789,057 794,142
Consumer loans 228,998 193,212
Auto loans 89,227 61,417
Loans secured by deposits 203,063 187,433
Student loans 14,631 20,578
23,055,445 22,247,737
Unearned discount - (2,345)
Allowance for losses (72,000) (60,200)
Deferred loan fees, net (51,066) (79,031)
$ 22,932,379 22,106,161
Weighted-average rate 8.11% 8.03%
<PAGE>
<PAGE>
Adjustable-rate loans included in the loan portfolio amounted to
approximately $20,289,000 and $19,463,000 at March 31, 1996 and 1995,
respectively.
Commercial real estate loans are secured by the following:
1996 1995
Retail strip center $ 496,000 -
Country club 299,571 308,226
Multi-purpose business property - 213,734
Office buildings 152,783 83,554
$ 948,354 605,514
Following is a summary of activity in allowance for losses:
1996 1995 1994
Balance, beginning
of year $ 60,200 48,863 37,160
Loan charge-offs (187) (11,145) (6,360)
Loan recoveries 400 1,335 763
Provision charged to
expense 11,587 21,147 17,300
Balance, end of year $ 72,000 60,200 48,863
At March 31, 1996 and 1995, the Association had approximately $4,000 and
$16,000, respectively, in nonaccrual loans (loans more than 90 days
delinquent). The average balance of nonaccrual loans for the year ended
March 31,1996 was approximately $19,000. Allowance for losses on
nonaccrual loans amounted to approximately $400 at March 31, 1996. For
the year ended March 31, 1996, gross interest income which would have been
recorded had nonaccrual loans been current in accordance with their
original terms amounted to approximately $700. The amount of interest
income included in the Association's net earnings for the year ended March
31, 1996 was approximately $500.
The Association originates loans to officers and directors of the
Association in the ordinary course of business. These loans were made on
substantially the same terms as those prevailing at the time for
comparable transactions with unaffiliated persons. In addition, a
director of the association is an officer of a title company which
transacts business with the Association. The dollar amounts of the above
transactions and related amounts due for periods covered by the
consolidated financial statements have not been presented since the
amounts are considered immaterial to the overall financial position or
results of operations of the Association.
(6) PREMISES AND EQUIPMENT, NET
Premises and equipment, net are summarized as follows:
1996 1995
Land $ 106,420 106,420
Office building 313,013 13,013
Furniture and equipment 234,569 244,473
654,002 663,906
Less accumulated depreciation 288,901 275,158
$ 365,101 388,748
<PAGE>
<PAGE>
Depreciation expense for the years ended March 31, 1996, 1995 and 1994 was
$30,455, $30,661 and $32,662, respectively.
(7) FORECLOSED REAL ESTATE HELD FOR SALE, NET
Foreclosed real estate held for sale, net is summarized as follows:
1996 1995
Foreclosed real estate held for sale $ - 371,214
Allowance for losses - (13,000)
$ - 358,214
Following is a summary of activity in allowance for losses:
1996 1995 1994
Balance, beginning of year $ 13,000 13,000 13,000
Charge-offs, net of gain
of sale (10,796) (45) 6,958
Loss charged (gain credited)
to operations (2,204) 45 (6,958)
Balance, end of year $ - 13,000 13,000
Foreclosed real estate held for sale is summarized as follows:
1996 1995
Office building $ - 265,962
Single-family dwellings - 105,252
$ - 371,214
(8) DEPOSITS
Deposits are summarized as follows:
Description and interest rate 1996 1995
NOW accounts, 2.25% $ 1,412,411 1,260,297
Savings accounts, 2.75% 6,917,334 6,947,315
Money market deposit
accounts, 3.50% and
4.00%, respectively 1,166,674 858,764
Total transaction accounts 9,496,419 9,066,376
Certificates:
3.00 - 3.99% 59,822 682,950
4.00 - 4.99% 3,997,941 8,755,405
5.00 - 5.99% 8,561,151 3,299,306
6.00 - 6.99% 3,189,967 3,317,694
7.00 - 7.99% 194,774 187,463
8.00 - 8.99% 144,360 165,921
Total certificates, 5.36%
and 4.95%, respectively 16,148,015 16,408,739
Total deposits $ 25,644,434 25,475,115
Weighted-average rate - deposits 4.40% 4.19%
<PAGE>
<PAGE>
Certificate maturities are summarized as follows:
1996 1995
First year $ 12,441,200 12,352,328
Second year 2,775,033 2,758,856
Third year 784,533 1,100,569
Fourth year 6,562 104,173
Fifth year 10,000 -
After fifth year 130,687 92,813
$ 16,148,015 16,408,739
(9) INCOME TAXES
In computing Federal income tax, savings institutions are allowed a
statutory bad debt deduction of otherwise taxable income of 8%, subject
to limitations based on aggregate loans and deposit balances. Due to
the limitation based on the level of deposits outstanding and retained
earnings, the Association used the experience method bad debt deduction
for the years ended March 31, 1996, 1995 and 1994. As of March 31,
1996, appropriations of retained earnings representing bad debt
deductions were approximately $1,144,000. If these tax bad debt
reserves are used for other than loan losses, the amount used will be
subject to Federal income taxes at the then prevailing corporate rate.
The provisions of SFAS No. 109 require the Association to establish a
deferred tax liability for the tax effect of the tax bad debt reserves
over the base year amounts. The Association's base year tax bad debt
reserves are approximately $1,101,000. The estimated deferred tax
liability on such amount is approximately $374,000, which has not been
recorded in the accompanying consolidated financial statements.
The components of the net deferred tax liability are summarized as follows:
1996 1995
Deferred tax liabilities:
Tax bad debt reserves arising
after March 31, 1988 $ 16,714 19,302
FHLB stock dividends 48,338 44,758
Tax over book accumulated depreciation 66,821 63,175
Accrued income and expense 61,804 49,169
Tax over book ESOP expense 2,269 -
Total deferred tax liabilities 195,946 176,404
Deferred tax assets:
Unearned discount on loans - 856
Deferred loan fees, net 19,895 28,838
Allowance for losses on loans
and foreclosed real estate 28,051 26,710
Gross deferred tax assets 47,946 56,404
Valuation allowance - -
Net deferred tax assets 47,946 56,404
Net deferred tax liability $ 148,000 120,000
<PAGE>
<PAGE>
Income taxes are summarized as follows:
1996 1995 1994
Current:
Federal $ 65,000 102,000 172,000
State 12,000 9,000 19,000
77,000 111,000 191,000
Deferred:
Federal 21,000 - (24,000)
State 1,000 6,000 1,000
22,000 6,000 (23,000)
$ 99,000 117,000 168,000
Deferred income tax expense represents the tax effects of reporting income
and expense in different periods for financial reporting purposes than
tax purposes as follows:
1996 1995 1994
Provision for loss on
loans and foreclosed
real estate $ (3,073) (5,543) (1,812)
Accrued income and expense 20,578 9,075 (19,445)
Book depreciation (in excess of)
tax depreciation 3,646 (3,532) (4,589)
Deferred state income taxes 1,000 6,000 1,000
Other (151) - 1,846
$ 22,000 6,000 (23,000)
The provision for income taxes differs from the Federal statutory corporate
tax rate to earnings before income taxes as follows:
1996 1995 1994
Tax at statutory rate 34.0 % 34.0 % 34.0 %
Increases (decreases) in taxes:
Tax-exempt income (3.7) (3.2) (.7)
State income taxes, net of
Federal tax benefit 3.0 2.8 2.8
Surtax exemption (1.1) - -
Other, net - (.4) .2
Effective tax rate 32.2 % 33.2 % 36.3 %
<PAGE>
(10) EMPLOYEE BENEFITS
The Association participates in a multiemployer, defined benefit retirement
plan which covers substantially all employees. Although the plan's assets
exceed the actuarially computed value of vested benefits at June 30, 1995,
the valuation date of the most recent report, the Association has an
unfunded liability to the plan at March 31, 1996 of approximately $34,000
as a result of prior service cost. Plan benefits are fully vested after
five years of service and are based on an employee's years of service and
a percentage of the employee's average salary, using the five highest
consecutive years preceding retirement. The Association's funding policy
is to make contributions to the plan equal to the amount accrued as
pension expense. Total pension expense for the years ended March 31,
1996, 1995 and 1994 was $33,525, $32,652 and $36,000, respectively.
In connection with the conversion from mutual to stock form, the
Association established an employee stock ownership plan (ESOP) for the
benefit of participating employees. Employees are eligible to participate
upon attaining age twenty-one and completing one year of service.
The ESOP borrowed $608,350 from the Company to fund the purchase of 60,835
shares of the Company's common stock. The purchase of shares of the ESOP
was recorded in the consolidated financial statements through a credit to
common stock and additional paid-in capital with a corresponding charge to
a contra equity account for the unreleased shares. The loan is secured
solely by the common stock and is to be repaid in equal quarterly
installments of principal and interest payable through March 2002 at an
8.50% interest rate. The intercompany ESOP note and related interest were
eliminated in consolidation.
The Association makes quarterly contributions to the ESOP which are equal
to the debt service less dividends on unallocated ESOP shares used to
repay the loan. Dividends on allocated shares will be paid to
participants of the ESOP. The ESOP shares are pledged as collateral on
the ESOP loan. Shares are released from collateral and allocated to
participating employees, based on the proportion of loan principal and
interest repaid and compensation of the participants. Forfeitures will be
reallocated to participants on the same basis as other contributions in
the plan year. Benefits are payable upon a participant's retirement,
death, disability or separation from service.
Effective with the reorganization date the Association adopted SOP 93-6.
As shares are committed to be released from collateral, the Association
reports compensation expense equal to the average fair value of the shares
committed to be released. Dividends on allocated shares will be charged
to stockholders' equity. Dividends on unallocated shares are recorded as
a reduction to the ESOP loan. ESOP expense for the year ended March 31,
1996 was $87,775. The fair value of unreleased shares based on market
price of the Company's stock was $672,663 at March 31, 1996.
The number of ESOP shares at March 31, 1996 are summarized as follows:
Allocated shares -
Shares released for allocation 7,022
Unreleased shares 53,813
Total ESOP shares 60,835
<PAGE>
<PAGE>
(11) STOCKHOLDERS' EQUITY AND REGULATORY CAPITAL
The Company issued 760,437 shares of common stock at $10 per share in
conjunction with an initial public offering completed on December 27,
1995. Net proceeds from the sale of common stock in the offering were
$6,465,575, after deduction of conversion costs of $530,445, and unearned
compensation related to shares issued to the Employee Stock Ownership
Plan. The Company retained 50% of the net conversion proceeds, less the
funds used to originate a loan to the ESOP for the purchase of shares of
common stock, and used the balance of the net proceeds to purchase all of
the stock of the Association in the conversion.
Deposit account holders and borrowers do not have voting rights in the
Association. Voting rights were vested exclusively with the stockholders
of the holding company. Deposit account holders continue to be insured by
the SAIF. A liquidation account was established at the time of conversion
in an amount equal to the capital of the Association as of the date of the
latest balance sheet contained in the final prospectus. Each eligible
account holder or supplemental eligible account holder is entitled to a
proportionate share of this account in the event of a complete liquidation
of the Association, and only in such event. This share will be reduced if
the account holder's or supplemental eligible account holder's deposit
balance falls below the amounts on the date of record and will cease to
exist if the account is closed. The liquidation account will never be
increased despite any increase in the related deposit balance.
An OTS regulation restricts the Association's ability to make capital
distributions, including paying dividends. The regulation provides that
an institution meeting its capital requirements, both before and after its
proposed capital distribution, may generally distribute the greater of (1)
75% of its net earnings for the prior four quarters or (2) 100% of its net
earnings to date during the calendar year, plus the amount that would
reduce by one-half its surplus capital ratio (defined as the percentage by
which the institution's capital-to-asset ratio exceeds the ratio of its
capital requirements to its assets) at the beginning of the calendar year
without prior supervisory approval. The regulation provides more
significant restrictions on payment of dividends in the event that the
capital requirements are not met.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
(FIRREA) requires that savings institutions maintain "core capital" of at
least 3% of adjusted total assets. Under proposals currently being
evaluated by the OTS, a savings institution's core capital requirement
could be increased to between 4% and 5% of adjusted total assets. Core
capital is defined to include stockholders' equity among other components.
Savings institutions also must maintain "tangible capital" of not less
than 1.5% of the Association's adjusted total assets. "Tangible capital"
is defined, generally, as core capital minus any "intangible assets." All
of the Association's capital is tangible.
In addition to requiring compliance with the core and tangible capital
standards, FIRREA and the OTS regulations also require that savings
institutions satisfy a risk-based capital standard. The minimum level of
such capital is based on a credit risk component and calculated by
multiplying the value of each asset (including off-balance sheet
commitments) by one of four risk factors. The four risk categories range
from zero for cash to 100% for certain delinquent loans and repossessed
property. Savings institutions must maintain an 8.0% risk-based capital
level.
Other laws and OTS regulations affect the computation of regulatory
capital. As of March 31, 1996, the Association met all capital
requirements.
<PAGE>
<PAGE>
(12) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Association is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments
generally include commitments to originate mortgage loans. Those
instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the balance
sheet. The Association's maximum exposure to credit loss in the event
of nonperformance by the borrower is represented by the contractual
amount and related accrued interest receivable of those instruments.
The Association minimizes this risk by evaluating each borrower's
creditworthiness on a case-by-case basis. Generally, collateral held by
the Association consists of a first or second mortgage on the
borrower's property. The Association generally offers adjustable-rate
loans in order to reduce the sensitivity of its earnings to interest
rate fluctuations. Commitments at March 31, 1996 to originate
adjustable-rate and fixed-rate mortgage loans were approximately
$141,000 and $198,000, respectively, expiring in 90 days or less.
(13) CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS
The following condensed balance sheet and condensed statements of
earnings and cash flows for Joachim Bancorp, Inc. should be read in
conjunction with the consolidated financial statements and the notes
thereto.
BALANCE SHEET
March 31,
Assets 1996
Cash and cash equivalents $ 1,319,229
Certificates of deposit 50,242
Securities held to maturity 1,556,341
ESOP note receivable 532,306
Accrued interest receivable 14,550
Investment in subsidiary 7,279,073
Other assets 7,604
Total assets $ 10,759,345
Liabilities and Stockholders' Equity
Other liabilities $ 7,000
Accrued income taxes 1,000
Total liabilities 8,000
Stockholders' equity 10,751,345
Total liabilities and
stockholders' equity $ 10,759,345
<PAGE>
<PAGE>
STATEMENT OF EARNINGS
Period from
December 27, 1995
to March 31,
1996
Equity in earnings of the Association $ 185,776
Interest income 53,069
Other expenses (15,309)
Income taxes (15,000)
Net earnings $ 208,536
STATEMENT OF CASH FLOWS
Period from
December 27, 1995
to March 31,
1996
Cash flows from operating activities:
Net earnings $ 208,536
Adjustments to reconcile net earnings to net cash
provided by (used for) operating activities:
Equity in earnings of Association (185,776)
Amortization of premiums on securities 231
Interest credited to certificates of deposit (242)
Decrease (increase) in:
Accrued interest receivable (14,550)
Other assets (7,604)
Increase (decrease) in:
Other liabilities 7,000
Accrued income taxes 1,000
Net cash provided by (used for)
operating activities 8,595
Cash flows from investing activities:
Loan to ESOP (608,350)
Principal collected on loan to ESOP 76,044
Purchase of common stock of Association (3,536,962)
Purchase of certificates of deposit (50,000)
Purchase of securities held to maturity (1,556,572)
Net cash provided by (used for)
investing activities (5,675,840)
Cash flows from financing activities:
Proceeds from sale of common stock 7,073,925
Cash dividends (87,451)
Net cash provided by (used for)
financing activities 6,986,474
Net increase (decrease) in cash and
cash equivalents 1,319,229
Cash and cash equivalents at beginning of period -
Cash and cash equivalents at end of period $ 1,319,229
<PAGE>
<PAGE>
(14) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of the Company's financial
instruments at March 31, 1996, are summarized as follows:
Carrying Fair
Amount Value
Non-trading instruments and nonderivatives:
Cash and cash equivalents $ 5,384,802 5,384,802
Certificates of deposit 1,300,242 1,300,242
Securities held to maturity 5,298,854 5,266,825
Stock in FHLB of Des Moines 288,500 288,500
Mortgage-backed and related
securities held to maturity 873,599 861,705
Loans receivable, net 22,932,379 23,383,360
Deposits $ 25,644,434 25,726,206
The following methods and assumptions were used in estimating the fair
values of financial instruments:
Cash and cash equivalents and certificates of deposit are valued at their
carrying amounts due to the relatively short period to maturity of the
instruments.
Fair values of securities and mortgage-backed and related securities are
based on quoted market prices or, if unavailable, quoted market prices of
similar securities.
Stock in FHLB of Des Moines is valued at cost, which represents redemption
value and approximates fair value.
Fair values are computed for each loan category using market spreads to
treasury securities for similar existing loans in the portfolio and
management's estimates of prepayments.
Deposits with no defined maturities, such as NOW accounts, savings
accounts and money market deposit accounts, are valued at the amount
payable on demand at the reporting date.
The fair value of certificates of deposit is computed at fixed spreads to
treasury securities with similar maturities.
(15) CONTINGENCY
Proposals recently have been introduced in the U.S. Congress that, if
adopted, would overhaul the savings association industry. The most
significant of these proposals would recapitalize the SAIF through a
one-time special assessment of approximately 85 basis points on the
annual amount of deposits held by the institution. Should the
Association be required to pay such special assessment, the
Association's capital will be reduced by approximately $144,000, based
on deposits of $25.7 million as of March 31, 1996 and a tax rate of 34%.
In the event the assessment is not deductible for tax purposes, capital
would be reduced by approximately $218,000. Management cannot predict
whether the special assessment proposal will be enacted, or, if enacted,
the amount of any one-time fee or the date to be used for determining
deposits on which the assessment will be based.
<PAGE>
<PAGE>
CORPORATE INFORMATION
OFFICERS DIRECTORS
ANDREW H. ENGLAND ANDREW H. ENGLAND MARGARET F. SMITH
chairman of the board retired funeral home owner retired tire store owner
DeSoto, Missouri DeSoto, Missouri
ADOLPH J. SCHATZLE
vice-chairman of the ADOLPH J. SCHATZLE JAMES H. WILKINS
board retired managing officer of retired railroad carshop
the Association superintendent
BERNARD R. WESTHOFF Hillsboro, Missouri DeSoto, Missouri
president
BERNARD R. WESTHOFF STOKELY R. WISCHMEIER
LEE ELLEN HOGAN president executive
senior vice-president, Hopson Lumber Co.
treasurer and DOUGLAS G. DRAPER DeSoto, Missouri
secretary Chairman of the Board
and former owner
MELVIN L. YARBROUGH Hillsboro Title Co.
vice-president Hillsboro, Missouri
CORPORATE OFFICES SPECIAL COUNSEL
DeSoto Plaza Breyer & Aguggia
DeSoto, Missouri 63020 1300 I Street N.W.
Telephone (314) 586-8821 Suite 470 East
Washington, D.C. 20005
STOCK TRANSFER AGENT AND REGISTRAR AUDITORS
Registrar and Transfer Company Michael Trokey & Company, P.C.
10 Commerce Drive Certified Public Accountants
Cranford, New Jersey 07016 10411 Clayton Road
St. Louis, Missouri 63131
STOCKHOLDERS' ANNUAL MEETING
The annual meeting of Joachim Bancorp, Inc. will be held on July 17, 1996 at
2:00 p.m., at 712 S. Main Street, DeSoto, Missouri.
FORM 10-KSB
A COPY OF FORM 10-KSB, INCLUDING FINANCIAL STATEMENT SCHEDULES, AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO
STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY,
JOACHIM BANCORP, INC., DESOTO PLAZA, DESOTO, MISSOURI 63020.
<PAGE>
<PAGE>
Exhibit 21
Subsidiaries of Registrant
Percentage Jurisdiction or
Subsidiaries (1) Owned State of Incorporation
Joachim Federal Savings and Loan
Association 100% United States
JSLA Service Corp. 100% Missouri
(1) The operations of the Company's subsidiaries are included in the Company's
consolidated financial statements.
<PAGE>
Exhibit 27
Financial Data Schedule (in thousands)
This schedule contains financial information extracted from the consolidated
financial statements of Joachim Bancorp, Inc. for the year ended March 31,
1996 and is qualified in its entirety by reference to such financial
statements.
Financial Data
as of or for the year
Item Number ended March 31, 1996 Item Description
- - ---------- ------------- -----------------
9-03 (1) $ 626,578 Cash and Due from Banks
9-03 (2) 6,058,466 Interest - bearing deposits
9-03 (3) __ Federal funds sold - purchased
securities for resale
9-03 (4) __ Trading account assets
9-03 (6) __ Investment and mortgage backed
securities held for sale
9-03 (6) 6,460,953 Investment and mortgage backed
securities held to maturity -
carrying value
9-03 (6) 6,417,030 Investment and mortgage backed
securities held to maturity-market
value
9-03 (7) 22,932,379 Loans
9-03 (7)(2) 72,000 Allowance for loan losses
9-03 (11) 36,779,351 Total assets
9-03 (12) 25,644,434 Deposits
9-03 (13) -- Short - term borrowings
9-03 (15) 383,572 Other liabilities
9-03 (16) -- Long - term debt
9-03 (19) -- Preferred stock - mandatory redemption
9-03 (20) -- Preferred stock - no mandatory
redemption
9-03 (21) 7,604 Common stocks
9-03 (22) 10,743,741 Other stockholders' equity
9-03 (23) 36,779,351 Total liabilities and stockholders'
equity
9-04 (1) 1,821,537 Interest and fees on loans
9-04 (2) 181,120 Interest and dividends on investments
9-04 (4) 346,100 Other interest income
9-04 (5) 2,348,757 Total interest income
9-04 (6) 1,157,550 Interest on deposits
9-04 (9) 1,157,550 Total interest expense
9-04 (10) 1,191,207 Net interest income
9-04 (11) 11,587 Provision for loan losses
9-04 (13)(h) -- Investment securities gains/(losses)
9-04 (14) 928,898 Other expenses
9-04 (15) 307,536 Income/loss before income tax
9-04 (17) 307,536 Income/loss before extraordinary items
9-04 (18) -- Extraordinary items, less tax
9-04 (19) -- Cumulative change in accounting
principles
9-04 (20) 208,536 Net income or loss
9-04 (21) .28 Earnings per share - primary
9-04 (21) .28 Earnings per share - fully diluted
I.B. 5 3.80% Net yield-interest earnings-actual
III.C.1. (a) $ -- Loans on non - accrual
III.C.1. (b) 4,000 Accruing loans past due 90 days or more
III.C.2. (c) -- Troubled debt restructuring
III.C.2 -- Potential problem loans
IV.A.1 60,200 Allowance for loan loss -
beginning of period
IV.A.2 187 Total chargeoffs
IV.A.3 400 Total recoveries
IV.A.4 72,000 Allowance for loan loss - end of period
IV.B.1 72,000 Loan loss allowance allocated to
domestic loans
IV.B.2 -- Loan loss allowance allocated to
foreign loans
IV.B.3 -- Loan loss allowance - unallocated
<PAGE>
<PAGE>
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<PERIOD-END> MAR-31-1996
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<LOANS-PAST> 4000
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