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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ x ] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee required) For the fiscal year ended December 31, 1996
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[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required) For the transition period
from to
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Commission file number 333-06581
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ST. JOSEPH CAPITAL CORPORATION
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(Name of Small Business Issuer in Its Charter)
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Delaware 35-1977746
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(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
4101 Edison Lakes Parkway, Mishawaka, Indiana 46545
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(Address of Principal Executive Offices) (Zip Code)
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(219) 273-9700
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
None.
Securities registered under Section 12(g) of the Exchange Act:
None.
Check whether the Issuer (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 Issuer was required to file such reports),
and (2) has been subject to such filing requirements for past 90 days.
Yes [ x ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
regulation S-B contained in this form, and no disclosure will be contained, to
the best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ x ]
The Issuer's revenues for its most recent fiscal year were $ 197,057.
The aggregate market value of the voting stock held by non-affiliates of the
Issuer as of March 7, 1997 was approximately $ 14,238,855. As of said date,
the Issuer had 1,265,676 shares of Common Stock issued and outstanding.
Documents incorporated by reference:
Part II of Form 10-KSB - 1996 Annual Report to Stockholders.
Part III of Form 10-KSB - Proxy statement for annual meeting of stockholders to
be held in April, 1997.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ x ]
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Company, a Delaware corporation organized in February, 1996, is a
bank holding company which owns all of the capital stock of the St. Joseph
Capital Bank, an Indiana state bank located in Mishawaka, Indiana (the "Bank").
The Bank commenced business on February 13, 1997. From the date of the
Company's inception through December 31, 1996, the Company and the Bank
conducted no business other than matters incidental to their organization and
opening for business. On September 4, 1996, the Company commenced an initial
public offering of 1,265,000 shares of its Common Stock pursuant to a
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission ("SEC") on June 21, 1996, as amended. Although not currently
required to file reports with the SEC under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Company intends to continue filing
the reports specified by the Exchange Act. The Company currently maintains its
offices at 4101 Edison Lakes Parkway, Mishawaka, Indiana, 46545. The Company's
telephone number is (219) 273-9700.
BUSINESS STRATEGY
The Bank concentrates on the financial services needs of individuals and
local businesses. A cornerstone of the Bank's business strategy is to
emphasize the Bank's local management and its commitment to the Bank's market
area. The Bank also expects to establish a high standard of quality in each
service it provides, and the employees of the Bank are expected to emphasize
service in their dealings with clients. Management believes that the use of
state-of-the-art technology will permit each employee to devote more time and
attention to personal service, respond more quickly to a client's requests and
deliver services in the most timely manner possible.
The Company's goal is to create a "client-driven" organization focused on
providing high value to clients by promptly delivering products and services
matched directly to their needs. The Company expects to gain market share by
developing strong ties to its community. In this regard, most of the Company's
directors currently hold, and have held in the past, leadership positions in a
number of community organizations, and intend to continue this active
involvement in future years. Other members of the management team will also be
encouraged to volunteer for such positions. Additionally, employees are
expected to be active in the civic, charitable and social organizations located
in the Michiana area.
The Bank offers a broad range of deposit services, including checking
accounts, money market accounts, savings accounts and time deposits of various
types, as well as a full range of short to intermediate term personal and
commercial loans. The Bank makes personal loans directly to individuals for
various purposes, including purchases of automobiles, mobile homes, boats and
other recreational vehicles, home improvements, education and personal
investments. The Bank makes residential mortgage loans and substantially all
of such loans are retained by the Bank and consist of balloon payment and
adjustable rate mortgages. The Bank also offers other services, including
credit cards, cashiers checks, traveler's checks and automated teller access.
The Bank's initial legal lending limit is $1,500,000. The Board of
Directors has established an "in-house" limit of $ 1,250,000. The Board may
from time to time raise or lower the "in-house" limit as it deems appropriate
to comply with safe and sound banking practices and respond to overall economic
conditions.
The Bank's market area is competitive. There are currently thirteen banks
with multiple offices in the 15 mile radius surrounding the Bank's location.
There are also five savings associations doing business in the area and
numerous credit unions. The Bank also faces competition from finance
companies, insurance companies, mortgage companies, securities brokerage firms,
money market funds, loan production offices and other providers of financial
services. Most of the Bank's competitors have been in business for many years,
have established customer bases, are substantially larger, have substantially
larger lending limits than the Bank and can offer certain services,
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including multiple branches and international banking services, that the Bank
will be able to offer only through correspondent banks, if at all. In
addition, most of these entities have greater capital resources than the Bank,
which among other things, may allow them to price their services at levels more
favorable to clients and to provide larger credit facilities than could the
Bank. The Company believes that the Bank's legal lending limit of
approximately $1,500,000 is adequate to satisfy the credit needs of most of its
clients.
EMPLOYEES
The Bank has 12 full-time employees. The Company believes that none of
its employees are covered by a collective bargaining agreement with the
Company or the Bank. The Company considers its employee relations to be
excellent.
SUPERVISION AND REGULATION
GENERAL
Financial institutions and their holding companies are extensively
regulated under federal and state law. As a result, the growth and earnings
performance of the Company and the Bank can be affected not only by management
decisions and general economic conditions, but also by the requirements of
applicable state and federal statutes and regulations and the policies of
various governmental regulatory authorities including, but not limited to, the
Indiana Department of Financial Institutions (the "DFI") the Board of Governors
of the Federal Reserve System (the "FRB"), the Federal Deposit Insurance
Corporation (the "FDIC"), the Internal Revenue Service and state taxing
authorities and the SEC. The effect of such statutes, regulations and policies
can be significant, and cannot be predicted with a high degree of certainty.
Federal and state laws and regulations generally applicable to financial
institutions, such as the Company and the Bank, regulate, among other things,
the scope of business, investments, reserves against deposits, capital levels
relative to operations, the nature and amount of collateral for loans, the
establishment of branches, mergers, consolidations and dividends. The system of
supervision and regulation applicable to the Company and the Bank establishes a
comprehensive framework for their respective operations and is intended
primarily for the protection of the FDIC's deposit insurance funds and the
depositors, rather than the shareholders, of financial institutions.
The following references to material statutes and regulations affecting
the Company and the Bank are brief summaries thereof and do not purport to be
complete, and are qualified in their entirety by reference to such statutes and
regulations. Any change in applicable law or regulations may have a material
effect on the business of the Company and the Bank.
RECENT REGULATORY DEVELOPMENTS
On September 30, 1996, President Clinton signed into law the "Economic
Growth and Regulatory Paperwork Reduction Act of 1996" (the "Regulatory
Reduction Act"). Subtitle G of the Regulatory Reduction Act consists of the
"Deposit Insurance Funds Act of 1996" (the "DIFA"). The DIFA provides for a
one-time special assessment on each depository institution holding deposits
subject to assessment by the FDIC for the Savings Association Insurance Fund
(the "SAIF") in an amount which, in the aggregate, will increase the designated
reserve ratio of the SAIF (i.e., the ratio of the insurance reserves of the
SAIF to total SAIF-insured deposits) to 1.25% on October 1, 1996. Subject to
certain exceptions, the special assessment was payable in full on November 27,
1996. The Bank holds no SAIF-assessable deposits and, therefore, was not
subject to the special assessment.
Prior to the enactment of the DIFA, a substantial amount of the SAIF
assessment revenue was used to pay the interest due on bonds issued by the
Financing Corporation (the "FICO"), the entity created in 1987 to finance the
recapitalization of the Federal Savings and Loan Insurance Corporation (the
"FSLIC"), the SAIF's predecessor insurance fund. Pursuant to the DIFA, the
interest due on outstanding FICO bonds will be covered by assessments against
both SAIF and Bank Insurance Fund ("BIF") member institutions beginning January
1, 1997. Between January 1, 1997 and December 31, 1999, FICO assessments
against BIF-member institutions cannot exceed 20% of
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the FICO assessments charged SAIF-member institutions. From January 1, 2000
until the FICO bonds mature in 2019, FICO assessments will be shared by all
FDIC-insured institutions on a pro rata basis. The FDIC estimates that the
FICO assessments for the period January 1, 1997 through December 31, 1999 will
be approximately 0.013% of deposits for BIF members versus approximately 0.064%
of deposits for SAIF members, and will be less than 0.025% of deposits
thereafter.
The DIFA also provides for a merger of the BIF and the SAIF on January 1,
1999, provided there are no state or federally chartered, FDIC-insured savings
associations existing on that date. To facilitate the merger of the BIF and
the SAIF, the DIFA directs the Treasury Department to conduct a study on the
development of a common charter and to submit a report, along with appropriate
legislative recommendations, to the Congress by March 31, 1997.
In addition to the DIFA, the Regulatory Reduction Act includes a number of
statutory changes designed to eliminate duplicative, redundant or unnecessary
regulatory requirements. Among other things, the Regulatory Reduction Act
establishes streamlined notice procedures for the commencement of new
nonbanking activities by bank holding companies, establishes time frames within
which the FDIC must act on applications by state banks to engage in activities
which, although permitted for state banks under applicable state law, are not
permissible activities for national banks, and excludes ATM closures and
certain branch office relocations from the requirements applicable to branch
closings. The Regulatory Reduction Act also clarifies the liability of a
financial institution, when acting as a lender or in a fiduciary capacity,
under the federal environmental laws. Although the full impact of the
Regulatory Reduction Act on the operations of the Company and the Bank cannot
be determined at this time, management believes that the legislation may reduce
compliance costs to some extent and allow the Company and the Bank somewhat
greater operating flexibility
THE COMPANY
GENERAL. The Company, as the sole stockholder of the Bank, is a bank
holding company. As a bank holding company, the Company is registered with,
and is subject to regulation by, the FRB under the Bank Holding Company Act, as
amended (the "BHCA"). In accordance with FRB policy, the Company is expected
to act as a source of financial strength to the Bank and to commit resources to
support the Bank in circumstances where the Company might not do so absent such
policy. Under the BHCA, the Company is subject to periodic examination by the
FRB and is required to file with the FRB periodic reports of its operations and
such additional information as the FRB may require. The Company is also
subject to regulations by the DFI under Indiana law.
INVESTMENTS AND ACTIVITIES. Under the BHCA, a bank holding company must
obtain FRB approval before: (i) acquiring, directly or indirectly, ownership
or control of any voting shares of another bank or bank holding company if,
after such acquisition, it would own or control more than 5% of such shares
(unless it already owns or controls the majority of such shares); (ii)
acquiring all or substantially all of the assets of another bank or bank
holding company; or (iii) merging or consolidating with another bank holding
company. Subject to certain conditions (including certain deposit
concentration limits established by the BHCA), the FRB may allow a bank holding
company to acquire banks located in any state of the United States without
regard to whether the acquisition is prohibited by the law of the state in
which the target bank is located. In approving interstate acquisitions,
however, the FRB is required to give effect to applicable state law limitations
on the aggregate amount of deposits that may be held by the acquiring bank
holding company and its insured depository institution affiliates in the state
in which the target bank is located or which require that the target bank have
been in existence for a minimum period of time (not to exceed five years)
before being acquired by an out-of-state bank holding company.
The BHCA also prohibits, with certain exceptions noted below, the Company
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to banks and their subsidiaries, except that bank holding
companies may engage in, and may own shares of companies engaged in, certain
businesses found by the FRB to be "so closely related to banking ... as to be a
proper incident thereto." Under current regulations of the FRB, the Company
and its non-bank subsidiaries are permitted to engage in, among
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other activities, such banking-related businesses as the operation of a thrift,
sales and consumer finance, equipment leasing, the operation of a computer
service bureau, including software development, and mortgage banking and
brokerage. The BHCA generally does not place territorial restrictions on the
activities of non-bank subsidiaries of bank holding companies.
Federal legislation also prohibits acquisition of "control" of a bank or
bank holding company, such as the Company, without prior notice to certain
federal bank regulators. "Control" is defined in certain cases as acquisition
of 10% of the outstanding shares of a bank or bank holding company.
CAPITAL REQUIREMENTS. Bank holding companies are required to maintain
minimum levels of capital in accordance with FRB capital adequacy guidelines.
If capital falls below minimum guideline levels, a bank holding company, among
other things, may be denied approval to acquire or establish additional banks
or non-bank businesses.
The FRB's capital guidelines establish the following minimum regulatory
capital requirements for bank holding companies: a risk-based requirement
expressed as a percentage of total risk-weighted assets, and a leverage
requirement expressed as a percentage of total assets. The risk-based
requirement consists of a minimum ratio of total capital to total risk-weighted
assets of 8%, of which at least one-half must be Tier 1 capital. The leverage
requirement consists of a minimum ratio of Tier 1 capital to total assets of 3%
for the most highly rated companies, with minimum requirements of 4% to 5% for
all others. For purposes of these capital standards, Tier 1 capital consists
primarily of permanent stockholders' equity less intangible assets (other than
certain mortgage servicing rights and purchased credit card relationships) and
total capital means Tier 1 capital plus certain other debt and equity
instruments which do not qualify as Tier 1 capital and a portion of the
company's allowance for loan and lease losses.
The risk-based and leverage standards described above are minimum
requirements, and higher capital levels will be required if warranted by the
particular circumstances or risk profiles of individual banking organizations.
Further, any banking organization experiencing or anticipating significant
growth would be expected to maintain capital ratios, including tangible capital
positions (i.e., Tier 1 capital less all intangible assets), well above the
minimum levels.
Under the FRB's guidelines, the capital standards described above
generally apply on a consolidated basis to bank holding companies that have
more than $150 million in total consolidated assets and on a bank-only basis to
bank holding companies that, like the Company, have less than $150 million in
total consolidated assets.
DIVIDENDS. The FRB has issued a policy statement with regard to the
payment of cash dividends by bank holding companies. In the policy statement,
the FRB expressed its view that a bank holding company experiencing earnings
weaknesses should not pay cash dividends exceeding its net income or which
could only be funded in ways that weakened the bank holding company's financial
health, such as by borrowing. Additionally, the FRB possesses enforcement
powers over bank holding companies and their non-bank subsidiaries to prevent
or remedy actions that represent unsafe or unsound practices or violations of
applicable statutes and regulations. Among these powers is the ability to
proscribe the payment of dividends by banks and bank holding companies. In
addition to the restrictions on dividends that may be imposed by the FRB, the
Delaware General Corporation Law would allow the Company to pay dividends only
out of its surplus, or if the Company has no such surplus, out of its net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year.
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FEDERAL SECURITIES REGULATION. The Company's common stock is registered
with the SEC under the Securities Act of 1933, as amended. Consequently, the
Company is subject to the information, proxy solicitation, insider trading and
other restrictions and requirements of the SEC under the Exchange Act. Although
not currently required to file reports with the SEC under the Exchange Act, the
Company intends to continue filing such reports.
THE BANK
GENERAL. The Bank is an Indiana-chartered bank, the deposit accounts of
which are insured by the BIF of the FDIC. As a BIF-insured, Indiana-chartered
bank, the Bank is subject to the examination, supervision, reporting and
enforcement requirements of the DFI, as the chartering authority for Indiana
banks, and the FDIC, as administrator of the BIF.
DEPOSIT INSURANCE. As an FDIC-insured institution, the Bank is required
to pay deposit insurance premium assessments to the FDIC. The FDIC has adopted
a risk-based assessment system under which all insured depository institutions
are placed into one of nine categories and assessed insurance premiums based
upon their respective levels of capital and supervisory evaluations.
Institutions classified as well-capitalized (as defined by the FDIC) and
considered healthy pay the lowest premium while institutions that are less than
adequately capitalized (as defined by the FDIC) and considered of substantial
supervisory concern pay the highest premium. Risk classification of all
insured institutions is made by the FDIC for each semi-annual assessment
period.
The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC 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 in writing by, or written agreement
with, the FDIC. The FDIC may also suspend deposit insurance temporarily during
the hearing process for a permanent termination of insurance if the institution
has no tangible capital. Management of the Company is not aware of any
activity or condition that could result in termination of the deposit insurance
of the Bank.
FICO ASSESSMENTS. Since 1987, a portion of the deposit insurance
assessments paid by SAIF members has been used to cover interest payments due
on the outstanding obligations of the FICO, the entity created to finance the
recapitalization of the FSLIC, the SAIF's predecessor insurance fund. Pursuant
to federal legislation enacted September 30, 1996, commencing January 1, 1997,
SAIF members and BIF members will be subject to assessments to cover the
interest payment on outstanding FICO obligations. Such FICO assessments will
be in addition to amounts assessed by the FDIC for deposit insurance. Until
January 1, 2000, the FICO assessments made against BIF members may not exceed
20% of the amount of the FICO assessments made against SAIF members. It is
estimated that SAIF members will pay FICO assessments equal to 0.064% of
deposits while BIF members will pay FICO assessments equal to 0.013% of
deposits. Between January 1, 2000 and the maturity of the outstanding FICO
obligations in 2019, BIF members and SAIF members will share the cost of the
interest on the FICO bonds on a pro rata basis. It is estimated that FICO
assessments during this period will be less than 0.025% of deposits.
CAPITAL REQUIREMENTS. The FDIC has established the following minimum
capital standards for state-chartered insured non-member banks, such as the
Bank: a leverage requirement consisting of a minimum ratio of Tier 1 capital
to total assets of 3% for the most highly-rated banks with minimum requirements
of 4% to 5% for all others, and a risk-based capital requirement consisting of
a minimum ratio of total capital to total risk-weighted assets of 8%, at least
one-half of which must be Tier 1 capital. For purposes of these capital
standards, Tier 1 capital and total capital consist of substantially the same
components as Tier 1 capital and total capital under the FRB's capital
guidelines for bank holding companies (see "--The Company--Capital
Requirements").
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The capital requirements described above are minimum requirements. Higher
capital levels will be required if warranted by the particular circumstances or
risk profiles of individual institutions. For example, the regulations of the
FDIC provide that additional capital may be required to take adequate account
of interest rate risk or the risks posed by concentrations of credit,
nontraditional activities or securities trading activities.
Federal law provides the federal banking regulators with broad power to
take prompt corrective action to resolve the problems of undercapitalized
institutions. The extent of the regulators' powers depends on whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Depending upon the capital category to which an institution
is assigned, the regulators' corrective powers include: requiring the
submission of a capital restoration plan; placing limits on asset growth and
restrictions on activities; requiring the institution to issue additional
capital stock (including additional voting stock) or to be acquired;
restricting transactions with affiliates; restricting the interest rate the
institution may pay on deposits; ordering a new election of directors of the
institution; requiring that senior executive officers or directors be
dismissed; prohibiting the institution from accepting deposits from
correspondent banks; requiring the institution to divest certain subsidiaries;
prohibiting the payment of principal or interest on subordinated debt; and
ultimately, appointing a receiver for the institution.
DIVIDENDS. Under Indiana Law, the Bank will be prohibited from paying
dividends in an amount greater than its undivided profits. The Bank will,
however, be required to obtain the approval of DFI for the payment of any
dividend if the aggregate amount of all dividends paid by the Bank during any
calendar year, including the proposed dividend, would exceed the sum of: (i)
the total net profits of the Bank for that year; and (ii) the retained net
profits of the Bank for the previous two years. Indiana law defines, "net
profits" to mean the sum of all earnings from current operations plus actual
recoveries on loans, investments and other assets, less the sum of all current
operating expenses, actual losses, accrued dividends on preferred stock, if any
and all federal, state and local taxes.
The payment of dividends by any financial institution or its holding
company is affected by the requirement to maintain adequate capital pursuant to
applicable capital adequacy guidelines and regulations, and a financial
institution generally is prohibited from paying any dividends if, following
payment thereof, the institution would be undercapitalized. Notwithstanding
the availability of funds for dividends, however, the FDIC may prohibit the
payment of any dividends if the FDIC determines such payment would constitute
an unsafe or unsound practice.
INSIDER TRANSACTIONS. The Bank is subject to certain restrictions imposed
by the Federal Reserve Act on extensions of credit to the Company and its
subsidiaries, on investments in the stock or other securities of the Company
and its subsidiaries and the acceptance of the stock or other securities of the
Company or its subsidiaries as collateral for loans. Certain limitations and
reporting requirements are also placed on extensions of credit by the Bank to
its directors and officers, to directors and officers of the Company and its
subsidiaries, to principal stockholders of the Company, and to "related
interests" of such directors, officers and principal stockholders. In
addition, such legislation and regulations may affect the terms upon which any
person becoming a director or officer of the Company or one of its subsidiaries
or a principal stockholder of the Company may obtain credit from banks with
which the Bank maintains a correspondent relationship.
SAFETY AND SOUNDNESS STANDARDS. The FDIC has adopted guidelines which
establish operational and managerial standards to promote the safety and
soundness of state non-member banks. The guidelines set forth standards for
internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
compensation, fees and benefits, asset quality and earnings. In general, the
guidelines prescribe the goals to be achieved in each area, and each
institution is responsible for establishing its own procedures to achieve those
goals. If an institution fails to comply with any of the standards set forth
in the guidelines, the FDIC may require the institution to submit a plan for
achieving and maintaining compliance. The preamble to the guidelines states
that the FDIC expects to require a compliance plan from an institution whose
failure to meet one or more of the guidelines is of such severity that it could
threaten the safety and soundness of the institution. Failure to submit an
acceptable plan, or failure to comply with a plan that has been accepted by the
FDIC, would constitute grounds for further enforcement action.
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BRANCHING AUTHORITY. Indiana banks, such as the Bank, have the authority
under Indiana law to establish branches anywhere in the State of Indiana,
subject to receipt of all required regulatory approvals.
Effective June 1, 1997 (or earlier if expressly authorized by applicable
state law), the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Riegle-Neal Act") allows banks to establish interstate branch
networks through acquisitions of other banks, subject to certain conditions,
including certain limitations on the aggregate amount of deposits that may be
held by the surviving bank and all of its insured depository institution
affiliates. The establishment of de novo interstate branches or the
acquisition of individual branches of a bank in another state (rather than the
acquisition of an out-of-state bank in its entirety) is allowed by the
Riegle-Neal Act only if specifically authorized by state law. The legislation
allows individual states to "opt-out" of certain provisions of the Riegle-Neal
Act by enacting appropriate legislation prior to June 1, 1997. The State of
Indiana has enacted legislation authorizing interstate branching (the "Indiana
Branching Law") which allows Indiana banks to branch interstate by merger or de
novo expansion and allows out-of-state banks meeting certain requirements to
branch into Indian by merger or de novo expansion. The Indiana Branching Law
became effective March 15, 1996, but contains the limitation that prior to June
1, 1997, interstate mergers and de novo branches are not permitted to an
out-of-state bank unless the laws of its home state permit Indiana banks to
merge or establish de novo branches in such state on a reciprocal basis.
STATE BANK ACTIVITIES. Under federal law and FDIC regulations, FDIC
insured state banks are prohibited, subject to certain exceptions, from making
or retaining equity investments of a type, or in an amount, that are not
permissible for a national bank. Federal law and FDIC regulations also
prohibit FDIC insured state banks and their subsidiaries, subject to certain
exceptions, from engaging as principal in any activity that is not permitted
for a national bank or its subsidiary, respectively, unless the bank meets, and
continues to meet, its minimum regulatory capital requirements and the FDIC
determines the activity would not pose a significant risk to the deposit
insurance fund of which the bank is a member. Impermissible investments and
activities must be divested or discontinued within certain time frames set by
the FDIC. These restrictions have not had, and are not currently expected to
have, a material impact on the operations of the Bank.
FEDERAL RESERVE SYSTEM. Federal Reserve Board regulations, as presently
in effect, require depository institutions to maintain non-interest earning
reserves against their transaction accounts (primarily NOW and with regular
checking accounts), as follows: for accounts aggregating $49.3 million or
less, the reserve requirement is 3% of aggregate transaction accounts; and for
accounts aggregating in excess of $49.3 million, the reserve requirement is
$1.6 million plus 10% of the aggregate amount of total transaction accounts in
excess of $52.0 million. The first $4.4 million of otherwise reservable
balances are exempted from the reserve requirements. These reserve
requirements are subject to annual adjustment by the Federal Reserve Board.
The Bank is in compliance with the foregoing requirements.
ITEM 2. PROPERTIES
The Company leases premises for the Bank's main office at 3820 Edison
Lakes Parkway, Mishawaka, Indiana, which also serve as the Company's corporate
headquarters. The premises consist of a 9,600 square foot, two-story brick
building constructed in 1988 with parking for approximately 57 vehicles. Until
such time as the Bank needs the space, the Company may sublet approximately
1,200 square feet of the second floor if a suitable tenant is located, although
none has yet been identified. The building is located on a major thoroughfare
in Mishawaka, approximately 2 miles south of Interstate 80 and near the city's
population center.
The lease for the building has a primary term of five years with an option
for one five-year extension, and permits the Company, the Bank or an affiliate
of either to purchase the property for $800,000 at any time during the term of
the lease. Under the lease, the aggregate annual lease payment is $67,500 for
the first year of the lease and increases by 14,500 in the second year of the
lease and by $9,500 in each succeeding year during the initial five year term.
It also increases by 5% per year over and above the rental payment due in year
five in each year of the five year option period, if exercised.
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The Bank has four interior teller stations and a night depository
facility. The Company believes the facility will be adequate to meet the needs
of the Company and the Bank for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company is not aware of any legal proceedings against it or the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S STOCK AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock was held by approximately 70 holders of record
as of March 15, 1997, and is quoted on the OTC Bulletin Board under the symbol
"SJOE." To date there has been no regular and liquid market for the common
stock, and there can be no assurance that a regular and liquid trading market
will develop in the foreseeable future.
The following table shows, for the periods indicated, the range of prices
per share of transactions in the Company's common stock as quoted on the OTC
Bulletin Board. Certain other private transactions may have occurred during
the periods indicated of which the Company has no knowledge. The following
prices represent inter-dealer prices without retail markups, markdowns or
commissions.
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Quarter ending: Price/Share
------------------ ----------------
March 31, 1996 N/A
June 30, 1996 N/A
September 31, 1996 $10.00*
December 31, 1996 $10.625 - $10.75
</TABLE>
*Represents initial public offering price on September 4, 1996.
No cash or other dividends were declared or paid during the fiscal year
ended December 31, 1996. The Company expects that all Company and Bank
earnings, if any, will be retained to finance the growth of the Company and the
Bank and that no cash dividends will be paid for the foreseeable future. If and
when dividends are declared, the Company will probably be largely dependent
upon dividends paid by the Bank for funds to pay dividends on the Common Stock.
It is also possible, however, that the Company will pay dividends in the
future generated from investment income and other activities of the Company.
Under Indiana law, the Bank will be restricted as to the maximum amount of
dividends it may pay on its Common Stock. The Indiana Act provides that an
Indiana bank may not pay dividends in an amount greater than its undivided
profits or if the payment of dividends would impair such bank's capital.
Moreover, the approval of the DFI is required for the payment of any dividend
if the aggregate amount of all dividends paid by the Bank during such calendar
year, including the proposed dividend, would exceed the sum of (i) the total
net profits (as defined in the Indiana Act) of the Bank for that year; and (ii)
the retained net profits of the Bank for the previous two years. The DFI and
the FDIC are also authorized under certain circumstances to prohibit the
payment of dividends by the Bank. In the case of the Company, the Delaware
General Corporation Law would allow the Company to pay dividends only out of
its surplus, or if none, out of the current and/or the past fiscal year's net
profits. Further restrictions on dividends may also be imposed by the Federal
Reserve Board.
9
<PAGE> 10
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information on pages 6 - 16 of the Company's 1996 Annual Report to
Stockholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is incorporated by reference.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and related notes from the 1996 Annual
Report to Stockholders are incorporated by reference:
<TABLE>
<CAPTION>
Annual Report
Page No.
-------------
<S> <C>
Consolidated Balance Sheet 9
Consolidated Statements of Income 10
Consolidated Statements of Cash Flows 12
Consolidated Statements of Changes in Stockholders' Equity 11
Notes to Consolidated Financial Statements 13 - 16
Independent Auditors' Report 8
</TABLE>
ITEM 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS AND OFFICERS OF THE REGISTRANT
A. Directors. The information on pages 2-3 of the 1996 proxy statement
under the caption "Election of Directors" is incorporated by reference.
B. Executive Officers. The Company's executive officers who are not also
directors are as follows:
EDWARD R. POOLEY, Senior Vice President and Chief Financial Officer of
the Company and Senior Vice President and Cashier of the Bank, served since
1991 as Cashier and Chief Operations Officer of Metamora State Bank and
Treasurer of Metamora Bancorp, Inc., located in Metamora, Ohio, until joining
the Company.
There are no arrangements or understandings between any of the executive
officers or any other persons pursuant to which any of the executive officers
have been selected for their respective positions.
ITEM 10. EXECUTIVE COMPENSATION
The information on pages 4-5 of the 1997 Proxy Statement under the caption
"Executive Compensation" is incorporated by reference.
ITEM. 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
The information on pages 5-6 of the 1997 Proxy Statement, under the
caption "Security Ownership of Certain Beneficial Owners" is incorporated by
reference.
10
<PAGE> 11
ITEM 12. CERTAIN RELATIONSHIPS AND TRANSACTIONS
The information on page 4 of the 1997 Proxy Statement under the caption
"Transactions with Management" is incorporated by reference.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Index to Financial Statements
See page 10.
(a)(2) Financial Statement Schedules
None required
(a)(3) Schedule of Exhibits
The Exhibit Index which immediately follows the signature pages to this
Form 10-KSB is incorporated by reference.
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the
fourth quarter of 1996.
(c) Exhibits
The Exhibit Index to this Form 10-KSB is incorporated by reference.
The exhibits required to be filed with this Form 10-KSB are included
with this Form 10-KSB and are located immediately following the
Exhibit Index to this Form 10-KSB.
(d) Financial Data Schedule
Exhibit 27.1
11
<PAGE> 12
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, as amended,
the Issuer caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on March 13, 1997.
ST. JOSEPH CAPITAL CORPORATION
By: /s/ John W. Rosenthal
----------------------------
John W. Rosenthal, Chief Executive
Officer and and Chairman of the
Board
By: /s/ Edward R. Pooley
----------------------------
Edward R. Pooley, Principal
Financial Officer and
Accounting Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Issuer and in the capacities noted below
and on March 13, 1997.
Signature Title
--------- -----
/s/ John W. Rosenthal President, Principal Executive
- ---------------------------------- Officer and Chairman of the
John W. Rosenthal Board
- ----------------------------------
Arthur J. Decio Director
/s/ David A. Eckrich
- ----------------------------------
David A. Eckrich Director
/s/ Jerry Hammes
- ----------------------------------
Jerry Hammes Director
- ----------------------------------
V. Robert Hepler Director
/s/Helen L. Krizman
- ----------------------------------
Helen L. Krizman Director
12
<PAGE> 13
Scott C. Malpass
__________________________________
Scott C. Malpass Director
/s/ Jack Matthys
__________________________________
Jack Matthys Director
__________________________________
Arthur H. McElwee Director
/s/ Richard A. Rosenthal
__________________________________
Richard A. Rosenthal Director
/s/ Robert A. Sullivan
__________________________________
Robert A. Sullivan Director
13
<PAGE> 14
ST. JOSEPH CAPITAL CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE NUMBER
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Certificate of Incorporation, as amended, of St. Joseph Capital Corporation *
3.2 Bylaws of St. Joseph Capital Corporation *
4.1 Specimen Common Stock Certificate of St. Joseph Capital Corporation (See *
also Articles IV, VI, VII, VIII, XI and XII of Exhibit 3.1 and Articles
III, IX, X, XI and XII of Exhibit 3.2)
10.1 St. Joseph Capital Corporation 1996 Stock Incentive Plan *
10.2 Stock Option Agreement between St. Joseph Capital Corporation and John W. *
Rosenthal, dated June 11, 1996
10.3 Employment Agreement between St. Joseph Capital and John W. Rosenthal, *
dated March 18, 1996
10.5 St. Joseph Capital Bank 401(k) Plan **
13.1 Annual Report to Security holders (furnished for the information of the 15
Commission and not to be deemed "filed" as part of this Form 10-KSB)
21.1 Subsidiaries of St. Joseph Capital Corporation *
27.1 Financial Data Schedule *
99.1 Proxy Statement and form of proxy for 1997 Annual Meeting of Stockholders 34
(except for sections incorporated by reference into this Form 10-KSB, the
proxy materials shall not be deemed to be "filed" with the Commission)
</TABLE>
* Incorporated by reference from the Registration Statement on Form SB-2
filed by the Company on June 21, 1996 (SEC File No. 333-06581), as
amended.
** Incorporated by reference from the Registration Statement on Form S-8 filed
by the Company on October 29, 1996 (SEC File No. 333-14999).
14
<PAGE> 1
Table of Contents
2 Letter to Shareholders
- ------------------------------------------------------------------
4 Mission Statement
- ------------------------------------------------------------------
5 Products & Services
- ------------------------------------------------------------------
6 Management's Discussion & Analysis
- ------------------------------------------------------------------
8 Report of Independent Auditors
- ------------------------------------------------------------------
17 Executive Officers and Directors
- ------------------------------------------------------------------
19 Corporate Information
- --------------------------------------------------------------------------------
1
<PAGE> 2
March 1997
To Our Shareholders and Friends:
It is with great pleasure that we present to our Shareholders the first Annual
Report for St. Joseph Capital Corporation. The Company came into
existence on February 29, 1996. We became a public company in September 1996,
after the very successful initial public offering (IPO) of our common stock.
Since we have established December 31 as our fiscal year-end, we are reporting
on our results for the period ending December 31, 1996.
The year included many highlights. We completed the regulatory approval
process; closed the IPO in September; entered into a lease for our permanent
location in Mishawaka, Indiana at 3820 Edison Lakes Parkway; and established
the infrastructure necessary to open the Bank on February 13, 1997.
The results achieved thus far are gratifying. As you may recall, the IPO
generated approximately $12.1 million in net proceeds. This substantial
capital base should allow the Company to grow, in the short term, without being
restricted by a shortage of capital.
The Company invested $10 million of the proceeds from the IPO into St. Joseph
Capital Bank in February 1997. Few start-up banks have enjoyed this much
initial capital to begin operations. The remaining capital of the Company has
been invested in highly liquid assets, thereby providing the Company with the
flexibility to respond to appropriate business opportunities as they arise.
As projected, we are reporting a loss for our first fiscal year. The $290,219
loss was a result of significant pre-opening and start-up expenditures and is
in line with our initial forecast. Until the Bank grows and achieves a revenue
stream from its banking operations, we expect that operating losses will
continue. It has been and will continue to be management's focus to reach a
break-even operating point as early as possible. We have embarked on an
aggressive calling program in order to establish banking relationships with
potential clients. Your assistance in this effort by providing us with
additional prospects would be greatly appreciated.
Cost consciousness will always be a priority at St. Joseph Capital Bank, but
never at the expense of client service. In some circumstances, we may invest
time and financial resources that result in deferring near-term profitability
- -- in order to enhance long-term value for our Company.
We continue to be dedicated to our Company's business strategy of maintaining
local management and ownership. Further, we remain committed to our target
markets within the Michiana area. With the financial institution industry
undergoing rapid change and consolidation, we firmly believe there is a need in
this community for our type of banking organization. In fact, we are convinced
that our strategy and focus will lead to long-term growth for the Company.
Comments from our shareholders and clients confirm this belief.
- --------------------------------------------------------------------------------
2
<PAGE> 3
In the pages that follow, we are providing more information regarding our
operating philosophy and products. We invite you to read on in order to gain
additional insights into how we will position the Company and manage our
business in the future.
We would like to thank our shareholders, our staff and our Board of Directors
for their many contributions in this first year. The countless hours of work,
combined with the high energy and enthusiasm of everyone involved, have made
this a year we shall always remember.
We welcome any comments, suggestions or questions you may have and look forward
to serving you as members of the St. Joseph Capital Corporation family for
years to come.
Sincerely,
John Rosenthal
Chairman, President &
Chief Executive Officer
Jack Matthys
Vice Chairman &
Chief Lending Officer
Edward Pooley
Senior Vice President &
Chief Financial Officer
- --------------------------------------------------------------------------------
3
<PAGE> 4
[ST. JOSEPH CAPITAL BANK LOGO]
MISSION STATEMENT
The mission of St. Joseph Capital Bank is to provide the highest level of
client service and needs-based financial solutions to small businesses and
individuals in the Michiana area. Three key founding principles will help form
this client-driven financial institution:
INTEGRITY Fairness and respect for all people (clients, prospects,
employees and shareholders), coupled with open and honest
communications, will be the hallmark of all our business
dealings. We commit to building relationships with these
constituencies based on mutual respect and understanding.
CLIENT SERVICE Timely decisions made by fully empowered local
owner/operators will distinguish us from the competition.
Our responsiveness and enthusiasm will be evident in
everything we do.
INNOVATION Satisfying client needs through traditional and
non-traditional methods, as well as looking for unique or
creative ways to meet the clients financial needs, will be
a distinguishing characteristic of our operations.
Strategic partnerships with other financial services
companies will allow St. Joseph Capital Bank to use a
consultative selling approach to meet the diverse needs of
the target market.
These three principles form the operating philosophy of St. Joseph Capital Bank
and will lead to growth and profits, which will provide attractive returns to
investors.
STATEMENT OF BELIEFS RELATING TO CLIENTS
WE BELIEVE ...
- - every client is IMPORTANT and is to be TREATED FAIRLY and with RESPECT.
- - CLIENT SERVICE and CLIENT LOYALTY shall be our FOCUS; from that focus,
profits and growth will follow.
- - in LISTENING to clients and then finding ways to meet their individual
needs.
- - our clients deserve to work with KNOWLEDGEABLE, PROFESSIONAL EMPLOYEES
who are EMPOWERED to be CREATIVE and FLEXIBLE in meeting the needs of our
clients, while achieving the goals/objectives of St. Joseph Capital Bank.
- - in OPEN, HONEST COMMUNICATION with clients.
- --------------------------------------------------------------------------------
4
<PAGE> 5
[ST. JOSEPH CAPITAL BANK LOGO]
BUSINESS BANKING SERVICES
- - BUSINESS CHECKING: A non-interest-bearing checking account for
corporations or partnerships.
- - PREMIER BUSINESS CHECKING: An interest-bearing checking account designed
for proprietorships, non-profit organizations and government entities.
- - PREMIER BUSINESS SAVINGS: A tiered-rate savings account for businesses,
non-profit organizations and government entities.
- - CERTIFICATES OF DEPOSIT: Features maturities ranging from thirty days to
five years.
- - INVESTMENT SWEEP AND TWO-WAY SWEEP: An automatic investment of excess
funds into an overnight repurchase agreement or applied to outstanding
loan balances.
- - COMMERCIAL LOANS: A variety of loans are available to meet all business
needs.
- - PREMIER ELECTRONIC ACCESS: A computer-based cash management system used
to access account information, transfer funds, reconcile accounts and
initiate ACH transactions, loan advances or loan repayments.
- - COURIER SERVICE: A unique pick-up/drop-off service that makes banking
more convenient for clients.
Other Business Banking Services include: STANDBY AND DOCUMENTARY LETTERS OF
CREDIT, NIGHT DEPOSITORY SERVICES, PREMIER TELEPHONE ACCESS, BANK-BY-MAIL
(postage prepaid), MERCHANT CREDIT CARD PROCESSING, CORPORATE VISA GOLD(TM)
CARDS AND PREMIER CARD (a combined ATM and debit card).
PERSONAL BANKING SERVICES
- - PREMIER CHECKING: A high-yield, interest-bearing checking account.
- - PREMIER SAVINGS: A high-yield, tiered-rate savings account.
- - CERTIFICATES OF DEPOSIT: Features maturities ranging from thirty days to
five years.
- - INDIVIDUAL RETIREMENT ACCOUNTS: Variable- or fixed-rate accounts.
- - RESIDENTIAL MORTGAGE LOANS: For the purchase, construction or refinancing
of a primary residence or vacation home. Available in three- and
five-year adjustable-rate mortgages.
- - LINES OF CREDIT: A flexible solution to revolving credit in the form of
an OVERDRAFT LINE OF CREDIT, A PERSONAL LINE OF CREDIT OR A HOME EQUITY
LINE OF CREDIT.
- - INSTALLMENT LOANS: Fixed- or variable-rate loans for the financing of
specific items.
- - VISA GOLD(TM) CARDS: A no-fee, low-rate credit card.
Other Personal Banking Services include: PREMIER TELEPHONE ACCESS, PREMIER
CARD (a combined ATM and debit Card), AND BANK-BY-MAIL (postage pre-paid).
- --------------------------------------------------------------------------------
5
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
St. Joseph Capital Corporation (the "Company") was formed in February 1996
under the laws of the State of Delaware for the purpose of becoming the bank
holding company for St. Joseph Capital Bank, Mishawaka, Indiana (the "Bank").
The Bank is organized as an Indiana-chartered commercial bank with depository
accounts insured by the Federal Deposit Insurance Corporation.
On September 10, 1996, the Company completed an initial common stock offering
during which 1,265,000 shares of the Company's common stock were sold at $10
per share, resulting in gross proceeds of $12.65 million. Expenses associated
with the initial public offering totaling $534,000 were netted against the
gross proceeds and not recorded as expenses in the Company's statement of
income. Thus, the net proceeds from the initial public offering were $12.1
million. The Company used approximately $10 million of the proceeds from the
stock offering to provide the initial capitalization of the Bank in February
1997.
The Bank received regulatory approval to operate as a bank from the Indiana
Department of Financial Institutions on August 8, 1996, and received its
certificate of insurance from the Federal Deposit Insurance Corporation on
February 11, 1997. The Bank commenced operations on February 13, 1997. The
Bank intends to offer a full range of commercial and consumer banking services
primarily within a 15-mile radius of Mishawaka, Indiana.
The Company received approval from the Board of Governors of the Federal
Reserve System to operate as a Bank Holding Company on September 4, 1996.
FINANCIAL CONDITION
As of December 31, 1996, the Company had total assets of $11.8 million. The
Company's assets consisted primarily of investment securities totaling $10.1
million and interest-bearing deposits and federal funds sold totaling $1.4
million. The funding of the Company's assets came from the initial common
stock offering, which generated net proceeds of $12.1 million. The proceeds of
the stock offering were invested in short-term interest-earning assets, pending
utilization of the proceeds to fund the capitalization of the Bank in early
1997. The Company had total stockholders' equity of $11.8 million as of
December 31, 1996.
The Company had a net loss of $290,219 for the period from February 29, 1996
(date of inception), through December 31, 1996. The losses were primarily the
result of salaries and employee benefits of $272,000, professional fees of
$56,000 and miscellaneous expenses of $152,000 associated with the regulatory
application process, as well as Bank start-up costs. These expenses were
partially offset by net interest income of $189,000.
Because the Company is a new venture, it is anticipated that the Company's net
losses will continue for an indefinite period into the future.
- --------------------------------------------------------------------------------
6
<PAGE> 7
COMMITMENTS
The Company committed to lease a building for its main office location for an
initial lease term of five years. The annual lease payments are $67,500 during
the first year, with an increase of $14,500 in the second year and $9,500 in
each subsequent year. The Company can purchase the building for $800,000 at
any time during the term of the lease.
RECENT REGULATORY DEVELOPMENTS
On September 30, 1996, President Clinton signed into law the Economic Growth
and Regulatory Paperwork Reduction Act of 1996 (the "Regulatory Reduction
Act"). Subtitle G of this Act consists of the Deposit Insurance Funds Act of
1996 (the "DIFA"). The DIFA provides for a one-time special assessment on each
depository institution holding deposits subject to assessment by the FDIC for
the Savings Association Insurance Fund (the "SAIF") in an amount which, in the
aggregate, increased the designated reserve ratio of the SAIF (i.e., the ratio
of the insurance reserves of the SAIF to total SAIF-insured deposits) to 1.25%
on October 1, 1996. Subject to certain exceptions, the special assessment was
payable in full on November 27, 1996. St. Joseph Capital Bank holds no
SAIF-assessable deposits and, therefore, is not subject to the special
assessment.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This report, including the Chairman's Letter to Stockholders, contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. The Company intends such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in the Private Securities Reform Act of 1995, and is including this statement
for purposes of these safe harbor provisions. Forward-looking statements,
which are based on certain assumptions and describe future plans, strategies
and expectations of the Company, are generally indentifiable by use of the
words "believe," "expect," "intend," "anticipated," "estimated," "project" or
similar expressions. The Company's ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which
could have a material adverse affect on the operations and future prospects of
the Company and the subsidiaries include, but are not limited to, changes in:
interest rates, general economic conditions, legislative/regulatory changes,
monetary and fiscal policies of the U.S. Government including policies of the
U.S. Treasury and the Federal Reserve Board, the quality or composition of the
loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles, policies and guidelines. These risks and uncertainties
should be considered in evaluating forward-looking statements and undue
reliance should not be placed on such statements. Further information
concerning the Company and its business, including additional factors that
could materially affect the Company's financial results, is included in the
Company's filings with the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
7
<PAGE> 8
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
St. Joseph Capital Corporation
Mishawaka, Indiana
We have audited the accompanying balance sheet of St. Joseph Capital
Corporation (the "Company") as of December 31, 1996, and the related statements
of income, changes in stockholders' equity and cash flows for the period from
February 29, 1996 (date of inception) to December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 misstatements. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of St. Joseph Capital Corporation
as of December 31, 1996, and the results of its operations and its cash flows
for the period from February 29, 1996 to December 31, 1996 in conformity with
generally accepted accounting principles.
Crowe, Chizek and Company LLP
South Bend, Indiana
January 24, 1997
- --------------------------------------------------------------------------------
8
<PAGE> 9
BALANCE SHEET
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Cash and due from banks $ 3,103
Interest-bearing deposits in banks 1,307,009
Federal funds sold 100,000
-----------
Total cash and cash equivalents 1,410,112
Securities available for sale 10,127,902
Premises and equipment, net 274,720
Other assets 28,671
-----------
Total assets $11,841,405
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and other liabilities $ 48,519
Stockholders' equity
Preferred stock, $.01 par value, 100,000 authorized;
-0- shares issued and outstanding -
Common stock, $.01 par value, 1,500,000 shares authorized;
1,265,160 shares issued and outstanding 12,652
Additional paid-in capital 12,103,000
Retained deficit (290,219)
Unrealized depreciation on securities available for sale (32,547)
-----------
Total stockholders' equity 11,792,886
-----------
Total liabilities and stockholders' equity $11,841,405
===========
</TABLE>
- --------------------------------------------------------------------------------
9
See accompanying notes to financial statements.
<PAGE> 10
STATEMENT OF INCOME
Period from February 29, 1996, to December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INTEREST INCOME $197,057
INTEREST EXPENSE 7,656
----------
NET INTEREST INCOME 189,401
OTHER EXPENSES
Salaries and employee benefits 271,679
Professional fees 55,805
Advertising expense 13,125
Premises and equipment 29,028
Incorporation expense 30,819
Other expenses 79,164
----------
Total other operating expenses 479,620
----------
NET LOSS $(290,219)
==========
LOSS PER COMMON SHARE $(.23)
==========
</TABLE>
- --------------------------------------------------------------------------------
10
See accompanying notes to financial statements.
<PAGE> 11
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Period from February 29, 1996, to December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BALANCE, BEGINNING OF PERIOD $ -
Proceeds from issuance of common stock
for initial capitalization 1,000
Proceeds from the sale of 1,265,160 shares of
common stock, net of stock-offering costs 12,115,652
Redemption of common stock from
initial capitalization (1,000)
Change in unrealized appreciation on
securities available for sale (32,547)
Net loss (290,219)
-----------
BALANCE AT END OF PERIOD $11,792,886
===========
</TABLE>
- --------------------------------------------------------------------------------
11
See accompanying notes to financial statements.
<PAGE> 12
STATEMENT OF CASH FLOWS
Period from February 29, 1996, to December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (290,219)
Adjustments to reconcile net loss to net cash
from operating activities
Depreciation 4,176
Discount accretion (167,621)
Increase in other assets (28,671)
Increase in accounts payable 48,519
------------
Net cash from operating activities (433,816)
------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available for sale (17,054,828)
Maturity of securities available for sale 7,062,000
Fixed-asset expenditures (278,896)
------------
Net cash from investing activities (10,271,724)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock,
net of stock-offering costs 12,115,652
Proceeds from loans 275,000
Repayment of loans (275,000)
------------
Net cash from financing activities 12,115,652
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,410,112
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -
------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,410,112
============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 7,656
Income taxes -
</TABLE>
- --------------------------------------------------------------------------------
12
See accompanying notes to financial statements.
<PAGE> 13
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of St. Joseph Capital Corporation (the
"Company") conform to generally accepted accounting principles and to general
practices within the banking industry. The following describes the significant
accounting and reporting policies that are employed in the preparation of the
financial statements.
Use of Estimates in Preparing Financial Statements: The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that impact
the reported amounts of assets, liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. The fair values of securities and
depreciation of premises and equipment involve certain significant estimates
made by management. These estimates are reviewed by management routinely and
it is reasonably possible that circumstances that exist at December 31, 1996,
may change in the near-term future and that the effect could be material to the
financial statements.
Securities: Securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might
be sold before maturity. Securities available for sale are carried at fair
value, with unrealized holding gains and losses reported separately in
shareholders' equity, net of tax. Securities are classified as trading when
held for short-term periods in anticipation of market gains, and are carried at
fair value. Securities are written down to fair value when a decline in fair
value is not temporary.
The estimated fair value for securities is based on quoted market values for
the individual securities or for equivalent securities. Interest income
includes amortization of purchase premiums and discounts.
Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation. Buildings and improvements are depreciated using the
straight-line method. Maintenance and repairs are expensed, and major
improvements are capitalized. Assets are reviewed for impairment under
Statement of Financial Accounting Standards No. 121 when events indicate that
the reported carrying amount may not be fully recoverable.
Profit-Sharing Plan: The Company maintains a 401(k) profit-sharing plan
covering substantially all employees. For details concerning the plan, see
Note 5.
Earnings Per Common Share: Earnings (loss) per common share have been computed
based on the average number of shares outstanding during the period, which was
1,265,024.
Statement of Cash Flows: For purposes of the statement of cash flows, cash and
cash equivalents are defined to include the Company's cash on hand, its
deposits in other financial institutions and federal funds sold with a maturity
of 90 days or less.
- --------------------------------------------------------------------------------
13
(Continued)
<PAGE> 14
NOTE 2 - ORGANIZATION
St. Joseph Capital Corporation was incorporated under the laws of the state of
Delaware on February 29, 1996, with an initial capitalization of $1,000. The
Company's activities to date have been limited to the organization of St.
Joseph Capital Bank (the "Bank"), as well as preparation for and completion of
a $12,650,000 common stock offering (the "Offering"). The Company sold
1,265,000 shares of common stock at a price of $10 per share in the Offering
resulting in net proceeds of $12,115,652. A substantial portion of the
proceeds of the Offering will be used by the Company to provide the initial
capitalization of the Bank which is anticipated to occur in February 1997 at
which time the Bank will begin operations.
NOTE 3 - SECURITIES AVAILABLE FOR SALE
<TABLE>
<S> <C> <C> <C> <C>
Year-end securities were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------- --------------- --------------- ------------
U.S. Government and agency $ 10,160,449 $ - $ (32,547) $ 10,127,902
=============== =============== ============ ============
Contractual maturities of debt securities at year-end 1996 were as follows:
Amortized Fair
Cost Value
--------------- -------------
Due in one year or less $10,160,449 $ 10,127,902
=========== ============
</TABLE>
There were no sales of securities during the period.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The Company has committed to lease a building for its main office location.
The lease has a term of five years with the option for one five-year extension.
In addition, the lease agreement allows the Company to purchase the building
for $800,000 at any time during the term of the lease. The aggregate annual
lease payments are $67,500 for the first year of the lease and increase by
$14,500 in the second year and $9,500 in each succeeding year during the
initial five-year term. Future minimum commitments are:
<TABLE>
<S> <C>
1997 $ 67,500
1998 82,000
1999 86,500
2000 96,000
2001 105,500
--------
Total $437,500
========
</TABLE>
- --------------------------------------------------------------------------------
14
(Continued)
<PAGE> 15
NOTE 5 - BENEFIT PLANS
The Company's Board of Directors has adopted a stock-option plan. Under the
terms of this plan, options for up to 100,000 shares of the Company's common
stock may be granted to key management employees and directors of the Company
and its subsidiaries. The exercise price of the options will be determined at
the time of grant by an administrative committee to be appointed by the Board
of Directors.
Financial Accounting Standards No. 123, which became effective for 1996,
requires proforma disclosures for companies that do not adopt its fair-value
accounting method for stock-based employee compensation. Accordingly, the
following proforma information presents net income and earnings per share had
the Standard's fair-value method been used to measure compensation cost for
stock-option plans. Compensation cost actually recognized for stock options
was $0 for 1996.
<TABLE>
<S> <C>
Net loss as reported $(290,219)
Proforma net loss (476,453)
Loss per share as reported $ (.23)
Proforma loss per share (.38)
</TABLE>
In future years, the proforma effect of not applying this Standard is expected
to increase as additional options are granted.
Stock-option plans are used to reward employees and provide them with an
additional equity interest. Options are issued for 10-year periods with
varying vesting periods. Information about option grants follows:
<TABLE>
<CAPTION>
Weighted-
Weighted- Average
Number of Average Fair Value
Options Exercise Price of Grants
--------- -------------- ----------
<S> <C> <C> <C>
Outstanding, beginning of 1996
Granted 56,030 $10.02 $4.92
---------
Outstanding, end of 1996 56,030
=========
</TABLE>
Stock options exerciseable on December 31, 1996, totaled 28,030 at a
weighted-average exercise price of $10.04.
- --------------------------------------------------------------------------------
15
(Continued)
<PAGE> 16
NOTE 5 - BENEFIT PLANS (Continued)
The fair-value of options granted during 1996 is estimated using the following
weighted-average information: risk-free interest rate of 6.5%, expected life
of 10 years, expected volatility of stock price of .15, and expected dividends
of 0% per year.
The Company maintains a 401(k) plan covering substantially all employees.
Annual expense related to the plan is based on a discretionary matching of up
to 6% of the participants' compensation. The plan also allows for an
additional discretionary contribution on the employee's behalf for any eligible
employee irrespective of the employee's participation in the plan during the
year. The discretionary matching percentage and the additional discretionary
contribution are to be determined by the Board of Directors at the end of each
year. No expense was recorded related to this plan for 1996.
NOTE 6 - INCOME TAXES
Net deferred tax assets are primarily the result of a net operating loss
carryforward. Information concerning deferred tax assets is as follows:
<TABLE>
<S> <C>
Net deferred tax asset $127,816
Valuation allowance (127,816)
---------
-
=========
</TABLE>
- --------------------------------------------------------------------------------
16
(Continued)
<PAGE> 17
BOARD OF DIRECTORS OF THE CORPORATION
<TABLE>
<S> <C>
ARTHUR J. DECIO DAVID A. ECKRICH
Chairman and Chief Executive Officer, President, Adams Road Development, Inc.
Skyline Corporation
JERRY HAMMES V. ROBERT HEPLER
Chairman, Romy Hammes Bancorp, Inc., President & Chief Executive Officer,
Peoples Bank of Kankakee County and VRH Rentals
Romy Hammes Management, Inc.
HELEN L. KRIZMAN SCOTT C. MALPASS
Controller, R-Vision, Inc. Associate Vice President for Finance and
Chief Investment Officer, University of Notre Dame
JACK MATTHYS ARTHUR H. MCELWEE, JR.
Vice Chairman and Chief Lending Officer, President, Toefco Engineered Coating
St. Joseph Capital Corporation Systems, Inc.
JOHN W. ROSENTHAL RICHARD A. ROSENTHAL
Chairman, President and Athletic Director Emeritus, University of
Chief Executive Officer, Notre Dame
St. Joseph Capital Corporation
ROBERT A. SULLIVAN
President, Capital Bank, N.A.
OFFICERS OF THE CORPORATION
JOHN W. ROSENTHAL JACK MATTHYS
Chairman, President and Vice Chairman and
Chief Executive Officer Chief Lending Officer
EDWARD R. POOLEY ARTHUR H. MCELWEE, JR.
Senior Vice President and Secretary
Chief Financial Officer
</TABLE>
- --------------------------------------------------------------------------------
17
(Continued)
<PAGE> 18
DIRECTORS OF THE BANK
<TABLE>
<S> <C>
DAVID A. ECKRICH (1,4) JERRY HAMMES, (1,2)
President, Adams Road Development, Inc. Chairman, Romy Hammes Bancorp, Inc.
Peoples Bank of Kankakee County and
Romy Hammes Management, Inc.
HELEN L. KRIZMAN (1,3) SCOTT C. MALPASS (2,4)
Controller, R-Vision, Inc. Associate Vice President for Finance and
Chief Investment Officer, University of Notre Dame
JACK MATTHYS (2) ARTHUR H. MCELWEE, JR. (3,4)
Vice Chairman and Chief Lending Officer, President, Toefco Engineered Coating
St. Joseph Capital Bank Systems, Inc.
JOHN W. ROSENTHAL (2,3,4) RICHARD A. ROSENTHAL (2,4)
Chairman, President Athletic Director Emeritus, University of
and Chief Executive Officer, Notre Dame
St. Joseph Capital Bank
ROBERT A. SULLIVAN (2,3)
President, Capital Bank, N.A.
</TABLE>
1. Member of the Audit Committee
2. Member of the Directors Loan Policy Committee
3. Member of the Human Resources Committee
4. Member of the Investment Committee
OFFICERS OF THE BANK
<TABLE>
<S> <C>
JOHN W. ROSENTHAL JACK MATTHYS
Chairman, President and Vice Chairman and
Chief Executive Officer Chief Lending Officer
NANCY N. KING PATRICK D. NOVITZKI
Senior Vice President, Senior Vice President,
Deposit Services Lending Services
EDWARD R. POOLEY LENORE R. GENTNER
Senior Vice President, Cashier, Vice President,
and Chief Financial Officer Deposit Services
ERIC S. GERHOLD JANICE M. REAVES
Vice President, Assistant Vice President,
Senior Credit Administrator Loan Documentation/Client Services
THERESA R. CRUZ
Operations Officer
</TABLE>
- --------------------------------------------------------------------------------
18
(Continued)
<PAGE> 19
CORPORATE INFORMATION
- ---------------------
St. Joseph Capital Corporation, a bank holding
company, provides a broad range of banking
services to businesses and individuals in the
Michiana area. Its sole subsidiary, St. Joseph
Capital Bank, was founded on February 13, 1997.
HEADQUARTERS
- ------------
3820 Edison Lakes Parkway
Mishawaka, Indiana 46545
219-273-9700
ANNUAL MEETING
- --------------
Tuesday, April 29, 1997
7:00 p.m. (local time)
Center for Continuing Education
Notre Dame, Indiana 46556
STOCK LISTING
- -------------
St. Joseph Capital Corporation common
stock is an Over-the-Counter "bulletin board"
stock and trades under the symbol "SJOE".
STOCK TRANSFER AGENT AND REGISTRAR
- ----------------------------------
First Union National Bank of North Carolina
230 South Tyron Street, 10th Floor
Charlotte, North Carolina 28288-1154
Attn. Eleanor G. Autry, Vice President
FORM 10-KSB AND OTHER FINANCIAL REPORTS
- ---------------------------------------
Single copies of this Annual Report, the Corporation's
Annual Report on Form 10-KSB as filed with the Securities
and Exchange Commission and quarterly earnings reports
may be obtained from:
Edward Pooley
Senior Vice President & CFO
St. Joseph Capital Corporation
3820 Edison Lakes Parkway
Mishawaka, Indiana 46545
INDEPENDENT ACCOUNTANTS
- -----------------------
Crowe, Chizek and Company, LLP
330 East Jefferson Boulevard
P. O. Box 7
South Bend, Indiana 46624
- --------------------------------------------------------------------------------
19
(Continued)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,103
<INT-BEARING-DEPOSITS> 1,307,009
<FED-FUNDS-SOLD> 100,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,127,902
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 11,841,405
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 48,519
<LONG-TERM> 0
0
0
<COMMON> 12,652
<OTHER-SE> 11,828,753
<TOTAL-LIABILITIES-AND-EQUITY> 11,841,405
<INTEREST-LOAN> 0
<INTEREST-INVEST> 197,057
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 197,057
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 7,656
<INTEREST-INCOME-NET> 189,401
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 479,620
<INCOME-PRETAX> (290,219)
<INCOME-PRE-EXTRAORDINARY> (290,219)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (290,219)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> 0
<YIELD-ACTUAL> 4.03
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE> 1
[ST. JOSEPH CAPITAL BANK LETTERHEAD]
March 18, 1997
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of St. Joseph Capital
Corporation, I cordially invite you to attend the Annual Meeting of
Stockholders of St. Joseph Capital Corporation to be held at 7:00 p.m. on April
29, 1997, at the Center for Continuing Education at the University of Notre
Dame, Notre Dame, Indiana. A map showing the location of the meeting is found
on the back page of the accompanying proxy statement. The accompanying Notice
of Annual Meeting of Stockholders and Proxy Statement discuss the business to
be conducted at the meeting. We have also enclosed a copy of the Company's
1996 Annual Report to Stockholders. At the meeting we shall report on Company
operations and the outlook for the year ahead.
Your Board of Directors has nominated four persons to serve as Class I
directors. Each of the nominees are incumbent directors. The Board of
Directors also proposes to amend Article IV of the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock, $.01
per share, from 1,500,000 to 2,500,000 shares. In addition, the Company's
management has selected and recommends that you ratify the selection of Crowe,
Chizek and Company LLP to continue as the Company's independent public
accountants for the year ending December 31, 1997.
We recommend that you vote your shares for the director nominees and in
favor of the proposals.
I encourage you to attend the meeting in person. WHETHER OR NOT YOU PLAN
TO ATTEND, HOWEVER, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND
RETURN IT IN THE ACCOMPANYING POSTPAID RETURN ENVELOPE AS PROMPTLY AS POSSIBLE.
This will ensure that your shares are represented at the meeting.
If you have any questions concerning these matters, please do not hesitate
to contact me at (219) 273-9700. We look forward with pleasure to seeing and
visiting with you at the meeting.
Very truly yours,
ST. JOSEPH CAPITAL CORPORATION
/s/John W. Rosenthal
-------------------------------
John W. Rosenthal
Chairman
<PAGE> 2
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 29, 1997
ST. JOSEPH CAPITAL CORPORATION
To the stockholders of
ST. JOSEPH CAPITAL CORPORATION
The Annual Meeting of the Stockholders of St. Joseph Capital Corporation,
a Delaware corporation (the "Company"), will be held at the Center for
Continuing Education at the University of Notre Dame, Notre Dame, Indiana, on
Tuesday, April 29, 1997, at 7:00 p.m., local time, for the following purposes:
1. to elect four Class I directors for a term of three years.
2. to amend Article IV of the Company's Certificate of
Incorporation to increase the number of authorized shares of Common
Stock, $.01 par value per share, from 1,500,000 to 2,500,000 shares.
3. to approve the appointment of Crowe, Chizek and Company LLP
as independent public accountants for the Company for the fiscal
year ending December 31, 1997.
4. to transact such other business as may properly be brought
before the meeting and any adjournments or postponements thereof.
The map on the back page of the attached Proxy Statement shows the
location of the Annual Meeting.
The Board of Directors has fixed the close of business on March 7, 1997,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting.
By order of the Board of Directors
/s/John W. Rosenthal
----------------------------------
John W. Rosenthal
Chairman
Mishawaka, Indiana
March 18, 1997
- --------------------------------------------------------------------------------
4101 Edison Lakes Parkway Mishawaka, In 46545 Phone: (219) 273-9700
<PAGE> 3
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of St. Joseph Capital Corporation (the "Company") of
proxies to be voted at the Annual Meeting of Stockholders to be held at the
Center for Continuing Education at the University of Notre Dame, Notre Dame,
Indiana, on Tuesday, April 29, 1997, at 7:00 p.m., local time, and at any
adjournments or postponements thereof.
The Board of Directors would like to have all stockholders represented at
the meeting. If you do not expect to be present, please sign and mail your
proxy card in the enclosed self-addressed, stamped envelope to the Company's
transfer agent, First Union National Bank of North Carolina, 230 South Tryon
Street, Charlotte, North Carolina 28202, Attention: Ms. Ellie Autry. You have
the power to revoke your proxy at any time before it is voted, and the giving
of a proxy will not affect your right to vote in person if you attend the
meeting.
The mailing address of the Company's principal executive offices is 4101
Edison Lakes Parkway, Mishawaka, Indiana 46545. This Proxy Statement and the
accompanying proxy card are being mailed to stockholders on or about March 18,
1997. The 1996 Annual Report of the Company, which includes consolidated
financial statements of the Company, is enclosed.
The Company is a bank holding company which serves the financial needs of
the "Michiana" area of Indiana and Michigan. It is the parent company of the
St. Joseph Capital Bank (the "Bank"), an Indiana state bank located in
Mishawaka, Indiana, which commenced operations on February 13, 1997.
Only holders of record of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), at the close of business on March 7, 1997 will be
entitled to vote at the annual meeting or any adjournments or postponements of
such meeting. On March 7, 1997, the Company had 1,265,676 shares of Common
Stock issued and outstanding. In the election of directors, and for all other
matters to be voted upon at the annual meeting, each issued and outstanding
share of Common Stock is entitled to one vote. All shares of Common Stock
represented at the annual meeting by properly executed proxies received prior
to or at the annual meeting, and not revoked, will be voted at the meeting in
accordance with the instructions thereon. If no instructions are indicated,
properly executed proxies will be voted for the nominees and for adoption of
the proposals set forth in this Proxy Statement.
A majority of the shares of the Common Stock, present in person or
represented by proxy, shall constitute a quorum for purposes of the annual
meeting. Abstentions and broker non-votes will be counted for purposes of
determining a quorum. Directors shall be elected by a plurality of the votes
present in person or represented by proxy. For approval of the amendment to
the Company's Certificate of Incorporation, the affirmative vote of the
majority of the Company's outstanding shares entitled to vote on the subject
matter shall constitute stockholder approval. In all matters other than the
election of directors, the affirmative vote of the majority of shares present
in person or represented by proxy at the annual meeting and entitled to vote on
the subject matter shall be required to constitute stockholder approval.
Abstentions will be treated as votes against a proposal and broker non-votes
will have no effect on the vote.
<PAGE> 4
ELECTION OF DIRECTORS
At the Annual Meeting of the Stockholders to be held on April 29, 1997,
the stockholders will be entitled to elect four (4) Class I directors for a
term expiring in 2000. The directors of the Company are divided into three
classes having staggered terms of three years. Each of the nominees for
election as Class I directors are incumbent directors. The Company has no
knowledge that any of the nominees will refuse or be unable to serve, but if
any of the nominees becomes unavailable for election, the holders of the
proxies reserve the right to substitute another person of their choice as a
nominee when voting at the meeting. Set forth below is information, as of
March 7, 1997, concerning the nominees for election and for the other persons
whose terms of office will continue after the meeting, including age, year
first elected a director of the Company and business experience during the
previous five years of each. Each of the individuals have held the positions
listed for the past five years unless otherwise noted. The four nominees, if
elected at the annual meeting, will serve as Class I directors for three year
terms expiring in 2000.
NOMINEES
<TABLE>
<CAPTION>
NAME DIRECTOR PRINCIPAL OCCUPATION
(AGE) SINCE FOR THE LAST FIVE YEARS
- ----- -------- -----------------------
<S> <C> <C>
CLASS I
(TERM EXPIRES 2000)
David A. Eckrich 1996 President, Adams Road Development, Inc.
(Age 56)
Jerry Hammes 1996 Chairman, Romy Hammes Bancorp, Inc., Peoples
(Age 65) Bank of Kankakee County and Romy Hammes, Inc.
Arthur H. McElwee 1996 President, Toefco Engineered Coating
(Age 54) Systems, Inc. (1994-present); President,
Goshen Rubber, Inc. (1991-1994); Secretary
of the Company
John W. Rosenthal 1996 Chairman of the Board, President and Chief
(Age 37) Executive Officer of the Company and the
Bank; Vice President and Senior Corporate
Banker, First National Bank of Chicago
(1988-1996)
CONTINUING DIRECTORS
CLASS II
(TERM EXPIRES 1998)
Arthur J. Decio 1996 Chairman of the Board and Chief Executive
(Age 66) Officer, Skyline Corporation
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME DIRECTOR PRINCIPAL OCCUPATION
(AGE) SINCE FOR THE LAST FIVE YEARS
- ----- -------- -----------------------
<S> <C> <C>
V. Robert Hepler 1996 President and Chief Executive Officer, VRH
(Age 68) Rentals (1994-present); President, Bob
Hepler Construction Equipment Company (prior
to 1994)
Jack Matthys 1996 Vice Chairman of the Company and Chief
(Age 50) Lending Officer of the Bank; President,
Krizman, Inc. (1990-1992)
Richard A. Rosenthal 1996 Director of Athletics, University of Notre
(Age 64) Dame (1987-1995)
CLASS III
(TERM EXPIRES 1999)
Scott C. Malpass 1996 Associate Vice President for Finance and
(Age 33) Chief Investment Officer, University of
Notre Dame
Robert A. Sullivan 1996 President, Capital Bank, N.A., Sylvania, Ohio
(Age 42)
Helen L. Krizman 1996 Controller, R-Vision, Inc. (1996-present);
Controller, The Warrick Corporation
(Age 33) (1991-1996)
</TABLE>
All of the Company's directors will hold office for the terms indicated,
or until their respective successors are duly elected and qualified. There are
no arrangements or understandings between any of the directors, executive
officers or any other person pursuant to which any of the Company's directors
or executive officers have been selected for their respective positions, and no
member of the Board is related to another member by blood or marriage, except
that Richard A. Rosenthal is the father of John W. Rosenthal.
For serving on the Board of Directors of the Company and the Bank,
directors who are also not officers receive annual fees in the form of options
to purchase 300 shares of the Company's Common Stock at the current fair market
value of such shares on the date of grant. The options vest immediately and
have a term of 10 years. Directors also receive options to purchase 15 shares
for each Board meeting of the Company or the Bank that they attend. Options
are not granted for Board meetings of both the Company and the Bank when such
meetings are held on the same day. No additional compensation is paid to
directors for attendance at committee meetings.
3
<PAGE> 6
The Board of Directors of the Company has not established any committees.
The Bank's Board of Directors has established a directors' loan policy
committee, an audit committee, an investment committee and a human resources
committee. These committees are composed entirely of outside directors, except
that John W. Rosenthal, the Company's President and Chief Executive Officer,
serves on all committees except the audit committee, and Jack Matthys, the
Bank's Chief Lending Officer, serves on the directors' loan policy committee.
TRANSACTIONS WITH MANAGEMENT
During the fiscal year ended December 31, 1996, neither the Company nor
the Bank conducted activities other than in connection with their respective
organization and opening for business. It is expected that certain directors
and executive officers of the Company (including their affiliates, families and
companies in which they are principal owners, officers or directors) will be
loan customers of, and have other transactions with, the Company and the Bank
in the ordinary course of business. Such loans and lines of credit are
expected to be made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for transactions with other persons and are not expected to involve more
than the normal risk of collectibility or present other unfavorable features.
EXECUTIVE COMPENSATION
The following table shows the compensation for the last fiscal year by the
Chief Executive Officer of the Company. No executive officer of the Company or
the Bank had 1996 salary and bonus which exceeded $100,000.
<TABLE>
<CAPTION>
====================================================================================================================================
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (g) (h)
FISCAL
YEAR STOCK ALL OTHER
NAME AND ENDED OPTIONS COMPENSATION
PRINCIPAL POSITION DECEMBER 31ST SALARY($)(1) BONUS ($) GRANTED (#) ($)(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John W. Rosenthal
President & Chief Executive Officer 1996 $75,384 - - 27,000 $6,038
====================================================================================================================================
</TABLE>
(1) Includes compensation deferred at the election of Mr. Rosenthal.
(2) Represents automobile allowance.
4
<PAGE> 7
STOCK OPTION INFORMATION
The following table sets forth certain information concerning the number
and value of stock options granted in the last fiscal year to the individuals
named in the Summary Compensation Table:
<TABLE>
<CAPTION>
====================================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
(a) (b) (c) (d) (e)
% OF TOTAL OPTIONS
OPTIONS GRANTED TO
GRANTED EMPLOYEES IN FISCAL EXERCISE OR BASE EXPIRATION
NAME (#)(1) YEAR PRICE ($/SH) DATE
====================================================================================================================================
<S> <C> <C> <C> <C>
John W. Rosenthal 27,000 48% $10.00 June 11, 2006
====================================================================================================================================
(1) Options become exercisable in equal portions on December 31, 1996, June
30, 1997 and June 30, 1998.
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the Company's
Common Stock beneficially owned on March 7, 1997 with respect to all persons
known to the Company to be the beneficial owner of more than five percent of
the Company Common Stock, each director, each executive officer named in the
Summary Compensation Table and all directors and executive officers of the
Company and the Bank as a group.
5
<PAGE> 8
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL AND AMOUNT AND NATURE OF PERCENT
NUMBER OF PERSONS IN GROUP BENEFICIAL OWNERSHIP(1)(2) OF CLASS
--------------------------- -------------------------- --------
<S> <C> <C>
DIRECTORS
John W. Rosenthal(3) 24,192 1.9%
Arthur J. Decio 25,315 2.0%
David A. Eckrich 25,345 2.0%
Jerry Hammes 49,245 3.8%
V. Robert Hepler 25,315 2.0%
Helen L. Krizman 10,345 0.8%
Scott C. Malpass 2,830 0.2%
Jack Matthys(4) 25,000 1.9%
Arthur H. McElwee 10,345 0.8%
Richard A. Rosenthal(5) 13,945 1.1%
Robert A. Sullivan 10,345 0.8%
All directors and executive
officers as a group
(12 persons) 226,410 17.8%
</TABLE>
_____________
(1) The information contained in this column is based upon information
furnished to the Company by the persons named above and the members of the
designated group. The nature of beneficial ownership for shares shown in this
column is sole voting and investment power, except as set forth in the
footnotes below. Inclusion of shares shall not constitute an admission of
beneficial ownership or voting or investment power over included shares.
(2) Includes shares obtainable under options granted to directors and officers
of the Company and the Bank under the Company's Stock Option Plan which are
presently exercisable or which become exercisable within 60 days of the date of
this table.
(3) Includes 92 shares in a 401(k) account for Mr. Rosenthal and 6,400 shares
held in a trust, for which Mr. Rosenthal serves as a co-trustee and in such
capacity has shared voting and investment power. Also includes 9,000 shares
presently obtainable through stock options granted under the Company Stock
Option Plan, over which shares Mr. Rosenthal has no voting and sole investment
power.
(4) Includes 5,000 shares presently obtainable through the exercise of stock
options, over which shares Mr. Matthys has no voting and sole investment power.
(5) Includes shares held by Mr. Rosenthal's spouse.
6
<PAGE> 9
PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The Board of Directors of the Company has unanimously approved an
amendment (the "Amendment") to Article IV of the Company's Certificate of
Incorporation ("Certificate") that would increase the number of authorized
shares of the Company's Common Stock, $.01 par value per share, from 1,500,000
shares to 2,500,000 shares. As of March 7, 1997, the Company had 1,265,676
shares of Common Stock issued and outstanding. The Board of Directors has
proposed adoption of the Amendment for several reasons, including those set
forth below.
First, the additional shares authorized by the Amendment will provide
management with a substantial number of shares of Common Stock to enter into
certain transactions involving the use of Common Stock that may be advisable
from time to time. Such transactions could include, but are not limited to,
the acquisition by the Company of additional branch locations, subsidiaries or
bank or thrift holding companies. Although no such transactions are planned
for the immediate future, management and the Board of Directors believe that it
is in the Company's best interests to have available a large number of
authorized shares of Common Stock if such transactions become advisable.
Second, the additional shares of Common Stock authorized by the Amendment
could be used to raise additional working capital for the Company or the Bank.
The Board of Directors does not currently have any plans to raise capital
through the issuance of additional shares or otherwise, but these shares would
be available for that purpose.
Third, the Amendment will provide for the additional shares of Common
Stock necessary to permit stock dividends, should the Board of Directors
determine that such dividends are in the best interests of the Company and its
stockholders.
The increase in the number of shares of Common Stock authorized by the
Amendment will allow for the possibility of substantial dilution of the voting
power of current stockholders of the Company, although no dilution will occur
as a direct result of any stock dividends which may be declared in the future.
The degree of any such dilution which would occur following the issuance of any
additional shares of Common Stock in transactions other than stock dividends
would depend upon the number of shares of Common Stock that are actually issued
in such transactions, which number cannot be determined at this time. Issuance
of a large number of additional shares could significantly dilute the voting
power of existing stockholders.
The existence of a substantial number of authorized and unissued shares of
Common Stock could also impede an attempt to acquire control of the Company
because the Company would have the ability to issue additional shares of Common
Stock in response to any such attempt. The Company is not aware of any such
attempt to acquire control at this time, and no decision has been made as to
whether any or all newly authorized but unissued shares of Common Stock would
be issued in response to any such attempt.
To be approved by the Company's stockholders, the Amendment must receive
the affirmative vote of a majority of shares outstanding and entitled to vote
on the Amendment at the Annual Meeting of Stockholders. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE YOUR SHARES FOR THE AMENDMENT.
7
<PAGE> 10
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Stockholders will be asked to approve the appointment of Crowe, Chizek and
Company LLP as the Company's independent public accountants for the year ending
December 31, 1997. A proposal will be presented at the annual meeting to
ratify the appointment of Crowe, Chizek and Company LLP. If the appointment of
Crowe, Chizek and Company LLP is not ratified, the matter of the appointment of
independent public accountants will be considered by the Board of Directors.
Representatives of Crowe, Chizek and Company LLP are expected to be present at
the meeting and will be given the opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
THIS APPOINTMENT.
GENERAL
Your proxy is solicited by the Board of Directors and the cost of
solicitation will be paid by the Company. In addition to the solicitation of
proxies by use of the mails, officers, directors and regular employees of the
Company or the Bank, acting on the Company's behalf, may solicit proxies by
telephone, telegraph or personal interview. The Company will, at its expense,
upon the receipt of a request from brokers and other custodians, nominees and
fiduciaries, forward proxy soliciting material to the beneficial owners of
shares held of record by such persons.
OTHER BUSINESS
It is not anticipated that any action will be asked of the stockholders
other than that set forth above, but if other matters properly are brought
before the meeting, the persons named in the proxy will vote in accordance with
their best judgment.
FAILURE TO INDICATE CHOICE
If any stockholder fails to indicate a choice in items (1), (2) and (3) on
the proxy card, the shares of such stockholder shall be voted (FOR) in each
instance.
By order of the Board of Directors
/s/ John W. Rosenthal
---------------------
John W. Rosenthal
Chairman
Mishawaka, Indiana
March 18, 1997
ALL STOCKHOLDERS ARE URGED TO SIGN
AND MAIL THEIR PROXIES PROMPTLY
8
<PAGE> 11
[MAP]
<PAGE> 12
ST. JOSEPH CAPITAL CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. Election of Directors
David A. Eckrich
Jerry Hammes
Arthur H. McElwee
John W. Rosenthal
2. Amendment to the Certificate of Incorporation
to increase the number of shares of Common
Stock authorized from 1,500,000 to 2,500,000
3. To ratify the selection of Crowe, Chizek and Company LLP
The Board of Directors recommends a vote FOR all proposals.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
SPECIFICATION MADE. IF NO CHOICES ARE INDICATED,
THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
Dated: , 1997
-------------------------
Signature(s)
-------------------------
-------------------------
NOTE: Please sign exactly as your name(s) appears. For joint
accounts, each owner should sign. When signing as executor,
administrator, attorney, trustee or guardian, etc., please
give your full title.
<PAGE> 13
ST. JOSEPH CAPITAL CORPORATION
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS -- APRIL 29, 1997 PROXY
The undersigned hereby appoints John W. Rosenthal and Jack Matthys, or
either of them acting in the absence of the others, with power of substitution,
attorneys and proxies, for and in the name and place of the undersigned, to
vote the number of shares of Common Stock that the undersigned would be
entitled to vote if then personally present at the Annual Meeting of the
Stockholders of St. Joseph Capital Corporation, to be held at the Center for
Continuing Education at the University of Notre Dame, Notre Dame, Indiana, on
Tuesday, April 29, 1997, at 7:00 p.m., local time, or any adjournments or
postponements thereof, upon the matters set forth in the Notice of Annual
Meeting and Proxy Statement (receipt of which is hereby acknowledged) as
designated on the reverse side, and in their discretion, the proxies are
authorized to vote upon such other business as may come before the meeting:
Check here for address change. Check here if you plan to attend
New Address: the meeting.
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(Continued and to be signed on reverse side.)
