<PAGE>
As filed with the Securities and Exchange Commission on January 27, 1997
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------
ROCKY FORD FINANCIAL, INC.
--------------------------------------------------
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C> <C>
Delaware 6035 Requested
- ------------------------------- ---------------------------- ----------------------
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
</TABLE>
801 Swink Avenue, Rocky Ford, Colorado 81067-0032
(714) 254-7642
- --------------------------------------------------------------------------------
(Address and telephone number of principal executive offices and principal
place of business)
Mr. Keith E. Waggoner, President
Rocky Ford Financial, Inc.
801 Swink Avenue
Rocky Ford, Colorado 81067-0032
(719) 254-7642
- --------------------------------------------------------------------------------
(Name, address, and telephone number of agent for service)
Please send copies of all communications to:
Allan D. Housley, Esquire
Howard S. Parris, Esquire
Housley Kantarian & Bronstein, P.C.
1220 19th Street, N.W., Suite 700
Washington, D.C. 20036
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Proposed Proposed
Dollar Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities to be Price Per Offering Registration
to be Registered Registered Unit Price (1) Fee
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share......... $4,232,000 $10.00 $4,232,000 $1,282.42
- ---------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
PROSPECTUS
ROCKY FORD FINANCIAL, INC.
(HOLDING COMPANY FOR
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION)
Up to 368,000 Shares of Common Stock
$10.00 Per Share
Rocky Ford Financial, Inc. (the "Company"), a Delaware corporation, is
offering up to 368,000 shares, subject to adjustment, of its common stock, par
value $.01 per share (the "Common Stock"), in connection with the conversion of
Rocky Ford Federal Savings and Loan Association (the "Association") from a
federal mutual savings and loan association to a federal stock savings and loan
association (the "Converted Association") and the issuance of the Converted
Association's capital stock to the Company pursuant to the Plan of Conversion
(the "Plan") of the Association. The conversion of the Association to the
Converted Association, the acquisition of control of the Converted Association
by the Company and the issuance and sale of the Common Stock are collectively
referred to herein as the "Conversion."
The shares of the Common Stock are being offered pursuant to nontransferable
subscription rights ("Subscription Rights") in a subscription offering (the
"Subscription Offering"). Subscription Rights are not transferable, and persons
who attempt to transfer their Subscription Rights may lose the right to
subscribe for stock in the Conversion and may be subject to other sanctions and
penalties imposed by the Office of Thrift Supervision ("OTS"). The Company may
offer any shares of Common Stock not subscribed for in the Subscription Offering
in a community offering (the "Community Offering") to certain members of the
general public to whom the Company delivers a copy of this Prospectus and a
stock order form (the "Stock Order Form"), with preference given to natural
persons and trusts of natural persons who are permanent residents of Otero
County, Colorado (the "Local Community"). The Association and the Company may,
in their absolute discretion, reject orders in the Community Offering in whole
or in part. It is anticipated that shares of the Common Stock not
(continued on following page)
For information on how to subscribe, call the Stock Information
Center at (___) ___-____.
PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW AND CONSIDER THE DISCUSSION UNDER
"RISK FACTORS" BEGINNING ON PAGE __.
THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY STATE SECURITIES COMMISSION, NOR HAS SUCH
COMMISSION, OFFICE OR CORPORATION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS ACCOUNTS
OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
================================================================================
<TABLE>
<CAPTION>
Estimated Fees
and Expenses,
Including
Underwriting
Purchase Discounts and Estimated Net
Price (1) Commissions (2) Proceeds (3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share (4).................... $10.00 $1.09 $8.91
- --------------------------------------------------------------------------------
Total Minimum.................... $2,720,000 $340,000 $2,380,000
- --------------------------------------------------------------------------------
Total Midpoint................... $3,200,000 $350,000 $2,850,000
- --------------------------------------------------------------------------------
Total Maximum.................... $3,680,000 $350,000 $3,330,000
- --------------------------------------------------------------------------------
Total Maximum, as adjusted (5)... $4,232,000 $350,000 $3,882,000
================================================================================
</TABLE>
(footnotes on following page)
TRIDENT SECURITIES, INC.
The date of this Prospectus is ___________, 1997
<PAGE>
(continued from preceding page)
otherwise subscribed for in the Subscription and Community Offerings may be
offered at the discretion of the Company to certain members of the general
public as part of a community offering on a best efforts basis by a selling
group of selected broker-dealers to be managed by Trident Securities, Inc. (the
"Syndicated Community Offering"). Neither Trident Securities, Inc. nor any
selected broker-dealers will have any obligation to purchase any shares of the
Common Stock. See "The Conversion -- Offering of Common Stock," " --
Subscription Offering," " -- Community Offering," and " -- Syndicated Community
Offering."
The total number of shares to be issued in the Conversion may be
significantly increased or decreased to reflect market and financial conditions
at the completion of the Conversion. The aggregate purchase price of all shares
of the Common Stock will be based on the estimated pro forma market value of the
Association, as converted, as determined by an independent appraisal. All shares
of the Common Stock will be sold for $10.00 per share (the "Purchase Price").
With the exception of the ESOP, which intends to purchase 8.0% of the total
number of shares of Common Stock issued in the Conversion, no Eligible Account
Holder, Supplemental Eligible Account Holder or Other Member nor person
(together with associates of and persons acting in concert therewith) in the
Community Offering and Syndicated Community Offering may purchase more than the
lesser of 5% or $150,000 of the shares of Common Stock issued in the Conversion.
In addition, no person (together with associates and persons acting in concert
therewith) may purchase in the aggregate more than the lesser of 5% or $150,000
of the shares of Common Stock issued in the Conversion. The maximum overall
purchase limitation and the amount permitted to be subscribed for may be
increased or decreased under certain circumstances in the sole discretion of the
Company. The minimum purchase is 25 shares. See "The Conversion -- Limitations
on Purchase of Shares."
THE SUBSCRIPTION OFFERING WILL EXPIRE AT 12:00 NOON, LOCAL TIME, ON
___________, 1997, UNLESS EXTENDED BY THE COMPANY FOR UP TO AN ADDITIONAL __
DAYS. THE COMMUNITY OFFERING, IF ANY, MAY COMMENCE WITHOUT NOTICE AT ANY TIME
AFTER THE COMMENCEMENT OF THE SUBSCRIPTION OFFERING AND MAY TERMINATE AT ANY
TIME
(continued on following page)
(footnotes from preceding table)
- ----------------------
(1) The estimated aggregate value of the Common Stock is based on an
independent appraisal by Ferguson & Co., LLP. ("Ferguson") as of December
13, 1996. See "The Conversion -- Stock Pricing and Number of Shares to be
Issued." Based on such appraisal, the Company has determined to offer up
to 368,000 shares, subject to adjustment, at a purchase price of $10.00
per share (the "Purchase Price"). The final aggregate value will be
determined at the time of closing of the Conversion and is subject to
change due to changing market conditions and other factors. If a change
in the final valuation is required, an appropriate adjustment will be
made in the number of shares being offered within a range of 272,000
shares at the minimum of the Estimated Valuation Range (defined herein)
to 368,000 shares at the maximum of the Estimated Valuation Range and,
with OTS approval, to 423,200 shares at approximately 15% above the
maximum of the Estimated Valuation Range.
(2) Includes estimated printing, postage, legal, accounting and miscellaneous
expenses which will be incurred in connection with the Conversion. Also
includes estimated fees, sales commissions and reimbursable expenses to
be paid to Trident Securities, Inc. ("Trident Securities") in connection
with the Subscription and Community Offerings, estimated to be $82,200,
$92,600, $92,600 and $92,600 at the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range. The actual fees and
expenses may vary from the estimates. See "Pro Forma Data" for the
assumptions underlying these estimates. Trident Securities may be deemed
to be an underwriter, and certain amounts to be paid to Trident
Securities may be deemed to be underwriting compensation for purposes of
the Securities Act of 1933, as amended. The Company and the Association
have agreed to indemnify Trident Securities against certain liabilities
arising out of its services as financial and sales advisor.
(3) Includes the ESOP's expected purchase of 8% of the shares sold in the
Conversion with funds borrowed from the Company. Does not reflect a
possible purchase by a management recognition plan of a number of shares
equal to up to 4% of the shares to be issued in the Conversion with funds
contributed by the Converted Association. See "Capitalization" and "Pro
Forma Data."
(4) Based on the midpoint of the Estimated Valuation Range. At the minimum,
maximum and 15% above the maximum of the Estimated Valuation Range, the
estimated fees and expenses, including underwriting discounts and
commissions, per share are expected to be $1.25, $.95 and $0.83,
respectively, and the estimated net proceeds per share are expected to be
$8.75, $9.05 and $9.17, respectively.
(5) Gives effect to an increase in the number of shares which could occur
without a resolicitation of subscribers or any right of cancellation due
to an increase in the Estimated Valuation Range of up to 15% above the
maximum of the Estimated Valuation Range to reflect changes in market and
financial conditions. See "The Conversion -- Stock Pricing and Number of
Shares to be Issued."
2
<PAGE>
(continued from preceding page)
WITHOUT NOTICE, BUT MAY NOT TERMINATE LATER THAN __________, 1997. An executed
Stock Order Form, once received by the Association, may not be modified, amended
or rescinded without the consent of the Association. Subscriptions paid by
check, cash or money order will be held in a separate account at the Association
established specifically for this purpose, and interest will be paid at the
Association's passbook rate from the date payment is received until the
Conversion is completed or terminated. In the case of payments to be made
through withdrawal from deposit accounts at the Association, all sums authorized
for withdrawal will continue to earn interest at the contract rate until the
date of the completion of the Conversion but, following completion of the
Conversion, funds withdrawn from deposit accounts and used to purchase Common
Stock will no longer be deposit accounts and will not be insured by the Federal
Deposit Insurance Company, the Bank Insurance Fund, the Savings Association
Insurance Fund or any other governmental agency. If the Conversion is not
completed within 45 days after the last day of the Subscription Offering (which
date will be no later than __________, 1997) and the OTS consents to an
extension of time to complete the Conversion, subscribers must affirmatively
reconfirm their subscriptions prior to the expiration of the resolicitation
offering and may, in the alternative, modify or cancel their subscriptions. See
"The Conversion -- Subscription for Stock in Subscription and Community
Offerings."
The Association has retained Trident Securities, a broker-dealer registered
with the Securities and Exchange Commission ("SEC") and a member of the National
Association of Securities Dealers, Inc. ("NASD"), to provide financial and sales
assistance in connection with the Subscription and Community Offerings. Trident
Securities has agreed to use its best efforts to assist the Company and the
Association with the sale of the Common Stock in the Subscription Offering and
the Community Offering, if any.
3
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
Rocky Ford, Colorado
[INSERT MAP]
THE ASSOCIATION'S CONVERSION TO A STOCK ORGANIZATION IS CONTINGENT UPON APPROVAL
OF THE PLAN OF CONVERSION BY ITS MEMBERS, THE SALE OF AT LEAST THE MINIMUM
NUMBER OF SHARES OFFERED PURSUANT TO THE PLAN OF CONVERSION AND THE SATISFACTION
OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information and the Financial Statements and
accompanying Notes appearing elsewhere in this Prospectus.
Rocky Ford Financial, Inc.
The Company was incorporated under the laws of the State of Delaware in January
1997 at the direction of the Board of Directors of the Association for the
purpose of serving as a holding company of the Converted Association upon its
conversion from mutual to stock form. The Company has received approval from the
OTS to acquire control of the Converted Association subject to satisfaction of
certain conditions. Prior to the Conversion, the Company has not engaged and
will not engage in any material operations. Upon consummation of the Conversion,
the Company will have no significant assets other than the outstanding capital
stock of the Converted Association, a portion of the net proceeds of the
Conversion and a note receivable from the ESOP. Following the Conversion, the
Company's principal business will be overseeing and directing the business of
the Converted Association and investing the net Conversion proceeds retained by
it, and the Company will register with the OTS as a savings and loan holding
company.
Rocky Ford Federal Savings and Loan Association
The Association is a federal mutual savings and loan association operating
through a single office located in Rocky Ford, Colorado and serving Otero
County, Colorado. The Association was chartered as a federal savings and loan
association and received federal insurance of its deposit accounts in 1934,
under its current name, Rocky Ford Federal Savings and Loan Association. At
September 30, 1996, the Association had total assets of $20.4 million, total
deposits of $17.1 million and equity of $2.8 million.
Historically, the Association has operated as a traditional savings institution
by emphasizing the origination of loans secured by one- to four-family ("single-
family") residences. At September 30, 1996, $12.1 million, or 98.74% of the
Association's gross loan portfolio, consisted of single-family residential
mortgage loans, all of which are originated on properties in its market area.
Substantially all of these loans have terms of 10 to 15 years, and are fixed-
rate loans.
Financial and operating characteristics of the Association include the
following:
Community Orientation. The Association has been committed to meeting the
financial needs of the community in which it has operated for over 60 years. The
Board of Directors believes that with its long-term presence in the community
and single office, the Association is well positioned to provide financial
services on a personalized and efficient basis. Management believes that the
Association can be more effective in servicing its customers because of the
Association's ability to quickly and effectively provide responses to customer
needs and inquiries. Management plans to continue to emphasize the community
orientation of the Association and believes that this emphasis will represent a
continuing competitive advantage to the Association.
Capital Strength. At September 30, 1996, the Association had $2.8 million of
total equity, representing 13.63% of total assets. At such date, the Association
exceeded all of its minimum regulatory capital requirements, with tangible and
core capital of 12.90% of adjusted total assets and risk-based capital of 34.17%
of total risk-weighted assets. See "Regulation -- Depository Institution
Regulation -- Capital
5
<PAGE>
Requirements." As a result of the Conversion, assuming the Company retains 50%
of the net proceeds of the Conversion at the midpoint of the Estimated Valuation
Range, at September 30, 1996, the Association would have had pro forma
stockholders' equity of approximately $3.8 million, or 17.61% of pro forma total
assets, and the Company would have had pro forma consolidated stockholders'
equity of $5.2 million, or 22.95%, of total pro forma consolidated assets. See
"Historical and Pro Forma Regulatory Capital Compliance."
Profitability. The Association has been profitable in each of the last five
fiscal years. For the years ended September 30, 1996 and 1995, the Association's
net income was $129,000 and $287,000, respectively. The Association's return on
average assets was .64% and 1.50%, for the years ended September 30, 1996 and
1995, respectively. The Association's return on average total equity was 4.81%
and 12.24% for the years ended September 30, 1996 and 1995, respectively. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Asset Quality. At September 30, 1996 and 1995, the Association had no
nonperforming assets and no loans accounted for on a nonaccrual basis. The
Association's allowance for loan losses at September 30, 1996 totaled $60,000.
The information set forth above should be considered in the context of the
detailed information contained elsewhere herein, including "Risk Factors." For
additional information, see "Rocky Ford Federal Savings and Loan Association."
The Association is subject to examination and comprehensive regulation by the
OTS, and the Association's savings deposits are insured up to applicable limits
by the Savings Association Insurance Fund ("SAIF"), which is administered by the
FDIC. The Association is a member of and owns capital stock in the Federal Home
Bank ("FHLB") of Topeka, which is one of 12 regional banks in the FHLB System.
The Association is further subject to regulations of the Federal Reserve Board
governing reserves to be maintained and certain other matters. Regulations
significantly affect the operations of the Association. See "Regulation --
Depository Institution Regulation."
The Conversion
The Board of Directors of the Association adopted the Plan on January 14, 1997
pursuant to which the Association will convert from a federally chartered mutual
savings and loan association to a federally chartered stock savings and loan
association, (i.e., the Converted Association), and will thereafter operate as a
wholly owned subsidiary of a newly organized holding company formed by the
Association. See "The Conversion --General." Upon consummation of the
Conversion, the Converted Association will issue all of its outstanding capital
stock to the Company in exchange for at least 50% of the net proceeds from the
sale of the Common Stock in the Conversion.
The OTS has approved the Plan, subject to member approval and satisfaction of
certain other conditions. The OTS has also approved the Company's application to
acquire all of the capital stock of the Converted Association and thereby become
a savings and loan holding company, as part of the Conversion.
The Conversion is subject to certain conditions, including the prior approval of
the Plan at a special meeting of members to be held on ____________, 1997 (the
"Special Meeting").
6
<PAGE>
The portion of the net proceeds from the sale of Common Stock in the Conversion
to be distributed to the Converted Association by the Company will substantially
increase the Converted Association's capital position, which will in turn
increase the amount of funds available for lending and investment and provide
greater resources to support current operations by the Converted Association.
This capital will also provide the Association with additional liquid assets to
improve the Association's interest rate risk position and "cushion" the effect
of a significant increase in interest rates. The holding company structure will
provide greater flexibility than the Association alone would have for
diversification of business activities and geographic expansion. Management
believes that this increased capital will enable the Converted Association to
compete more effectively with other types of financial services organizations.
In addition, the Conversion will enhance the future access of the Company and
the Converted Association to the capital markets and will afford depositors and
others the opportunity to become stockholders of the Company and thereby
participate in any future growth of the Converted Association.
Stock Pricing and Number of Shares to be Issued
Federal regulations require that the aggregate purchase price of the Common
Stock to be issued in the Conversion be consistent with an independent appraisal
of the estimated pro forma market value of the Common Stock following the
Conversion. Ferguson, a firm experienced in valuing savings institutions, has
made an independent appraisal of the estimated aggregate pro forma market value
of the Common Stock to be issued in the Conversion. Ferguson has determined that
as of December 13, 1996, such estimated pro forma market value was $3,200,000.
See "The Conversion -- Stock Pricing and Number of Shares to be Issued." The
resulting valuation range in Ferguson's appraisal, which under OTS regulations
extends 15% below and above the estimated value, is from $2,720,000 to
$3,680,000 (the "Estimated Valuation Range"). The Company, in consultation with
its advisors, has determined to offer the shares of Common Stock in the
Conversion at the Purchase Price of $10.00 per share. SUCH APPRAISAL IS NOT
INTENDED AND MUST NOT BE CONSTRUED AS A RECOMMENDATION OF ANY KIND AS TO THE
ADVISABILITY OF PURCHASING SUCH SHARES OR AS ANY FORM OF ASSURANCE THAT, AFTER
THE CONVERSION, SUCH SHARES MAY BE RESOLD AT OR ABOVE THE PURCHASE PRICE. The
appraisal considered a number of factors and was based upon estimates derived
from those factors, all of which are subject to change from time to time. In
preparing the valuation, Ferguson relied upon and assumed the accuracy and
completeness of financial and statistical information provided by the
Association and the Company. Ferguson did not verify the financial statements
provided or independently value the assets of the Association. The appraisal
will be further updated immediately prior to the completion of the Conversion
and could be increased to up to $4,232,000 without a resolicitation of
subscribers based on market and financial conditions at the completion of the
Conversion. Ferguson received fees and reimbursement of out-of-pocket expenses
totalling not more than $30,000 for its appraisal and for assisting in the
preparation of the Company's business plan.
The total number of shares to be issued in the Conversion may be increased or
decreased without a resolicitation of subscribers so long as the aggregate
purchase price is not less than the minimum or more than 15% above the maximum
of the Estimated Valuation Range. Based on the Purchase Price of $10.00 per
share, the total number of shares which may be issued without a resolicitation
of subscribers is from 272,000 to 423,200. For further information, see "The
Conversion -- Stock Pricing and Number of Shares to be Issued."
7
<PAGE>
The Subscription, Community and Syndicated Community Offerings
The shares of Common Stock to be issued in the Conversion are being offered at
the Purchase Price of $10.00 per share in the Subscription Offering pursuant to
nontransferable Subscription Rights in the following order of priority: (i)
Eligible Account Holders (i.e., depositors whose accounts in the Association
totaled $50.00 or more on December 31, 1995); (ii) the ESOP (i.e., the Company's
tax-qualified stock benefit plan); (iii) Supplemental Eligible Account Holders
(i.e., depositors whose accounts in the Association totaled $50.00 or more on
March 31, 1997, other than Eligible Account Holders); and (iv) Other Members
(i.e., certain depositors and borrower members of the Association as of
___________, 1997, other than Eligible Account Holders and Supplemental Eligible
Account Holders). Subscription Rights received in any of the foregoing
categories will be subordinated to the Subscription Rights received by those in
a prior category, with the exception that any shares of Common Stock sold in
excess of the maximum of the Estimated Valuation Range may first be sold to the
ESOP.
The Company may offer any shares of Common Stock not subscribed for in the
Subscription Offering at the same price in the Community Offering to members of
the general public to whom the Company delivers a copy of this Prospectus and
the Stock Order Form. In the Community Offering, preference will be given to
natural persons and trusts of natural persons who are permanent residents of the
Local Community. Subscription Rights will expire if not exercised by 12:00 Noon,
local time, on ____________, 1997, unless extended (the "Expiration Date"). THE
COMPANY AND THE ASSOCIATION RESERVE THE ABSOLUTE RIGHT TO ACCEPT OR REJECT ANY
ORDERS IN THE COMMUNITY OFFERING, IN WHOLE OR IN PART, EITHER AT THE TIME OF
RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE FOLLOWING THE EXPIRATION DATE.
It is anticipated that shares of Common Stock not otherwise subscribed for in
the Subscription Offering and Community Offering, if any, may be offered at the
discretion of the Company to certain members of the general public as part of a
Syndicated Community Offering on a best efforts basis by a selling group of
selected broker-dealers to be managed by Trident Securities. See "The
Conversion -- Syndicated Community Offering." The Subscription and Community
Offerings and Syndicated Community Offering are referred to collectively herein
as the "Offerings."
The Association and the Company have engaged Trident Securities to consult with
and advise the Company and the Association with respect to the Offerings, and
Trident Securities has agreed to solicit subscriptions and purchase orders for
shares of Common Stock in the Offerings. Trident Securities will receive sales
commissions with respect to shares sold in the Subscription and Community
Offerings and Syndicated Community Offering, if necessary. The Company and the
Association have agreed to indemnify Trident Securities against certain
liabilities, including certain liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "The Conversion -- Plan of Distribution and
Marketing Agent."
The Association has established a Stock Information Center, which will be
managed by Trident Securities, to coordinate the Offerings, including tabulation
of orders and answering questions about the Offerings by telephone. All
subscribers will be instructed to mail payment to the Stock Information Center
or deliver payment directly to the office of the Association. Payment for shares
of Common Stock may be made by cash (if delivered in person), check or money
order or by authorization of withdrawal from deposit accounts maintained with
the Association. If payment is made through such deposit account authorization,
funds in the account to be used for
8
<PAGE>
such payment will not be available for withdrawal and will not be released until
the Conversion is completed or terminated or if the subscriber fails to
affirmatively confirm his or her order in the event of a resolicitation. See
"The Conversion -- Subscriptions for Stock in Subscription and Community
Offerings."
The Plan provides that the Conversion must be completed within 24 months after
the date of the approval of the Plan by the members of the Association. The Plan
has been approved by the OTS and is subject to the approval of the Association's
members at the Special Meeting to be held on ____________, 1997.
Purchase Limitations
With the exception of the ESOP, which intends to purchase 8.0% of the total
number of shares of Common Stock issued in the Conversion, no Eligible Account
Holder, Supplemental Eligible Account Holder or Other Member nor person
(together with associates of and persons acting in concert therewith) in the
Community Offering and Syndicated Community Offering may purchase more than the
lesser of 5% or $150,000 of the shares of Common Stock offered in the
Conversion. In addition, no person (together with associates and persons acting
in concert therewith) may purchase in the aggregate more than the lesser of 5%
or $150,000 of the shares of Common Stock offered in the Conversion. The maximum
overall purchase limitation and the amount permitted to be subscribed for may be
increased or decreased under certain circumstances in the sole discretion of the
Company. The minimum purchase is 25 shares. See "The Conversion -- Limitations
on Purchase of Shares." In the event of an oversubscription, shares will be
allocated as provided in the Plan. See "The Conversion -- Subscription
Offering," "-- Community Offering" and " -- Syndicated Community Offering." In
the event of an increase in the total number of shares up to the number issuable
at 15% above the maximum of the Estimated Valuation Range, the additional shares
may be distributed and allocated without the resolicitation of subscribers. See
"The Conversion -- Limitations on Purchase of Shares."
Potential Benefits of Conversion to Management
Option Plan. The Board of Directors of the Company intends to implement the
Option Plan, contingent upon receipt of OTS approval and stockholder approval at
a meeting held no earlier than six months following completion of the
Conversion, but which may be held more than one year following completion of the
Conversion. Assuming 320,000 shares are issued in the Conversion (at the
midpoint of the Estimated Valuation Range) and receipt of the required
approvals, the Company currently plans to grant options to purchase 8,000 shares
of the Common Stock to Keith E. Waggoner, Chief Executive Officer, and 17,600
shares of the Common Stock to all executive officers and directors as a group (8
persons, including the chief executive officer), respectively, under the Option
Plan in the year following the Conversion. The exercise price of the options,
which would be granted at no cost to the recipient thereof, would be the fair
market value of the Common Stock subject to the option on the date the option is
granted. See "Management of the Association -- Certain Benefit Plans and
Agreements."
MRP. The Board of Directors of the Company intends to implement the Rocky Ford
Financial, Inc. Management Recognition Plan ("MRP"), subject to receipt of OTS
approval and to stockholder approval at a meeting of the Company's stockholders
which may be held within one year but no earlier than six months following the
Conversion or may be held more than one year following completion of the
Conversion. Subject to such approvals, the MRP will purchase an amount of shares
after the Conversion equal to up to 4% of the shares issued in the Conversion
(12,800
9
<PAGE>
shares at the midpoint of the Estimated Valuation Range), for issuance to
executive officers and directors of the Association and the Company. At the
Purchase Price in the Conversion of $10.00 per share, the shares to be awarded
by the MRP to the directors and executive officers of the Company would have a
value of $70,400. No shares will be awarded under the MRP prior to receipt of
regulatory and stockholder approval. Awards under the MRP would be granted at no
cost to the recipients thereof. See "Management of the Association -- Certain
Benefit Plans and Agreements."
Other Benefits. In addition to the Option Plan and the MRP, the following
benefits may or will be realized as a result of the Conversion, subject in
certain cases to approval of such plans by the OTS: (i) under the Association's
Retirement Plan for Directors and Senior Officer, each participant will receive,
after terminating service on the Board, an amount equal to their plan account
balance, plus earnings over the distribution period; (ii) under the ESOP,
employees of the Association, including the executive officers, will have shares
of Common Stock allocated to their respective accounts in the ESOP; (iii) under
the Association's Incentive Compensation Plan employees of the Association will
receive annual performance and cash compensation; and (iv) the Chief Executive
Officer of the Association (to be President of the Company and the Converted
Association) has entered into separate employment agreements with the
Association and the Company to serve in his post-Conversion positions. In
addition to the possible financial benefits under the benefit plans, management
could benefit from certain statutory and regulatory provisions, as well as
certain provisions in the Company's Certificate of Incorporation and Bylaws,
that may tend to promote the continuity of existing management. See "Management
of the Association --Director Compensation," " -- Executive Compensation" and
" -- Certain Benefit Plans and Agreements," "Certain Restrictions on
Acquisitions of the Company and the Association" and "Certain Anti-takeover
Provisions in the Certificate of Incorporation and Bylaws."
Prospectus Delivery and Procedure for Purchasing Shares
To ensure that each subscriber receives a Prospectus at least 48 hours prior to
the Expiration Date in accordance with Rule 15c2-8 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), no Prospectus will be mailed any
later than five days prior to the Expiration Date or hand delivered any later
than two days prior to such date. Execution of a Stock Order Form will confirm
receipt or delivery in accordance with Rule 15c2-8. Stock Order Forms will be
distributed only with a Prospectus. The executed Stock Order Form must be
accompanied by payment by check, money order, bank draft or withdrawal
authorization to an existing account at the Association.
To ensure that Eligible Account Holders, Supplemental Eligible Account Holders
and Other Members are properly identified as to their stock purchase priorities,
as well as for purposes of allocating shares based on subscribers' deposit
balances in the event of oversubscription, such persons must list all of their
deposit accounts at the Association on the Stock Order Form. Failure to list all
such deposit accounts may result in the inability of the Company or the
Association to fill all or part of a subscription order. Neither the Company,
the Association nor any of their agents shall be responsible for any order on
which all deposit accounts of the subscriber have not been fully and accurately
disclosed.
10
<PAGE>
<TABLE>
<S> <C>
Non-transferability of Applicable federal regulations provide that prior
Subscription Rights to the completion of the Conversion, no person
shall transfer or enter into any agreement or
understanding to transfer the legal or beneficial
ownership of the Subscription Rights issued under
the Plan or the shares of Common Stock to be
issued upon their exercise. PERSONS VIOLATING
SUCH PROHIBITION MAY LOSE THEIR RIGHT TO SUBSCRIBE
FOR STOCK IN THE CONVERSION AND MAY BE SUBJECT TO
SANCTIONS BY THE OTS. EACH PERSON EXERCISING
SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY
THAT HIS OR HER PURCHASE OF COMMON STOCK IS SOLELY
FOR THE PURCHASER'S OWN ACCOUNT AND THAT THERE IS
NO AGREEMENT OR UNDERSTANDING REGARDING THE SALE
OR TRANSFER OF SUCH SHARES.
</TABLE>
<TABLE>
<S> <C>
Use of Proceeds The amount of proceeds from the sale of the Common
Stock in the Conversion will depend upon the total
number of shares actually sold, the numbers of
shares of Common Stock sold in the Subscription
Offering and the Community Offering and Syndicated
Community Offering, if any, and the actual
expenses of the Conversion. As a result, the
actual net proceeds from the sale of the Common
Stock cannot be determined until the Conversion is
completed. Based on the sale of $3,200,000
million of Common Stock at the midpoint of the
Estimated Valuation Range, the net proceeds are
estimated to be approximately $2,850,000. It is
anticipated, however, that the net proceeds will
be between approximately $2,380,000 and $3,330,000
if the aggregate purchase price is within the
Estimated Valuation Range and that the net
proceeds will be approximately $3,882,000 if the
aggregate purchase price is increased to 15% above
the maximum of the Estimated Valuation Range. See
"Pro Forma Data."
The Company has received OTS approval to purchase
all of the capital stock of the Converted
Association to be issued in the Conversion in
exchange for at least 50% of the net proceeds.
Assuming the sale of 320,000 shares of the Common
Stock at the midpoint of the Estimated Valuation
Range and the purchase of 8% of such shares by the
ESOP, the Association would receive $1,425,000 in
cash, and the Company would retain approximately
$1,169,000 in cash and $256,000 in the form of a
note receivable from the ESOP. The ESOP note
receivable will be for a ten-year term and carry
an interest rate, which adjusts annually, equal to
the prime rate as published in The Wall Street
-----------
Journal plus one percent.
-------
The proceeds retained by the Company after funding
the ESOP initially will be invested in short-term
and intermediate-term securities, including cash
and cash equivalents and U.S. government and
agency obligations. Also, such proceeds will be
available for a variety of corporate purposes,
including funding the MRP, if the MRP is
implemented, future acquisitions and
diversification of business, additional capital
contributions, dividends to stockholders and
future repurchases of the Common Stock to the
extent permitted by applicable regulations. The
Company currently has no specific plans,
intentions, arrangements or understandings
regarding any acquisitions, dividends or
repurchases.
The proceeds contributed to the Converted
Association will substantially increase the
capital of the Converted Association. The
Converted Association ultimately intends to use
such funds for general corporate purposes,
including the origination of loans and other
investments. It is expected that in the interim
all or part of the proceeds will be invested in
short-term and intermediate-term securities,
including cash and cash equivalents and U.S.
government and agency obligations.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Market for the Neither the Company nor the Association has ever
Common Stock issued stock before, and due to the relatively
small size of the Subscription and Community
Offerings, it is unlikely that an active and
liquid trading market will develop or be
maintained. The Company will request that Trident
Securities undertake to match offers to buy and
offers to sell the Common Stock, and Trident
Securities intends to list the Common Stock
over-the-counter through the National Daily
Quotation System "Pink Sheet" published by the
National Quotation Bureau, Inc. HOWEVER,
PURCHASERS OF COMMON STOCK SHOULD HAVE A LONG-TERM
INVESTMENT INTENT AND RECOGNIZE THAT THE ABSENCE
OF AN ACTIVE AND LIQUID TRADING MARKET MAY MAKE IT
DIFFICULT TO SELL THE COMMON STOCK, AND MAY HAVE
AN ADVERSE EFFECT ON THE PRICE. The development
of a public trading market depends upon the
existence of willing buyers and sellers, the
presence of which is not within the control of the
Company, the Association or any market maker.
There can be no assurance that an active and
liquid market for the Common Stock will develop in
the foreseeable future or, once developed, will
continue. Even if a market develops, there can be
no assurance that stockholders will be able to
sell their shares at or above the initial Purchase
Price after the completion of the Stock
Conversion. Purchasers of Common Stock should
consider the potentially illiquid and long-term
nature of their investment in the shares being
offered hereby. See "Risk Factors -- Potentially
Limited and Illiquid Market for the Common Stock"
and "Market for the Common Stock."
Dividends The Board of Directors currently intends to adopt
a policy of paying regular semi-annual cash
dividends on the Common Stock at an initial annual
rate of 3.0% of the $10.00 per share purchase
price of the Common Stock in the Conversion ($0.30
per share), with the first dividend being declared
and paid following the first full quarter after
the Conversion. However, there can be no
assurance that dividends will be paid or, if paid
initially, will continue to be paid in the future.
In addition, subject to regulatory approval, the
Board of Directors may determine to pay special
cash dividends. Special cash dividends, if paid,
may be paid in addition to, or in lieu of, regular
cash dividends. Like all possible dividend
payments, there can be no assurance that special
dividends will ever be paid. The payment of
regular or special dividends will be subject to
the requirements of applicable law and the
determination by the Board of Directors of the
Company that the net income, capital and financial
condition of the Company and the Association,
thrift industry trends and general economic
conditions justify the payment of dividends. See
"Dividend Policy" and "Regulation -- Depository
Institution Regulation -- Dividend Restrictions."
Risk Factors See "Risk Factors" for a discussion of certain
factors that should be considered by prospective
investors.
</TABLE>
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The following summary of selected consolidated financial information and
other data does not purport to be complete and is qualified in its entirety by
reference to the detailed information and Financial Statements and accompanying
Notes appearing elsewhere in this Prospectus.
Financial Condition and Other Data:
<TABLE>
<CAPTION>
At September 30,
-------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total assets...................... $20,388 $19,653 $19,621 $19,667 $19,805
Interest-bearing deposits......... 3,897 3,683 3,380 4,170 3,937
Securities available for sale..... 585 445 295 295 295
U.S. governmental agency
securities-held to maturity..... 500 2,700 3,573 2,004 500
Mortgage-backed securities, held
to maturity..................... 2,617 1,373 1,568 2,049 2,884
Loans receivable, net............. 12,287 10,984 10,361 10,491 10,751
Savings deposits.................. 17,145 16,702 17,137 17,420 17,858
Equity substantially restricted... 2,778 2,573 2,192 1,962 1,689
Number of:
Real estate loans outstanding.. 403 401 401 425 440
Savings accounts............... 1,652 1,675 1,709 1,815 1,867
Offices open................... 1 1 1 1 1
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Operating Data:
Year Ended September 30,
---------------------------------------
1996 1995 1994 1993 1992
------ ------- ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest income........................ $1,525 $1,471 $1,479 $1,583 $1,796
Interest expense....................... 820 734 684 763 1,042
------ ------ ------ ------ ------
Net interest income................ 705 737 795 820 754
Provision for loan losses (recovery)... -- (69) 18 24 40
------ ------ ------ ------ ------
Net interest income after provision
for loan losses.................. 705 806 777 796 714
------ ------ ------ ------ ------
Noninterest income..................... 21 26 18 33 10
------ ------ ------ ------ ------
Subtotal........................... 726 832 795 829 724
------ ------ ------ ------ ------
Noninterest expense:
Compensation and benefits............ 232 230 217 203 174
Other (1)............................ 307 197 191 210 189
------ ------ ------ ------ ------
Total noninterest expense............ 539 427 408 413 363
------ ------ ------ ------ ------
Income before taxes................ 187 405 387 416 361
Income tax expense..................... 58 118 157 143 142
------ ------ ------ ------ ------
Net income......................... $ 129 $ 287 $ 230 $ 273 $ 219
====== ====== ====== ====== ======
- ---------------
</TABLE>
(1) For the year ended September 30, 1996, includes an additional expense of
$106,000 for payment of the SAIF Special Assessment.
14
<PAGE>
Key Operating Ratios:
<TABLE>
<CAPTION>
At or for the
Year Ended September 30,
-------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C>
Performance Ratios:
Return on assets (ratio of net
earnings to average total assets)...... 0.64% 1.50% 1.14% 1.38% 1.08%
Return on equity (ratio of net
earnings to average equity)............ 4.81 12.24 10.69 14.45 13.79
Ratio of average
interest-earning assets to average
interest-bearing liabilities......... 116.14 114.83 111.93 110.39 107.85
Ratio of net interest income,
after provision for loan losses,
to noninterest expense............... 130.85 188.60 190.25 192.74 197.02
Net interest rate spread................ 2.90 3.33 3.60 3.81 3.38
Net yield on average
interest-earning assets................ 3.57 3.91 4.02 4.23 3.78
Quality Ratios:
Non-performing loans to total
loans at end of period................. 0.00 0.00 0.05 0.00 0.63
Non-performing loans to total assets.... 0.00 0.00 0.03 0.00 0.34
Non-performing assets to total assets
at end of period...................... 0.00 0.00 0.15 0.41 1.00
Allowance for loan losses to
non-performing loans at end of period.. 0.00 0.00 2560.00 0.00 155.88
Allowance for loan losses to total
loans, net............................. 0.49 0.55 1.24 1.12 0.99
Capital Ratios:
Equity to total assets at end
of period.............................. 13.63 13.09 11.17 9.98 8.53
Average equity to average assets........ 13.27% 12.24% 10.70% 9.56% 7.82%
</TABLE>
15
<PAGE>
RISK FACTORS
BEFORE INVESTING IN THE SHARES OF THE COMMON STOCK OFFERED BY THIS
PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS
PRESENTED BELOW.
Anticipated Low Return on Equity Following Conversion
As a result of the Conversion, the Association's equity will be
substantially increased. At September 30, 1996, the Association's ratio of
total equity to total assets was 13.63%, and, assuming the sale of 320,000
shares in the Conversion (i.e., the midpoint of the Estimated Valuation Range),
such ratio at the Association is expected to increase to 22.95%. Absent an
increase in consolidated net income that corresponds to the increase in the
consolidated equity of the Company and the Association from the Conversion, the
Company and the Association are unlikely to maintain a return on average equity
(i.e., net income divided by average equity) at historical levels and, as a
result, it is expected that the Company's return on equity initially will be
below industry norms. Consequently, investors should carefully evaluate and
consider the effect of a subpar return on equity on the market price of the
Common Stock. Further, there can be no assurance that the Company will be able
to increase net income following the Conversion in amounts commensurate with the
increase in equity resulting from the Conversion.
Future of Thrift Industry
It is currently expected that the U.S. Congress will soon take up
legislation that may eliminate savings associations as a separate industry.
Legislation enacted in September 1996 provides that the SAIF, the current
federal insurer of the Association's deposit accounts, will be merged with the
Bank Insurance Fund (the "BIF") which insures the deposits of commercial banks
on January 1, 1999 but only if there are no thrift institutions left. The
legislation directs the Department of the Treasury to submit a report to the
Congress by March 31, 1997 with its findings with respect to the development of
a common charter for banks and thrifts. The Association cannot predict what the
attributes of any such common charter would be or whether any legislation will
result from this study. It is possible, however, that the common charter may
not offer all the advantages which the Association now enjoys such as
unrestricted nationwide branching and the absence of activities restrictions on
savings and loan holding companies which do not control more than one savings
association. If the Association were to become subject to the restrictions
applicable to branching by banks headquartered in Colorado, its branching would
generally be restricted to Colorado. If the Company were to become subject to
the restrictions on bank holding companies, its activities would be limited to
activities that have been determined by the Board of Governors of the Federal
Reserve System to be so closely related to banking as to be a proper incident
thereto. If Congress fails to take action to create a common charter for banks
and thrift institutions or otherwise fails to end the thrift industry's separate
existence, the currently contemplated merger of the deposit insurance funds
would not take place and a shrinking thrift industry would be required to
support a separate deposit fund with certain fixed costs with a shrinking
assessment base.
Potential Effects of Changes in Interest Rates and the Current Interest Rate
Environment
Effect on Net Interest Income. The operations of the Association are
substantially dependent on its net interest income, which is the difference
between the interest income earned on its interest-earning assets and the
interest expense paid on its interest-bearing liabilities. Like most savings
institutions, the Association's earnings are affected by changes in market
interest rates and other economic factors beyond its control. Substantially all
of the Association's loans have terms of 10 to 15 years, while deposit accounts
have significantly shorter terms to maturity. If an institution's interest-
earning assets (primarily loans) have longer effective maturities than its
interest-bearing liabilities (deposits), the yield on the institution's
interest-earning assets generally will adjust more slowly than the cost of its
interest-bearing liabilities and, as a result, the institution's net interest
income generally would be adversely affected by material and prolonged increases
in interest rates and positively affected by comparable declines in interest
rates. In addition, rising interest rates may negatively affect the
Association's earnings due to diminished loan demand. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Asset
16
<PAGE>
and Liability Management" and "Business of the Bank -- Lending Activities"
and " -- Deposit Activities and Other Sources of Funds."
Effect on Securities. In addition to affecting interest income and
expenses, changes in interest rates also can affect the value of the
Association's investment portfolio, a substantial portion of which is comprised
of fixed-rate instruments. Generally, the value of fixed-rate instruments
fluctuates inversely with changes in interest rates. The Association has sought
to reduce the vulnerability to changes in interest rates by managing the nature
and composition of its securities portfolio and by maintaining a high level of
liquid assets. As a consequence of the fluctuation in interest rates, the
carrying value of the Association's held-to-maturity securities, including
mortgage-backed securities can exceed the market value of such securities. At
September 30, 1996, the fair value of such securities, including mortgage-backed
securities exceeded the carrying value by $33,000. The market value of the
available-for-sale securities held by the Association exceeded the amortized
cost of such securities by $271,000 at September 30, 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Asset and Liability Management."
Prepayment Risk. Changes in interest rates also can affect the
average life of loans and mortgage-backed securities. Historically lower
interest rates in recent periods have resulted in increased prepayments of loans
and mortgage-backed securities, as borrowers refinanced to reduce borrowings
cost. Under these circumstances, the Association is subject to reinvestment
risk to the extent that it is not able to reinvest such prepayments at rates
which are comparable to the rates on the maturing loans or securities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Limited and Illiquid Market for the Common Stock
Based on the midpoint of the Estimated Valuation Range, it is
anticipated that, following completion of the Conversion, the Company will have
approximately 320,000 shares of Common Stock issued and outstanding. Of such
amount, 25,600 of such shares will be held by the ESOP and an additional ______
shares will be held by directors and management of the Association and the
Company, limiting the number of shares held by the general public. The Company
has never issued stock before and, due to the relatively small size of the
offering and the significant amount of stock expected to be held by management
and the ESOP, it is highly unlikely that an active market for the Common Stock
will develop or, if developed, will be maintained, or that quotations for the
Common Stock will be available. The presence of a sufficient number of buyers
and sellers at any given time is a factor over which neither the Company nor any
market maker has control. The Company does not intend to list the Common Stock
on a national securities exchange or apply to have the Common Stock quoted on
any automated quotation system upon completion of the Conversion. The Company
has requested that Trident Securities undertake to match offers to buy and
offers to sell the Common Stock, and Trident Securities intends to list the
Common Stock over-the-counter through the National Daily Quotation System "Pink
Sheets" published by the National Quotation Bureau, Inc. It is anticipated that
Trident Securities will use its best efforts to match offers to buy and offers
to sell shares of Common Stock. Such efforts are expected to include
solicitation of potential buyers and sellers in order to match buy and sell
orders. However, Trident Securities will not be subject to any continuing
obligation to continue such efforts in the future.
The development of a liquid public market depends on the existence of
willing buyers and sellers, the presence of which is not within the control of
the Company, the Association or any market maker. Due to the size of the
Offering it is highly unlikely that a stockholder base sufficiently large to
create an active trading market will develop and be maintained. Investors in
the Common Stock could have difficulty disposing of their shares and should not
view the Common Stock as a short-term investment. The absence of an active and
liquid trading market for the Common Stock could affect the price and liquidity
of the Common Stock. See "Market for the Common Stock."
17
<PAGE>
Dependence on Chief Executive Officer
The Company and the Association depend to a considerable degree on
Chief Executive Officer, Keith Waggoner, and the loss of Mr. Waggoner could
adversely affect the Company and the Association. The Company and the
Association have entered into an employment agreement with Mr. Waggoner to serve
as President and Chief Executive Officer of the Company and the Association upon
consummation of the Conversion. See "Management of the Association."
Certificate of Incorporation, Bylaw and Statutory Provisions That Could
Discourage Hostile Acquisitions of Control
The Company's Certificate of Incorporation and Bylaws contain certain
provisions that could discourage nonnegotiated takeover attempts that certain
stockholders might deem to be in their interests or through which stockholders
might otherwise receive a premium for their shares over the then current market
price and that may tend to perpetuate existing management. These provisions
include: the classification of the terms of the members of the Board of
Directors; supermajority provisions for the approval of certain business
combinations; elimination of cumulative voting by stockholders in the election
of directors; certain provisions relating to meetings of stockholders;
restrictions on the acquisition of the Company's equity securities; and
provisions allowing the Board of Directors to consider nonmonetary factors in
evaluating a business combination or a tender or exchange offer. The provisions
in the Company's Certificate of Incorporation requiring a supermajority vote for
the approval of certain business combinations and containing restrictions on
acquisitions of the Company's equity securities provide that the supermajority
voting requirements or acquisition restrictions do not apply to business
combinations or acquisitions meeting specified Board of Directors approval
requirements. The Certificate of Incorporation also authorizes the issuance of
1,000,000 shares of serial preferred stock as well as additional shares of
Common Stock up to a total of 4,000,000 outstanding shares of capital stock.
These shares could be issued without stockholder approval on terms or in
circumstances that could deter a future takeover attempt.
The Certificate of Incorporation, Bylaw and statutory provisions, as
well as certain other provisions of state and federal law and certain provisions
in the Company's and the Association's employee benefit plans and employment
agreements and change in control severance agreements, may have the effect of
discouraging or preventing a future takeover attempt in which stockholders of
the Company otherwise might receive a substantial premium for their shares over
then current market prices. For a detailed discussion of those provisions, see
"Management of the Association -- Certain Benefit Plans and Agreements,"
"Description of Capital Stock," "Certain Restrictions on Acquisition of the
Company, the Converted Association and the Association" and "Certain Anti-
Takeover Provisions in the Certificate of Incorporation and Bylaws."
Valuation Not Indicative of Future Price of Common Stock
The final aggregate purchase price of the Common Stock in the
Conversion will be based upon an independent appraisal. Such valuation is not
intended, and must not be construed, as a recommendation of any kind as to the
advisability of purchasing such shares of Common Stock. Because such valuation
is necessarily based upon estimates and projections of a number of matters, all
of which are subject to change from time to time, no assurance can be given that
persons purchasing shares of Common Stock in the Conversion will thereafter be
able to sell such shares at or above the Purchase Price. See "The Conversion --
Stock Pricing and Number of Shares to be Issued."
Possible Income Tax Consequences of Distribution of Subscription Rights
If the Subscription Rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are deemed to have an
ascertainable value, the receipt of such rights would be taxable to recipients
who exercise the Subscription Rights in an amount equal to such value and the
Association could recognize a gain on such distribution. Whether Subscription
Rights are considered to have ascertainable value is an inherently factual
determination. The Association has received an opinion of Ferguson that such
rights have no value. The opinion
18
<PAGE>
of Ferguson is not binding on the IRS. See "The Conversion -- Effect of
Conversion to Stock Form on Depositors and Borrowers of the Association -- Tax
Effects."
Possible Dilutive Effect of MRP and Stock Options
It is expected that, following the consummation of the Conversion, the
Company will adopt the Option Plan and the MRP, both of which would be subject
to stockholder approval, and that such plans would be considered and voted upon
at a meeting of the Company's stockholders to be held within one year but not
less than six months after the Conversion. Under the MRP, employees and
directors could be awarded an aggregate amount of Common Stock equal to 4% of
the shares issued in the Conversion, and under the Option Plan, employees and
directors could be granted options to purchase an aggregate amount of Common
Stock equal to 10% of the shares issued in the Conversion at exercise prices
equal to the market price of the Common Stock on the date of grant. Under the
MRP, the shares issued to directors and employees could be newly issued shares
or shares purchased in the open market. In the event the shares issued under
the MRP and the Option Plan consist of newly issued shares of Common Stock, the
interests of existing stockholders would be diluted. If the shares to fund the
MRP and Option Plan are assumed to come from newly issued shares purchased
directly from the Company, and further assuming that all options granted under
the Option Plan are exercised, existing stockholders' ownership interests will
be diluted by 12.30%. At the midpoint of the Estimated Valuation Range, if all
shares under the MRP and the Option Plan were newly issued and the exercise
price for the option shares were equal to the Purchase Price per share in the
Conversion, the number of outstanding shares of Common Stock would increase from
320,000 to 364,800, the pro forma stockholders' equity per share of the
outstanding Common Stock at September 30, 1996 would have been $15.60, compared
with $16.39 without such plans, and the pro forma net income per share of the
outstanding Common Stock for the year ended September 30, 1996 would have been
$.60, compared with $.63 without such plans. See "Pro Forma Data" and
"Management of the Association -- Certain Benefit Plans and Agreements --
Management Recognition Plan" and "-- Stock Option and Incentive Plan."
Potential Impact on Voting Control of Purchases by Management
The level of ownership or control of the Common Stock after the
Conversion by directors and officers of the Company is expected to be
sufficiently high such that, if each member of management were to act
consistently with each other, management as a whole would have significant
influence over the outcome of any stockholder vote requiring a majority vote and
in the election of directors, and would have veto power in matters requiring the
approval of 80% of the Company's outstanding Common Stock. Thus, such level of
ownership may tend to promote the continuity of existing management. Further,
under such circumstances, management might have the power to authorize actions
that could be viewed as contrary to the best interests of non-affiliated holders
of the Common Stock and might have veto power over actions that such holders may
deem to be in their best interests.
In particular, it is currently expected that directors and executive
officers will subscribe for approximately ______ shares, or _____% of the Common
Stock (assuming the sale of _______ shares at the midpoint of the Estimated
Valuation Range). Based upon the ESOP's purchase of 8.0% of the Common Stock in
the Conversion (25,600 shares at the midpoint of the Estimated Valuation Range)
and assuming the issuance to the MRP of newly issued shares of Common Stock
equal to 4.0% of the Common Stock issued in the Conversion (12,800 shares at the
midpoint of the Estimated Valuation Range), management would initially control
_____% of the Common Stock outstanding (based upon the midpoint of the Estimated
Valuation Range). If all of the options currently expected to be granted under
the Option Plan (options for 32,000 shares at the midpoint of the Estimated
Valuation Range) were exercised, the percentage of shares controlled by such
persons would be _____% of the total number of shares of Common Stock
outstanding (based upon the midpoint of the Estimated Valuation Range). See "Pro
Forma Data," "Proposed Management Purchases," "Management of the Association --
Certain Benefit Plans and Agreements," "The Conversion -- Regulatory
Restrictions on Acquisition of the Common Stock," "Certain Restrictions on
Acquisition of the Company and the Association" and "Certain Anti-Takeover
Provisions in the Certificate of Incorporation and Bylaws."
19
<PAGE>
Potential Cost of ESOP and MRP
It is anticipated that the ESOP will purchase 8% of the Common Stock
sold in the Conversion with funds borrowed from the Company. The cost of
acquiring the ESOP shares will be $217,600, $256,000, $294,400 and $338,560 at
the minimum, midpoint, maximum and 15% above the maximum of the Estimated
Valuation Range, respectively. In addition, following the Conversion, and
subject to regulatory and stockholder approval, the Company intends to implement
the MRP, under which employees and directors could be awarded (at no cost to
them) an aggregate amount of Common Stock equal to 4% of the shares issued in
the Conversion. Assuming the sale in the Conversion of the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range, and assuming
the shares of Common Stock to be awarded under the MRP have a cost equal to the
Purchase Price of $10.00 per share, the reduction to stockholders' equity of
funding the MRP would be $108,800, $128,000, $147,200 and $169,280,
respectively.
ROCKY FORD FINANCIAL, INC.
Rocky Ford Financial, Inc. was incorporated under the laws of the
State of Delaware in January 1997 at the direction of the Board of Directors of
the Association for the purpose of serving as a savings and loan holding company
of the Converted Association upon the acquisition of all of the capital stock
issued by the Converted Association in the Conversion. The Company has received
approval from the OTS to acquire control of the Converted Association, subject
to satisfaction of certain conditions. Prior to the Conversion, the Company has
not engaged and will not engage in any material operations. Upon consummation
of the Conversion, the Company will have no significant assets other than the
outstanding capital stock of the Converted Association, up to 50% of the net
proceeds of the Conversion (after deducting amounts infused into the
Association and used to fund the ESOP) and a note receivable from the ESOP.
Upon consummation of the Conversion, the Company's principal business will be
overseeing the business of the Converted Association and investing the portion
of the net Conversion proceeds retained by it, and the Company will register
with the OTS as a savings and loan holding company.
As a holding company, the Company will have greater flexibility than
the Association to diversify its business activities through existing or newly
formed subsidiaries or through acquisition or merger with other financial
institutions, although the Company currently does not have any plans,
agreements, arrangements or understandings with respect to any such acquisitions
or mergers. After the Conversion, the Company will be classified as a unitary
savings and loan holding company and will be subject to regulation by the OTS.
The Company's executive offices are located at 801 Swink Avenue, Rocky
Ford, Colorado 81067-0032, and its main telephone number is (719) 254-7642.
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
The Association is a federal mutual savings and loan association
operating through a single office located in Rocky Ford, Colorado and serving
Otero County, Colorado. The Association was chartered as a federal mutual
savings and loan association and received federal insurance of its deposit
accounts in 1934, under its current name of Rocky Ford Federal Savings and Loan
Association. At September 30, 1996, the Association had total assets of $20.4
million, total deposits of $17.1 million and equity of $2.8 million.
The principal business of the Association consists of attracting
deposits from the general public and investing these deposits in loans secured
by first mortgages on single-family residences in the Association's market area.
The Association derives its income principally from interest earned on loans
and, to a lesser extent, interest earned on mortgage-backed securities and
investment securities and noninterest income. Funds for these activities are
provided principally by operating revenues, deposits and repayments of
outstanding loans and investment securities and mortgage-backed securities.
20
<PAGE>
The Association's executive offices are located at 801 Swink Avenue,
Rocky Ford, Colorado 81067-0032, and its main telephone number is (719) 254-
7642.
USE OF PROCEEDS
The amount of proceeds from the sale of the Common Stock in the
Conversion will depend upon the total number of shares actually sold in the
Subscription Offering and the Community Offering and the Syndicated Community
Offering, if any, and the actual expenses of the Conversion. As a result, the
actual net proceeds from the sale of the Common Stock cannot be determined until
the Conversion is completed. Based on the sale of $3,200,000 of Common Stock at
the midpoint of the Estimated Valuation Range, the net proceeds from the sale of
the Common Stock are estimated to be approximately $2,850,000. The Company has
received regulatory approval from the OTS to purchase all of the capital stock
of the Converted Association to be issued in the Conversion in exchange for at
least 50% of the net proceeds. Based on the foregoing assumption and the
purchase of 8% of the shares to be issued in the Conversion by the ESOP, the
Association would receive approximately $1,425,000 in cash, and the Company
would retain approximately $1,169,000 in cash and $256,000 in the form of a note
receivable from the ESOP. The ESOP note receivable will be for a ten-year term
and carry an interest rate, which adjusts annually, equal to the prime rate as
published in The Wall Street Journal plus one percent.
-----------------------
The proceeds retained by the Company, after funding the ESOP,
initially will be invested in short-term and intermediate-term securities
including cash and cash equivalents and U.S. government and agency obligations.
Such proceeds will be available for a variety of corporate purposes, including
funding the MRP, if implemented, future acquisitions and diversification of
business, additional capital contributions, dividends to stockholders and
future repurchases of the Common Stock to the extent permitted by applicable
regulations. The Company currently has no specific plans, intentions,
arrangements or understandings regarding acquisitions, capital contributions,
dividends or repurchases. Due to the limited nature of the Company's business
activities, the Company believes that the net proceeds retained after the
Conversion, earnings on such proceeds and payments on the ESOP note receivable
will be adequate to meet the Company's financial needs until dividends are paid
by the Converted Association. However, no assurance can be given that the
Company will not have a need for additional funds in the future. For additional
information, see "Regulation -- Depository Institution Regulation -- Dividend
Restrictions."
The proceeds contributed to the Converted Association will ultimately
become part of the Converted Association's general corporate funds to be used
for its business activities, including making loans and investments. Initially
it is expected that the proceeds will be invested in short-term and
intermediate-term securities including cash and cash equivalents and U.S.
government and agency obligations. The additional capital will also provide the
Association with additional liquidity to improve the Association's interest rate
risk position and "cushion" the effect of a significant increase in interest
rates. The Converted Association ultimately plans to use such proceeds
primarily to originate loans in the ordinary course of business.
Following the one-year anniversary of the completion of the Conversion
(or sooner if permitted by the OTS), and based upon then existing facts and
circumstances, the Company's Board of Directors may determine to repurchase
shares of Common Stock, subject to any applicable statutory and regulatory
requirements. Such facts and circumstances may include, but are not limited to:
(i) market and economic factors such as the price at which the stock is trading
in the market, the volume of trading, the attractiveness of other investment
alternatives in terms of the rate of return and risk involved in the investment,
the ability to increase the book value and/or earnings per share of the
remaining outstanding shares, and an improvement in the Company's return on
equity; (ii) the avoidance of dilution to stockholders by not having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Company and its stockholders. Any stock
repurchases will be subject to the determination of the Company's Board of
Directors that the Company and the Association will be capitalized in excess of
all applicable regulatory requirements after any such repurchases. The payment
of dividends or repurchasing of stock, however, would be prohibited if
stockholders' equity would be reduced below the amount required for the
liquidation account. See "Dividend Policy" and "The Conversion -- Certain
Restrictions on Purchase or Transfer of Shares After the Conversion."
21
<PAGE>
Set forth below are the estimated investable net proceeds from the
Conversion, assuming the sale of the Common Stock at the minimum, midpoint,
maximum and maximum, as adjusted, of the Estimated Valuation Range and
assuming that the ESOP purchases 8% of the shares issued in the Conversion and
the MRP purchases 4% of the shares issued in the Conversion.
<TABLE>
<CAPTION>
Maximum, as
Minimum of Midpoint of Maximum of Adjusted, of
272,000 320,000 368,000 423,200
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
----------- ----------- ---------- ------------
(In thousands)
<S> <C> <C> <C> <C>
Gross offering proceeds.. $2,720 $3,200 $3,680 $4,232
Less estimated offering
expenses................ (340) (350) (350) (350)
------ ------ ------ ------
Estimated net offering
proceeds............. 2,380 2,850 3,330 3,882
Less: ESOP funded by
the Company....... (218) (256) (294) (339)
MRP .............. (109) (128) (147) (169)
------ ------ ------ ------
Estimated investable
net proceeds......... $2,054 $2,466 $2,888 $3,374
====== ====== ====== ======
</TABLE>
DIVIDEND POLICY
General
The payment of dividends on the Common Stock will be subject to
determination and declaration by the Board of Directors of the Company. The
Board of Directors currently intends to establish a policy of paying regular
semi-annual cash dividends on the Common Stock at an initial annual rate of
3.0% of the $10.00 per share purchase price of the Common Stock in the
Conversion ($0.30 per share), with the first dividend being declared and paid
following the first full quarter after the Conversion. In addition, from time
to time, the Board of Directors may determine to pay special cash dividends.
Special cash dividends, if paid, may be paid in addition to, or in lieu of,
regular cash dividends. The payment of dividends, however, will be subject to
the requirements of applicable law and the determination by the Board of
Directors of the Company that the net income, capital and financial condition
of the Company and the Association, thrift industry trends and general
economic conditions justify the payment of dividends, and there can be no
assurance that dividends will be paid or, if paid, will continue to be paid in
the future.
Since the Company initially will have no significant source of income
other than dividends from the Converted Association, principal and interest
payments on the note payable from the ESOP and earnings from investment of the
cash proceeds of the Conversion retained by the Company, the payment of
dividends by the Company will depend in large part upon the amount of the
proceeds from the Conversion retained by the Company and the Company's
earnings thereon and the receipt of dividends from the Converted Association,
which is subject to various tax and regulatory restrictions on the payment of
dividends. At September 30, 1996, assuming the Association was a stock
association, the amount that would have been available to be paid by the
Association to the Company in the form of dividends under existing regulatory
limitations and restrictions was approximately $1.4 million (this does not
consider the need for the Association to maintain the liquidation account for
Association members). Unlike the Converted Association, the Company is not
subject to regulatory restrictions on the payment of dividends to
stockholders. Under the Delaware General Corporation Law, dividends may be
paid either out of surplus or, if there is no surplus, out of net profits for
the fiscal year in which the dividend is declared and/or the preceding fiscal
year. For additional information, see "Regulation -- Depository Institution
Regulation -- Capital Requirements," " -- Dividend Restrictions" and
"Taxation."
22
<PAGE>
Tax Considerations
In addition to the foregoing, earnings of the Association or the
Converted Association appropriated for bad debt reserves and deducted for
federal income tax purposes cannot be used by the Converted Association to pay
cash dividends to the Company without the payment of federal income taxes by
the Association at the then current income tax rate on the amount deemed
distributed, which would include the amount of any federal income taxes
attributable to the distribution. See "Taxation -- Federal Income Taxation"
and Note 9 of the Notes to Financial Statements included elsewhere herein.
The Company does not contemplate any distribution by the Association that
would result in a recapture of the Association's bad debt reserve or create
the above-mentioned federal tax liabilities.
MARKET FOR THE COMMON STOCK
It is anticipated that following completion of the Conversion the Company
will have approximately 320,000 shares of Common Stock issued and outstanding
based on the midpoint of the Estimated Valuation Range. The Company has never
issued stock before, and due to the relatively small size of the Offering it
is highly unlikely that an active market for the Common Stock will develop or
be maintained, or that quotations for the Common Stock will be available. The
presence of a sufficient number of buyers and sellers at any given time is a
factor over which neither the Company nor any market maker has control. The
Company will request that Trident Securities undertake to match offers to buy
and offers to sell the Common Stock, and Trident Securities intends to list
the Common Stock over-the-counter through the National Daily Quotation System
"Pink Sheet" published by the National Quotation Bureau, Inc. However,
purchasers of Common Stock should have a long-term investment intent and
recognize that the absence of an active and liquid trading market may make it
difficult to sell the Common Stock, and may have an adverse effect on the
price.
23
<PAGE>
CAPITALIZATION
The following table sets forth information regarding the historical
capitalization, including deposits, of the Association at September 30, 1996 and
the pro forma consolidated capitalization of the Company giving effect to the
sale of the Common Stock at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range based upon the assumptions set forth
under "Use of Proceeds" and below. For additional financial information
regarding the Association, see the Financial Statements and related Notes
appearing elsewhere herein. Depending on market and financial conditions, the
total number of shares to be issued in the Conversion may be significantly
increased or decreased above or below the midpoint of the Estimated Valuation
Range. No resolicitation of subscribers and other purchasers will be made unless
the aggregate purchase price of the Common Stock sold in the Conversion is below
the minimum of the Estimated Valuation Range or is above 15% above the maximum
of the Estimated Valuation Range. A CHANGE IN THE NUMBER OF SHARES TO BE ISSUED
IN THE CONVERSION MAY MATERIALLY AFFECT THE COMPANY'S PRO FORMA CAPITALIZATION.
SEE "PRO FORMA DATA" AND "THE CONVERSION -- STOCK PRICING AND NUMBER OF SHARES
TO BE ISSUED."
<TABLE>
<CAPTION>
Pro Forma Consolidated Capitalization of
Capitalization the Company at September 30, 1996 Based on the Sale of
of the ------------------------------------------------------------
Association at 272,000 Shares 320,000 Shares 368,000 Shares 423,200 Shares
September 30, at $10.00 at $10.00 at $10.00 at $10.00
1996 Per Share Per Share Per Share Per Share
-------------- -------------- ------------- ------------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Deposits (1)......................................... $ 17,145 $ 17,145 $ 17,145 $ 17,145 $ 17,145
FHLB advances........................................ -- -- -- -- --
----------- ------------ ------------ ------------ -----------
Total deposits and borrowed funds................ $ 17,145 $ 17,145 $ 17,145 $ 17,145 $ 17,145
=========== ============ ============ ============ ===========
Capital stock:
Preferred stock, par value $.01 per share:
authorized - 1,000,000 shares;
assumed outstanding - none..................... $ -- $ -- $ -- $ -- $ --
Common Stock, par value $.01 per share
authorized - 3,000,000 shares;
shares to be outstanding - as shown (2)(3)..... -- 3 3 4 4
Paid-in capital (2)(3)............................ -- 2,367 2,847 3,326 3,878
Less: Common Stock acquired by ESOP (4)........... -- (218) (256) (294) (339)
Common stock acquired by MRP (3)......... -- (109) (128) (147) (169)
Retained earnings (5)............................. 2,607 2,607 2,607 2,607 2,607
Unrealized gain on securities available for sale.. 171 171 171 171 171
----------- ------------ ------------ ------------ -----------
Total stockholders' equity (6)................. $ 2,778 $ 4,822 $ 5,244 $ 5,666 $ 6,152
=========== ============ ============ ============ ===========
</TABLE>
(footnotes on following page)
24
<PAGE>
- --------------------
(1) Does not reflect withdrawals from savings accounts for the purchase
of Common Stock in the Conversion; any withdrawals will reduce pro
forma capitalization by the amount of such withdrawals.
(2) Does not reflect additional shares of Common Stock that possibly
could be purchased by participants in the Option Plan, if
implemented, under which directors, executive officers and other
employees could be granted options to purchase an aggregate amount of
Common Stock equal to 10% of the shares issued in the Conversion
(32,000 shares at the midpoint of the Estimated Valuation Range) at
exercise prices equal to the market price of the Common Stock on the
date of grant. Implementation of the Option Plan will require
regulatory and stockholder approval. See "Management of the
Association -- Certain Benefit Plans and Agreements -- Stock Option
and Incentive Plan" and "Risk Factors -- Possible Dilutive Effect of
MRP and Stock Options."
(3) Assumes a number of shares of Common Stock equal to 4% of the Common
Stock to be sold in the Conversion will be purchased by the MRP
through open market purchases. The dollar amount of the Common Stock
to be purchased by the MRP is based on the $10.00 per share Purchase
Price in the Conversion, represents unearned compensation and is
reflected as a reduction of capital. Such amount does not reflect
possible increases or decreases in the value of such stock relative
to the Purchase Price in the Conversion. As the Association accrues
compensation expense to reflect the vesting of such shares pursuant
to the MRP, the charge against capital will be reduced accordingly.
Implementation of the MRP will require regulatory and stockholder
approval. If the shares to fund the MRP are assumed to come from
authorized but unissued shares purchased by the MRP from the Company
at the Purchase Price within the year following the Conversion, at
the minimum, midpoint, maximum and 15% above the maximum of the
Estimated Valuation Range, the number of outstanding shares would be
282,880 shares, 332,800 shares, 382,720 shares and 440,128 shares,
respectively, and total stockholders' equity would be $4,940,000,
$5,372,000, $5,814,000 and $6,321,000, respectively. If the MRP
acquires authorized but unissued shares from the Company,
stockholders' ownership in the Company would be diluted by
approximately 3.85%. See "Management of the Association -- Certain
Benefit Plans and Agreements -- Management Recognition Plan," "Pro
Forma Data" and "Risk Factors -- Possible Dilutive Effect of MRP and
Stock Options."
(4) Assumes 8% of the shares of Common Stock to be sold in the Conversion
are purchased by the ESOP, and that the funds used to purchase such
shares are borrowed from the Company out of net proceeds. Although
repayment of such debt will be secured solely by the shares purchased
by the ESOP, the Association or the Company expects to make
discretionary contributions to the ESOP in an amount at least equal
to the principal and interest payments on the ESOP debt. The
approximate amount expected to be borrowed by the ESOP is not
reflected in this table as borrowed funds but is reflected as a
reduction of capital. As the Association accrues compensation expense
to reflect the allocation of such shares pursuant to the ESOP, the
charge against capital will be reduced accordingly. See "Management
of the Association -- Certain Benefit Plans and Agreements --
Employee Stock Ownership Plan."
(5) The retained earnings of the Association are substantially
restricted. All capital distributions by the Association are subject
to regulatory restrictions tied to its regulatory capital level. In
addition, after the Conversion, the Association will be prohibited
from paying any dividend that would reduce its regulatory capital
below the amount in the liquidation account to be provided for the
benefit of the Association's Eligible Account Holders and
Supplemental Eligible Account Holders at the time of the Conversion
and adjusted downward thereafter. See "Regulation -- Depository
Institution Regulation -- Dividend Restrictions" and "The Conversion
-- Effect of Conversion to Stock Form on Depositors and Borrowers of
the Association -- Liquidation Account."
(6) Pro forma stockholders' equity information is not intended to
represent the fair market value of the Common Stock, the current
value of the Association's assets or liabilities or the amounts, if
any, that would be available for distribution to stockholders in the
event of liquidation. Such pro forma data may be materially affected
by a change in the number of shares to be sold in the Conversion and
by other factors. See "Pro Forma Data."
25
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The table below presents the Association's historical and pro forma
capital position relative to its various minimum statutory and regulatory
capital requirements at September 30, 1996 at the minimum, midpoint,
maximum and maximum, as adjusted, of the Estimated Valuation Range. For a
discussion of the assumptions underlying the pro forma capital calculations
presented below, see "Use of Proceeds," "Capitalization," "Pro Forma Data"
and the financial statements and related notes appearing elsewhere herein.
For a detailed description of the regulatory capital requirements
applicable to the Association, see "Regulation -- Regulation of the
Association -- Regulatory Capital Requirements."
<TABLE>
<CAPTION>
Historical at
September 30, 1996
---------------------
Percent of
Amount Assets (2)
------ ----------
<S> <C> <C>
Capital under generally accepted
accounting principles................ $ 2,778 13.63%
======== ======
Tangible capital...................... $ 2,607 12.90%
Tangible capital requirement.......... 303 1.50
-------- ------
Excess.............................. $ 2,304 11.40%
======== ======
Core capital.......................... $ 2,607 12.90%
Core capital requirement (3).......... 607 3.00
-------- ------
Excess.............................. $ 2,000 9.90%
======== ======
Risk-based capital.................... $ 2,667 34.17%
Risk-based capital requirement........ 624 8.00
-------- ------
Excess............................. $ 2,043 26.17%
======== ======
<CAPTION>
Pro Forma at September 30, 1996 (1)
Assuming Issuance of Shares of Common Stock at the:
------------------------------------------------------------------------------------------
Minimum of Midpoint of Maximum of Maximum, as Adjusted
272,000 Shares 320,000 Shares 368,000 Shares of 423,200 Shares
at $10 Per Share at $10 Per Share at $10 Per Share at $10 Per Share
--------------------- ------------------- ------------------- ------------------
Percent of Percent of Percent of Percent of
Amount Assets (2) Amount Assets (2) Amount Assets (2) Amount Assets (2)
------ ---------- ------ ---------- ------ ---------- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital under generally accepted
accounting principles............... $ 3,641 16.96% $ 3,819 17.61% $ 4,002 18.27% $ 4,211 19.00%
======== ====== ======== ====== ======== ====== ======== ======
Tangible capital...................... $ 3,470 16.29% $ 3,648 16.96% $ 3,831 17.63% $ 4,040 18.37%
Tangible capital requirement.......... 319 1.50 323 1.50% 326 1.50% 330 1.50
-------- ------ -------- ------ -------- ------ -------- ------
Excess............................. $ 3,151 14.79% $ 3,325 15.46% $ 3,505 16.13% $ 3,710 16.87%
======== ====== ======== ====== ======== ====== ======== ======
Core capital.......................... $ 3,470 16.29% $ 3,648 16.96% $ 3,831 17.63% $ 4,040 18.37%
Core capital requirement (3).......... 639 3.00 645 3.00 652 3.00 660 3.00
-------- ------ -------- ------ -------- ------ -------- ------
Excess............................. $ 2,831 13.29% $ 3,003 13.96% $ 3,179 14.63% $ 3,380 15.37%
======== ====== ======== ====== ======== ====== ======== ======
Risk-based capital.................... $ 3,530 29.98% $ 3,708 31.28% $ 3,891 32.59% $ 4,100 34.06%
Risk-based capital requirement........ 942 8.00 948 8.00 955 8.00 963 8.00
-------- ------ -------- ------ -------- ------ -------- ------
Excess............................. $ 2,588 21.98% $ 2,760 23.28% $ 2,936 24.59% $ 3,137 26.06%
======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
- ---------------
(1) Assumes that the Company will purchase all of the capital stock of the
Association to be issued upon Conversion in exchange for 50% of the net
Conversion proceeds. Also assumes net proceeds distributed to the
Association are initially invested in assets with an average risk weight of
38%. Further assumes that 8% of the Common Stock to be sold in the
Conversion is acquired by the ESOP, and that the funds used to acquire such
shares are borrowed from the Company. In accordance with generally accepted
accounting principles, the amount of Common Stock to be purchased by the
ESOP represents unearned compensation and is reflected in this table as a
reduction of capital. Although repayment of such debt will be secured
solely by the Common Stock purchased by the ESOP, the Association or the
Company expects to make discretionary contributions to the ESOP in an
amount at least equal to the principal and interest payments on the ESOP
debt. As the Association makes contributions to the ESOP for simultaneous
payment in an equal amount on the ESOP debt, there will be a corresponding
reduction in the charge against capital. See "Management of the Association
-- Certain Benefit Plans and Agreements -- Employee Stock Ownership Plan."
Also assumes that the MRP will purchase in the open market Common Stock in
an amount equal to 4% of the Common Stock issued in the Conversion. The
implementation of the MRP is subject to regulatory and stockholder
approvals. For purposes of this table, the cost of the Common Stock to be
purchased by the MRP is assumed to be equal to the $10 price per share
being offered in the Conversion. Such price may increase or decrease
between the date of consummation of the Conversion and the date that,
following receipt of regulatory and stockholder approvals, the shares are
actually purchased by the MRP. The purchase of shares of Common Stock by
the MRP following receipt of such approvals may be from authorized but
unissued shares of Common Stock or in the open market. In accordance with
generally accepted accounting principles, the amount of Common Stock to be
purchased by the MRP represents unearned compensation and is reflected in
this table as a reduction of capital. As the Association accrues
compensation expense over the five year period following such purchase in
accordance with generally accepted accounting principles to reflect the
vesting of such shares of Common Stock pursuant to the MRP, there will be a
corresponding reduction in the charge against capital. See "Management of
the Association -- Certain Benefit Plans and Agreements -- Management
Recognition Plan."
(2) Based on the Association's adjusted total assets for the purpose of the
tangible and core capital requirements and risk-weighted assets for the
purpose of the risk-based capital requirement. See "Regulation --
Depository Institution Regulation -- Capital Requirements."
(3) Does not reflect potential increases in the Association's core capital
requirement to between 4% and 5% of adjusted total assets in the event the
OTS amends its capital requirements to conform to the more stringent
leverage ratio adopted by the Office of the Comptroller of the Currency for
national banks as described in "Regulation."
26
<PAGE>
PRO FORMA DATA
The following table sets forth the actual and, after giving effect to
the Conversion for the periods and at the dates indicated, pro forma
consolidated income, stockholders' equity and other data of the Association
prior to the Conversion and of the Company following the Conversion. Unaudited
pro forma consolidated income and related data have been calculated for the year
ended September 30, 1996 as if the Common Stock had been sold at the beginning
of such periods, and the estimated net proceeds had been invested at 5.70% at
the beginning of the period. The foregoing yield approximates the yield on the
One-Year U.S. Treasury bill at September 30, 1996. (While OTS regulations
provide for the use of a yield representing the arithmetic average of the
average yield on the Association's interest-earning assets and the average cost
of deposits, the Association believes that the use of the One-year Treasury bill
rate is more relevant in the current interest rate environment). The pro forma
after-tax yield for the Company and the Association is assumed to be 3.71% for
the year ended September 30, 1996 based on the effective tax rate of 35% of the
period. Unaudited pro forma consolidated stockholders' equity and related data
have been calculated as if the Common Stock had been sold and was outstanding at
the end of the periods, without any adjustment of historical or pro forma equity
to reflect assumed earnings on estimated net proceeds. Per share amounts have
been computed as if the Common Stock had been outstanding at the beginning of
the period or at the dates shown, but without any adjustment of historical or
pro forma stockholders' equity to reflect the earnings on estimated net
proceeds. The pro forma data set forth below do not reflect withdrawals from
deposit accounts to purchase shares, accruals expected to be made by the
Association with regard to employee benefit plans to be adopted in connection
with the Conversion or increases in capital and, in the case of newly issued
shares, outstanding Common Stock upon the exercise of options by participants in
the Option Plan, under which an aggregate amount of Common Stock equal to 10% of
the shares issued in the Conversion (32,000 shares at the midpoint of the
Estimated Valuation Range) are expected to be reserved for issuance to
directors, executive officers and employees upon the exercise of stock options
at exercise prices equal to the market price of the Common Stock on the date of
grant. See "Management of the Association -- Certain Benefit Plans and
Agreements."
The estimated net proceeds to the Company, as set forth in the
following tables, assume the sale of the Common Stock at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range. The actual
net proceeds from the sale of the Common Stock cannot be determined until the
Conversion is completed. However, net proceeds set forth on the following
tables are estimated based upon the following assumptions: (i) 100% of the
shares of Common Stock will be sold in the Subscription and Community Offerings
as follows: (a) 8% will be sold to the ESOP and 60,000 shares will be sold to
directors and officers of the Association and their associates, for which
commissions will not be paid; and (b) the remaining shares will be sold to
others in the Subscription and Community Offerings; and (ii) other Conversion
expenses, not including sales commissions, will be approximately $295,000. The
foregoing assumptions regarding estimated purchases in the Subscription and
Community Offerings are based on reasonable market assumptions, market
conditions, consultations between the Association and Trident Securities and
planned purchases by the ESOP. Actual expenses may vary from those estimated.
THE STOCKHOLDERS' EQUITY AND RELATED DATA PRESENTED HEREIN ARE NOT
INTENDED TO REPRESENT THE FAIR MARKET VALUE OF THE COMMON STOCK, THE CURRENT
VALUE OF ASSETS OR LIABILITIES, OR THE AMOUNTS, IF ANY, THAT WOULD BE AVAILABLE
FOR DISTRIBUTION TO STOCKHOLDERS IN THE EVENT OF LIQUIDATION. FOR ADDITIONAL
INFORMATION REGARDING THE LIQUIDATION ACCOUNT, SEE "THE CONVERSION -- EFFECT OF
CONVERSION TO STOCK FORM ON DEPOSITORS AND BORROWERS OF THE ASSOCIATION --
LIQUIDATION ACCOUNT." THE PRO FORMA INCOME AND RELATED DATA DERIVED FROM THE
ASSUMPTIONS SET FORTH ABOVE SHOULD NOT BE CONSIDERED INDICATIVE OF THE ACTUAL
RESULTS OF OPERATIONS OF THE CONVERTED ASSOCIATION AND THE COMPANY FOR ANY
PERIOD. SUCH PRO FORMA DATA MAY BE MATERIALLY AFFECTED BY A CHANGE IN THE
NUMBER OF SHARES TO BE ISSUED IN THE CONVERSION AND OTHER FACTORS. SEE "THE
CONVERSION -- STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED."
27
<PAGE>
<TABLE>
<CAPTION>
At or for the Year Ended September 30, 1996
-------------------------------------------------------
272,000 320,000 368,000 423,200
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share
--------- --------- --------- ---------
(Dollars in thousands, except share and per share amounts)
<S> <C> <C> <C> <C>
Gross offering proceeds.................................. $ 2,720 $ 3,200 $ 3,680 $ 4,232
Less estimated offering expenses......................... (340) (350) (350) (350)
-------- -------- -------- --------
Estimated net offering proceeds........................ 2,380 2,850 3,330 3,882
Less Common stock acquired by ESOP..................... (218) (256) (294) (339)
Less Common stock acquired by MRP...................... (109) (128) (147) (169)
-------- -------- -------- --------
Estimated investable net proceeds...................... $ 2,054 $ 2,466 $ 2,888 $ 3,374
======== ======== ======== ========
Net income (1)
Historical net income.................................. $ 129 $ 129 $ 129 $ 129
Pro forma adjustments:
Net income from proceeds............................. 76 91 107 125
ESOP (2)............................................. (14) (17) (19) (22)
MRP (3).............................................. (14) (17) (19) (22)
-------- -------- -------- --------
Pro Forma Net Income................................... $ 177 $ 187 $ 198 $ 210
======== ======== ======== ========
Net Income Per share (1)
Historical............................................. $ 0.51 $ 0.43 $ 0.38 $ 0.33
Pro forma adjustments:
Net income from proceeds............................. 0.30 0.31 0.31 0.32
ESOP (2)............................................. (0.06) (0.06) (0.06) (0.06)
MRP (3).............................................. (0.06) (0.06) (0.06) (0.06)
-------- -------- -------- --------
Pro Forma -- Net Income
Per Share......................................... $ 0.70 $ 0.63 $ 0.58 $ 0.53
======== ======== ======== ========
Number of shares used in calculating earnings
per share (2)(3)......................................... 252,416 296,960 341,504 392,730
======== ======== ======== ========
Stockholders' equity (book value) (4)
Historical.............................................. $ 2,778 $ 2,778 $ 2,778 $ 2,778
Estimated net Conversion proceeds (3)................... 2,380 2,850 3,330 3,882
Less common stock acquired by:
ESOP (2).............................................. (218) (256) (294) (339)
MRP (3)............................................... (109) (128) (147) (169)
-------- -------- -------- --------
Pro Forma........................................... $ 4,832 $ 5,244 $ 5,666 $ 6,152
======== ======== ======== ========
Per Share
Historical.............................................. $ 10.21 $ 8.68 $ 7.55 $ 6.56
Estimated net Conversion proceeds........................ 8.75 8.91 9.05 9.17
Less common stock acquired by:
ESOP (2)............................................... (0.80) (0.80) (0.80) (0.80)
MRP (3)................................................ (0.40) (0.40) (0.40) (0.40)
-------- -------- -------- --------
Pro Forma............................................. $ 17.76 $ 16.39 $ 15.40 $ 14.54
======== ======== ======== ========
Number of shares used in calculating
equity per share........................................ 272,000 320,000 368,000 423,200
======== ======== ======== ========
Pro forma price to book value (5)........................ 56.30% 61.02% 64.94% 68.79%
======== ======== ======== ========
Pro forma price to earnings
(P/E ratio) (1)......................................... 14.29 15.87 17.24 18.87
======== ======== ======== ========
</TABLE>
Note: Totals may not add due to rounding. (Footnotes on succeeding page)
28
<PAGE>
- --------------------
(1) Net income includes an after-tax charge of approximately $68,000 taken
during the year ended September 30, 1996, representing a special assessment
of 65.7 basis points on the Association's deposits at March 31, 1995,
pursuant to legislation enacted to recapitalize the SAIF. Excluding that
charge, based on the other assumptions as reflected in this table,
Management estimates that pro forma earnings per share would have been
$0.97, $0.86, $0.78 and $0.71, and the price to earnings ratio would have
been 10.31, 11.63, 12.82, and 14.08 at the minimum, midpoint, maximum and
15% above the maximum of the Estimated Valuation Range, respectively.
(2) Assumes 8% of the shares to be sold in the Conversion are purchased by the
ESOP under all circumstances, and that the funds used to purchase such
shares are borrowed from the Company. The approximate amount expected to
be borrowed by the ESOP is not reflected as a liability but is reflected as
a reduction of capital. Although repayment of such debt will be secured
solely by the shares purchased by the ESOP, the Association expects to make
discretionary contributions to the ESOP in an amount at least equal to the
principal and interest payments on the ESOP debt. Pro forma net income has
been adjusted to give effect to such contributions, based upon a fully
amortizing debt with a ten-year term. Because the Company will be
providing the ESOP loan, only principal payments on the ESOP loan are
reflected as employee compensation and benefits expense. For purposes of
this table the Purchase Price of $10.00 was utilized to calculate the ESOP
expense. The Association intends to record compensation expense related to
the ESOP in accordance with American Institute of Certified Public
Accountants ("AICPA") Statement of Position ("SOP") No. 93-6. As a result,
to the extent the value of the Common Stock appreciates over time,
compensation expense related to the ESOP will increase. SOP 93-6 also
changes the earnings per share computations for leveraged ESOPs to include
as outstanding only shares that have been committed to be released to
participants. For purposes of the preceding table, it was assumed that 10%
of the ESOP shares purchased in the Conversion were committed to be
released at September 30, 1996. If it is assumed that 100% of the ESOP
shares were committed to be released at September 30, 1996, the application
of SOP 93-6 would result in net income per share of $0.65, $0.58, $0.54 and
$0.50, respectively, based on the sale of shares at the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Valuation Range. See
"Management of the Association -- Certain Benefit Plans and Agreements --
Employee Stock Ownership Plan."
(3) Assumes a number of shares of Common Stock equal to 4% of the Common Stock
to be sold in the Conversion will be purchased by the MRP in the open
market in the year following the Conversion. The dollar amount of the
Common Stock to be purchased by the MRP is based on the Purchase Price in
the Conversion and represents unearned compensation and is reflected as a
reduction of capital. Such amount does not reflect possible increases or
decreases in the value of such stock relative to the Purchase Price in the
Conversion. As the Association accrues compensation expense to reflect the
vesting of such shares pursuant to the MRP, the charge against capital will
be reduced accordingly. MRP adjustment is based on amortization of the MRP
over five years. Implementation of the MRP would require stockholder
approval at a meeting of the Company's stockholders to be held within one
year but no earlier than six months after the Conversion. For purposes of
this table, it is assumed that the MRP will be adopted by the Association's
Board of Directors and approved by the Company's stockholders, and that the
MRP will purchase the shares of Common Stock in the open market within the
year following the Conversion. If the shares to be purchased by the MRP
are assumed to be newly issued shares purchased from the Company by the MRP
at the Purchase Price, at the minimum, midpoint, maximum and 15% above the
maximum of the Estimated Valuation Range, the offering price as a
percentage of pro forma stockholders' equity per share would be 57.27%,
61.96%, 65.83% and 69.64%, respectively, and pro forma net income per share
would have been $0.69, $0.62, $0.57 and $0.53, respectively. As a result
of the MRP, stockholders' interests will be diluted by approximately 3.85%.
See "Management of the Association -- Certain Benefit Plans and Agreements
-- Management Recognition Plan" and "Risk Factors -- Dilutive Effect of MRP
and Stock Options."
(4) Consolidated stockholders' equity represents the excess of the carrying
value of the assets of the Company over its liabilities. The amounts shown
do not reflect the federal income tax consequences of the potential
restoration to income of the bad debt reserves for income tax purposes,
which would be required in the event of liquidation. The amounts shown
also do not reflect the amounts required to be distributed in the event of
liquidation to eligible depositors from the liquidation account which will
be established upon the consummation of the Conversion. Pro forma
stockholders' equity information is not intended to represent the fair
market value of the Common Stock, the current value of the Association's
assets or liabilities or the amounts, if any, that would be available for
distribution to stockholders in the event of liquidation. Such pro forma
data may be materially affected by a change in the number of shares to be
sold in the Conversion and by other factors.
(5) It is expected that following the consummation of the Conversion the
Company will adopt the Option Plan, which would be subject to stockholder
approval, and that such plan would be considered and voted upon at a
meeting of the Company's stockholders to be held within one year but no
earlier than six months after the Conversion. Upon adoption of the Option
Plan, employees and directors could be granted options to purchase an
aggregate amount of Common Stock equal to 10% of the shares issued in the
Conversion at exercise prices equal to the market price of the Common Stock
on the date of grant. In the event the shares issued under the Option Plan
consist of newly issued shares of Common Stock and all options available
for award under the Option Plan were awarded, the interests of existing
stockholders would be diluted. At the minimum, midpoint, maximum and 15%
above the maximum of the Estimated Valuation Range, if all shares under the
Option Plan were newly issued and the exercise price for the option shares
were equal to the Purchase Price in the Conversion, net income per share
would be $0.67, $0.60, $0.56 and $0.52, respectively, and the stockholders'
equity per share would be $17.06, $15.81, $14.91 and $14.12, respectively.
29
<PAGE>
PROPOSED MANAGEMENT PURCHASES
The following table sets forth information regarding the approximate
number of shares of the Common Stock intended to be purchased by each of the
directors and officers of the Association and by all directors and executive
officers as a group, including their associates. For purposes of the following
table, it has been assumed that 320,000 shares of the Common Stock will be sold
at $10.00 per share, the midpoint of the Estimated Valuation Range (see "--
Stock Pricing and Number of Shares to be Issued") and that sufficient shares
will be available to satisfy subscriptions in all categories.
<TABLE>
<CAPTION>
Percent Aggregate Purchase
Total of Price of
Name and Position Shares Total Proposed Purchases
----------------- ------ ----- ------------------
(Dollars in thousands)
<S> <C> <C> <C>
Donald F. Gause, President and Director
Keith E. Waggoner, Executive Vice President
and Chief Executive Officer
Norman L. Bailey, Director
William E. Burrell, Director
Francis E. Clute, Director
Brian H. Hancock, Director
R. Dean Jones, Director
Wayne W. Whittaker, Director
All directors and executive officers, as a
group (8 persons) and their associates
ESOP (1) 25,600 8.0 256,000
MRP (2) 12,800 4.0 128,000
-----
Total (3) % $
====== ===== =========
</TABLE>
- --------------------
(1) Consists of shares that could be allocated to participants in the ESOP,
under which executive officers and other employees would be allocated in
the aggregate 8% of the Common Stock issued in the Conversion. See
"Management of the Association -- Certain Benefit Plans and Agreements --
Employee Stock Ownership Plan."
(2) Consists of shares that are expected to be awarded to participants in the
MRP, if implemented, under which directors, executive officers and other
employees would be awarded an aggregate number of shares equal to 4% of the
Common Stock sold in the Conversion (12,800 shares at the midpoint of the
Estimated Valuation Range). The dollar amount of the Common Stock to be
purchased by the MRP is based on the Purchase Price in the Conversion and
does not reflect possible increases or decreases in the value of such stock
relative to the Purchase Price per share in the Conversion. Implementation
of the MRP would require stockholder approval. See "Management of the
Association -- Certain Benefit Plans and Agreements -- Management
Recognition Plan." Such shares could be newly issued shares or shares
purchased in the open market following implementation of the MRP, in the
sole discretion of the Company's Board of Directors. The percentage shown
assumes the shares are purchased in the open market. If all shares
acquired by the MRP are newly issued shares, the percentage of the
outstanding Common Stock owned by the MRP would be 3.85%. Any sale of
newly issued shares to the MRP would be dilutive to existing stockholders.
See "Risk Factors -- Possible Dilutive Effect of MRP and Stock Options."
(3) Does not include shares that might be purchased by participants in an
Option Plan, intended to be implemented, under which directors, executive
officers and other employees would be granted options to purchase an
aggregate amount of Common Stock equal to 10% of the shares issued in the
Conversion (32,000 shares at the midpoint of the Estimated Valuation Range)
at exercise prices equal to the market price of the Common Stock on the
date of grant. Shares issued pursuant to the exercise of options could be
from treasury stock or newly issued shares. Implementation of the Option
Plan would require stockholder approval. See "Management of the
Association -- Certain Benefit Plans and Agreements -- Stock Option and
Incentive Plan."
30
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
STATEMENTS OF INCOME
The following Statements of Income of Rocky Ford Federal Savings and
Loan Association for each of the years in the two-year period ended September
30, 1996 have been audited by Grimsley, White & Company, independent certified
public accountants, whose report thereon appears elsewhere herein. The
Statements of Income should be read in conjunction with the Financial Statements
and related notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
INTEREST INCOME
Interest on loans receivable............... $1,030,195 $ 983,109
Dividend on securities available for sale.. 23,499 19,999
Interest on securities held to maturity.... 224,192 276,752
Interest on other interest-bearing assets.. 247,451 191,199
---------- ----------
TOTAL INTEREST INCOME................ 1,525,337 1,471,059
INTEREST ON DEPOSITS......................... 820,431 733,829
---------- ----------
NET INTEREST INCOME.................. 704,906 737,230
(PROVISION FOR) RECOVERY OF LOAN LOSSES...... -- 68,407
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES................... 704,906 805,637
---------- ----------
NON-INTEREST INCOME
Loan origination fees, other charges....... 16,585 15,261
Income (loss) on real estate operations.... -- 779
Gain on sale of foreclosed real estate..... 4,157 10,214
---------- ----------
TOTAL NON-INTEREST INCOME............ 20,742 26,254
---------- ----------
NON-INTEREST EXPENSE
GENERAL AND ADMINISTRATIVE
Compensation and benefits................ 231,849 230,119
Occupancy and equipment.................. 38,703 30,775
Computer services........................ 30,202 45,784
SAIF deposit insurance................... 45,026 45,628
Other.................................... 87,022 74,862
Special SAIF assessment.................. 105,929 --
---------- ----------
TOTAL NON-INTEREST EXPENSE........... 538,731 427,168
---------- ----------
INCOME BEFORE TAXES.................. 186,917 404,723
INCOME TAX EXPENSE........................... 58,375 117,735
---------- ----------
NET INCOME........................... $ 128,542 $ 286,988
========== ==========
</TABLE>
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company has only recently been formed and, accordingly, has no
results of operations at this time. As a result, this discussion relates to
the financial condition and results of operations of the Association. The
principal business of the Association consists of accepting deposits from the
general public and investing these funds primarily in loans and in investment
securities and mortgage-backed securities. The Association's loan portfolio
consists primarily of loans secured by residential real estate located in its
market area, with terms of 10 to 15 years. See "Prospectus Summary -- Rocky
Ford Federal Savings and Loan Association."
The Association's net income is dependent primarily on its net interest
income, which is the difference between interest income earned on its loan,
investment securities and mortgage-backed securities portfolio and interest
paid on interest-bearing liabilities. Net interest income is determined by
(i) the difference between yields earned on interest-earning assets and rates
paid on interest-bearing liabilities ("interest rate spread") and (ii) the
relative amounts of interest-earning assets and interest-bearing liabilities.
The Association's interest rate spread is affected by regulatory, economic and
competitive factors that influence interest rates, loan demand and deposit
flows. To a lesser extent, the Association's net income also is affected by
the level of noninterest expenses such as compensation and employee benefits
and FDIC insurance premiums.
The operations of the Association are significantly affected by
prevailing economic conditions, competition and the monetary, fiscal and
regulatory policies of governmental agencies. Lending activities are
influenced by the demand for and supply of housing, competition among lenders,
the level of interest rates and the availability of funds. Deposit flows and
costs of funds are influenced by prevailing market rates of interest,
primarily on competing investments, account maturities and the levels of
personal income and savings in the Association's market area.
Asset/Liability Management
The Association seeks to reduce its exposure to changes in interest rates
by originating fixed-rate loans with maturities of no more than 15 years and
by maintaining a relatively high level of liquid assets. The matching of the
Association's assets and liabilities may be analyzed by examining the extent
to which its assets and liabilities are interest rate sensitive and by
monitoring the expected effects of interest rate changes on the Association's
net interest income.
An asset or liability is interest rate sensitive within a specific time
period if it will mature or reprice within that time period. If the
Association's assets mature or reprice more quickly or to a greater extent
than its liabilities, the Association's net portfolio value and net interest
income would tend to increase during periods of rising interest rates but
decrease during periods of falling interest rates. If the Association's
assets mature or reprice more slowly or to a lesser extent than its
liabilities, the Association's net portfolio value and net interest income
would tend to decrease during periods of rising interest rates but increase
during periods of falling interest rates. As a result of the interest rate
risk inherent in the historical savings institution business of originating
long-term loans funded by short-term deposits, the Association has pursued
certain strategies designed to decrease the vulnerability of its earnings to
material and prolonged changes in interest rates.
In accordance with the Association's interest rate risk policy, the
Association emphasizes the origination of fixed rate loans with maturities of
no more than 15 years and maintains a relatively high level of liquid assets.
Maintaining a high level of liquid assets tends to reduce potential net income
because liquid assets usually provide a lower yield than longer term (less
liquid) assets. At September 30, 1996, the average weighted term to maturity
of the Association's loan portfolio was 13 years.
32
<PAGE>
Interest Rate Sensitivity Analysis
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and
by monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific period if it
will mature or reprice within that period. The interest rate sensitivity gap
is defined as the difference between the amount of interest-earning assets
maturing or repricing within a specific time period and the amount of
interest-bearing liabilities maturing or repricing within that time period. A
gap is considered positive when the amount of interest rate sensitive assets
exceeds the amount of interest rate sensitive liabilities, and is considered
negative when the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. At September 30, 1996, the
Association had an excess of interest-bearing liabilities over interest-
earning assets maturing or repricing within one year of approximately $8.8
million, resulting in a negative one-year interest rate sensitivity gap of
43.13%. Generally, during a period of rising interest rates, a negative gap
would be expected to adversely affect net interest income while a positive gap
would be expected to result in an increase in net interest income, while
conversely during a period of declining interest rates, a negative gap would
be expected to result in an increase in net interest income and a positive gap
would be expected to adversely affect net interest income. The Association's
current one-year gap is within the guidelines established by management and
approved by the Board of Directors. Management considers numerous factors
when establishing these guidelines, including current interest rate margins,
capital levels, and any guidelines provided by the OTS.
33
<PAGE>
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at September 30, 1996 which are
expected to mature or reprice in each of the time periods shown.
<TABLE>
<CAPTION>
Over One Over Three Over Five Over
One Year Through Through Through Ten
or Less Three Years Five Years Ten Years Years Total
--------- ------------ ----------- ---------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets
-----------------------
Mortgage loans..................... $ 1,186 $ 2,261 $ 2,130 $ 4,592 $ 2,137 $12,306
Share loans........................ 63 39 -- -- -- 102
Interest-bearing deposits.......... 3,897 -- -- -- -- 3,897
U.S. government agency securities.. -- 500 -- -- -- 500
Mortgage-backed securities......... 164 306 281 609 1,287 2,617
Equity securities.................. -- -- -- -- 585 585
Total interest-earning assets...... 5,310 3,106 2,411 5,201 3,979 20,007
Interest-bearing liabilities
----------------------------
Certificate accounts............... 9,755 3,041 -- -- -- 12,796
Money market deposit accounts...... 3,271 -- -- -- -- 3,271
Passbook accounts.................. 1,078 -- -- -- -- 1,078
Total interest-bearing
liabilities...................... 14,104 3,041 -- -- -- 17,145
Interest-earning assets less
interest-bearing liabilities..... (8,794) 65 2,411 5,201 3,979 2,862
Cumulative interest-rate
sensitivity gap.................. (8,794) (8,729) (6,318) (1,117) 2,862
Cumulative ratio of interest-
earning assets to interest-
bearing liabilities.............. 37.65% 49.09% 63.15% 93.48% 116.69%
Cumulative interest-rate
sensitivity gap as a percentage
of assets........................ (43.13)% (42.81)% (30.99)% (5.48)% 14.04%
</TABLE>
Share loans, interest-bearing deposits, and U.S. government agency
securities are included in the period in which they mature. Equity
securities, which have no specified maturity, are included in the over ten
years period. Mortgage loans and mortgage-backed securities, all of which are
fixed rate, are based on normal amortization plus estimated annual prepayments
of 5%. Deposit certificate accounts are scheduled according to contractual
maturities. Money market and passbook deposit accounts are included in the
earliest period.
Net Portfolio Value. In recent years, the Association has measured its
interest rate sensitivity by computing the "gap" between the assets and
liabilities which were expected to mature or reprice within certain periods,
based on assumptions regarding loan prepayment and deposit decay rates
formerly provided by the OTS. However, the OTS now requires the computation
of amounts by which the net present value of an institution's cash flows from
assets, liabilities and off balance sheet items (the institution's net
portfolio value, or "NPV") would change in the event of a range of assumed
changes in market interest rates. These computations estimate the effect on
an institution's NPV from instantaneous and permanent 1% to 4% increases and
decreases in market interest rates. In
34
<PAGE>
the Association's interest rate sensitive policy, the Board of Directors has
established a maximum decrease in net interest income and maximum decreases in
NPV given these instantaneous changes in interest rates.
The following table sets forth the interest rate sensitivity of the
Association's net portfolio value as of September 30, 1996 in the event of 1%,
2%, 3% and 4% instantaneous and permanent increases and decreases in market
interest rates, respectively. These changes are set forth below as basis
points, where 100 basis points equals one percentage point.
<TABLE>
<CAPTION>
Net Portfolio Value NPV as % of Portfolio Value of Assets
Change ------------------------------- -------------------------------------
in Rates $ Amount $ Change % Change NPV Ratio Basis Point Change
-------- --------- -------- ---------- --------- ------------------
<S> <C> <C> <C> <C> <C>
(Dollars in thousands)
+ 400 bp 1,882 (1,702) (47%) 9.95% (713)
+ 300 bp 2,309 (1,275) (36%) 11.88% (520)
+ 200 bp 2,753 (831) (23%) 13.79% (329)
+ 100 bp 3,195 (389) (11%) 15.58% (150)
0 bp 3,584 -- -- 17.08% --
- 100 bp 3,833 249 7% 17.97% 89
- 200 bp 3,892 308 9% 18.11% 103
- 300 bp 3,930 346 10% 18.17% 109
- 400 bp 4,036 452 13% 18.48% 140
</TABLE>
The following table sets forth the interest rate risk capital component
for the Association at September 30, 1996 given a hypothetical 200 basis point
rate change in market interest rates. See "Regulation -- Depository
Institution Regulation -- Capital Requirements."
<TABLE>
<CAPTION>
September 30, 1996
------------------
<S> <C>
Pre-shock NPV Ratio: NPV as % of Portfolio Value of Assets 17.08%
Exposure Measure: Post-Shock NPV Ratio 13.79%
Sensitivity Measure: Change in NPV Ratio 329 bp
Interest Rate Risk Capital Component ($000) NA (1)
</TABLE>
- ---------------
(1) Although this calculation is not applicable to the Association, the
Association has a negative interest rate sensitivity gap which would
adversely affect net interest income during a period of rising interest
rates. The Association believes its high level of liquid assets would,
however, allow the Association to address this negative impact.
Computations of prospective effects of hypothetical interest rate changes
are based on numerous assumptions, including relative levels of market
interest rates and loan prepayments, and should not be relied upon as
indicative of actual results. Further, the computations do not contemplate
any actions the Association may undertake in response to changes in interest
rates.
Certain shortcomings are inherent in the method of analysis presented in
both the computation of NPV and in the analysis presented in prior tables
setting forth the maturing and repricing of interest-earning assets and
interest-bearing liabilities. For example, although certain assets and
liabilities may have similar maturities or periods to repricing, they may
react in differing degrees to changes in market interest rates. The interest
rates on certain of assets and liabilities may fluctuate in advance of changes
in market interest rates, while interest rates on other assets
35
<PAGE>
and liabilities may lag behind changes in market rates. Based on the above,
net interest income should decline with instantaneous increases in interest
rates while net interest income should increase with instantaneous declines in
interest rates. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in the tables.
Rocky Ford Federal originates only fixed-rate real estate loans and holds
them in portfolio until maturity. Because Rocky Ford Federal's interest-
bearing liabilities which mature or reprice within short periods substantially
exceed its earning assets with similar characteristics, material and prolonged
increases in interest rates generally would adversely affect net interest
income, while material and prolonged decreases in interest rates generally,
but to a lesser extent because of their historically low levels, would have
the opposite effect. The Association's high level of liquid assets and
investments "available for sale" provides Management with the flexibility to
address this interest rate sensitivity gap position.
Average Balance, Interest and Average Yields and Rates
The following table sets forth certain information relating to the
Association's average interest-earning assets and interest-bearing liabilities
and reflects the average yield on assets and average cost of liabilities for
the periods and at the date indicated. Such yields and costs are derived by
dividing income or expense by the average monthly balance of assets or
liabilities, respectively, for the periods presented. Management does not
believe that the use of month-end balances instead of daily balances has
caused any material difference in the information presented.
The table also presents information for the periods and at the date
indicated with respect to the difference between the average yield earned on
interest-earning assets and average rate paid on interest-bearing liabilities,
or "interest rate spread," which savings institutions have traditionally used
as an indicator of profitability. Another indicator of an institution's net
interest income is its "net yield on interest-earning assets," which is its
net interest income divided by the average balance of interest-earning assets.
Net interest income is affected by the interest rate spread and by the
relative amounts of interest-earning assets and interest-bearing liabilities.
When interest-earning assets approximate or exceed interest-bearing
liabilities, any positive interest rate spread will generate net interest
income.
36
<PAGE>
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------
At September 30, 1996 1995
1996 ------------------------------- ----------------------------
------------------ Average Average
Yield/ Average Yield/ Average Yield/
Balance Cost Balance Interest Cost Balance Interest Cost
------- ------ ------- -------- ------ ------- -------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits.............. $ 3,897 6.35% $ 4,330 $ 247 5.70% $ 3,347 $ 191 5.71%
Investments............................ 3,701 6.69 3,676 248 6.75 4,659 297 6.37
Loans.................................. 12,287 8.70 11,730 1,030 8.78 10,838 983 9.07
---------- ---------- --------- ---------
Total interest-earning assets ........... 19,885 7.67 19,736 1,525 7.73 18,844 1,471 7.81
---------- ---------- ---------
Non-interest-earning assets.............. 503 405 316
---------- ---------
Total assets............................. $ 20,388 $ 20,141 $ 19,160
========== ========== =========
Interest-bearing liabilities:
Savings deposits....................... $ 17,145 4.78 16,993 820 4.83 16,411 734 4.47
---------- ---------- --------- ---------
Total interest-bearing liabilities....... 17,145 4.78 16,993 820 4.83 16,411 734 4.47
---------- ---------
Non-interest bearing liabilities......... 465 476 403
---------- ---------- ---------
Total liabilities........................ 17,610 17,469 16,814
Equity................................... 2,778 2,672 2,346
---------- ---------- ---------
Total liabilities and equity............. $ 20,388 $ 20,141 $ 19,160
========== ========== =========
Net interest income...................... 705 $ 705 $ 737
========== ========== =========
Net interest rate spread (1)............. 2.89% 2.90% 3.33%
==== ==== ====
Net interest-earning assets.............. 2,740 $ 2,743 $ 2,433
========== ========== =========
Net interest margin (2).................. 3.55% 3.57% 3.91%
==== ==== ====
Average interest-earning assets to
average interest-bearing liabilities... 115.98% 116.14% 114.83%
=========== ========== =======
</TABLE>
- --------------------
(1) Net interest rate spread represents the difference between the average
yield on interest-earning assets and the average rate on interest-bearing
liabilities.
(2) Net interest margin represents net interest income divided by average
interest-earning assets.
37
<PAGE>
Rate/Volume Analysis
The following table sets forth certain information regarding changes
in interest income and interest expense of the Association for the periods
indicated. For each category of interest-earning asset and interest-bearing
liability, information is provided on changes attributable to: (i) changes in
volume (changes in volume multiplied by old rate); (ii) changes in rate (changes
in rate multiplied by old volume); and (iii) changes in rate/volume (changes in
rate multiplied by changes in volume).
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
----------------------------------------- ------------------------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
----------------------------------------- ------------------------------------------
Rate/ Rate/
Volume Rate Volume Total Volume Rate Volume Total
--------- -------- ------- ------- ------ ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits............... $ 56 $ -- $ -- $ 56 $ (22) $55 $ (7) $ 26
Investments............................. (62) 18 (4) (48) (46) 23 (4) (27)
Loans................................... 81 (31) (3) 47 30 (38) 1 (7)
--------- -------- ------- ------- ------ ------- ------- -------
Total interest-earning assets......... 75 (13) (7) 55 (38) 40 (10) (8)
--------- -------- ------- ------- ------ ------- ------- -------
Interest-bearing liabilities:
Deposits................................ 26 59 2 87 (49) 106 (8) 49
--------- -------- ------- ------- ------ ------- ------- -------
Increase (decrease) in net interest
income................................ $ 49 $ (72) $ (9) $ (32) $ 11 $ (66) $ (2) $ (57)
========= ======== ======= ======= ====== ======= ======= =======
</TABLE>
38
<PAGE>
Comparison of Financial Condition at September 30, 1996 and September 30, 1995
The Association's total assets increased by $735,000, or 3.74%, from $19.7
million at September 30, 1995 to $20.4 million at September 30, 1996.
The Association's loan portfolio increased by $1.3 million during the year
ended September 30, 1996. Net loans totaled $12.3 million and $11.0 million at
September 30, 1996 and 1995, respectively. The increase in the loan activity
during the year ended September 30, 1996 is due to increased loan demand in the
Association's market area.
The allowance for loan losses totaled $60,000 at September 30, 1996 and
1995. As of those dates the Association did not have any non-performing loans
in its portfolio. There were no loans charged off or recoveries of previous
loan losses during the year ended September 30, 1996. The determination of the
allowance for loan losses is based on management's analysis, performed on a
quarterly basis. Various factors are considered, including the market value of
the underlying collateral, growth and composition of the loan portfolio, the
relationship of the allowance for loan losses to outstanding loans, historical
loss experience, delinquency trends and prevailing economic conditions.
Although management believes its allowance for loan losses is adequate, there
can be no assurance that additional allowances will not be required or that
losses on loans will not be incurred. The Association has had minimal losses on
loans in prior years. At September 30, 1996, the ratio of the allowance for
loan losses to net loans was .49% as compared to .55% at September 30, 1995.
The decrease in the ratio is attributed to loan growth for the year ended
September 30, 1996.
At September 30, 1996, the Association's investment portfolio included
mortgage-backed and government securities classified as "held to maturity"
carried at amortized cost of $3.1 million and an estimated fair value of $3.1
million, and equity securities classified as "available for sale" with an
estimated fair value of $585,000. The balance of the Association's investment
portfolio at September 30, 1996 consisted of interest bearing deposits totaling
$3.9 million.
At September 30, 1996 deposits increased to $17.1 million and $16.7 million
at September 30, 1995 or a net increase of 2.65%. Management is continually
evaluating the investment alternatives available to the Association's customers,
and adjusts the pricing on its savings products to maintain its existing
deposits.
Certificates of deposit at September 30, 1996 included approximately $1.5
million of deposits with balances of $100,000 or more. Such time deposits may
be risky because their continued presence in the Association is dependent
partially upon the rates paid by the Association rather than any customer
relationship and, therefore, may be withdrawn upon maturity if another
institution offers higher interest rates. The Association may be required to
resort to other funding sources such as borrowing or sales of its securities
held available for sale if the Association believes that increasing its rates to
maintain such deposits would adversely affect its operating results. At this
time, the Association does not believe that it will need to significantly
increase its deposit rates to maintain such certificates of deposit and,
therefore, does not anticipate resorting to alternative funding sources.
Comparison of Operating Results for the Years Ended September 30, 1996 and 1995
Net Income. The Association's net income for the year ended September 30,
1996 was $129,000 compared to $287,000 for the year ended September 30, 1995.
The decrease in net earnings for the year resulted primarily from the special
SAIF assessment expense of $106,000 for the year ended September 30, 1996, and
the recognition of adjusting the allowance for loan losses and recording income
of $68,000 during the year ended September 30, 1995.
Net Interest Income. Net interest income for the year ended September 30,
1996 was $705,000 compared to $737,000 for the year ended September 30, 1995.
The decrease in net interest income for the year ended September 30, 1996 was
due to a decrease in the interest rate spread from 3.33% in 1995 to 2.90% in
1996. The
39
<PAGE>
decline was due to an increase in the cost of interest-bearing liabilities and a
decrease in the yield on interest earning assets.
Interest Income. Interest income increased by $55,000 from $1,471,000 to
$1,526,000 or by 3.67%, during 1996 compared to 1995. This increase resulted in
part from an overall increase of average interest-earning assets by $892,000
from $18,844,000 to $19,736,000 or by 4.73% from 1995 to 1996. The Association
experienced a decrease in the average yield on the interest-earning assets from
7.81% in 1995 to 7.73% in 1996. The decrease in the yield is attributed to
lower rates on mortgage loans, the average yield on loans in 1996 was 8.78% as
compared to 9.07% in 1995. Although these loans were made at lower rates, it
provided the Association with a competitive product that lead to growth in
residential lending and earned a higher yield than alternative short-term
investments.
Interest Expense. Interest expense increased $87,000 or 11.85% to $820,000
for the year ended September 30, 1996 from $734,000 for the year ended September
30, 1995. The increase was primarily attributable to the increase in the
average cost of deposits from 4.47% in 1995 to 4.83% in 1996 and an increase in
average deposits from $16,411,000 in 1995 to $16,993,000 in 1996. Due to the
increasing interest rate environment in fiscal 1996, there was an increase in
the number of savings customers.
Provision for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and the general economy. Such evaluation
considers numerous factors including, general economic conditions, loan
portfolio composition, prior loss experience, the estimated fair value of the
underlying collateral and other factors that warrant recognition in providing
for an adequate loan loss allowance.
The Association determined that a provision for loan loss was not required
for the year ended September 30, 1996. The negative provision for the year
ended September 30, 1995, was the result of a decrease in the general loan loss
allowance of $68,000, resulting in income to the Association in that amount, due
to the performance of the loan portfolio.
Non-Interest Expense. The $112,000 increase in non-interest expense in
1996 compared to 1995 was primarily attributable to the $106,000 special SAIF
assessment during 1996.
Income Taxes. The Association's effective tax rate for the years ended
September 30, 1996 and September 30, 1995 was 31% and 29%, respectively. The
decrease in income tax expense of $58,000 in 1996 compared to 1995 was due to
the decrease in income in 1996 compared to 1995.
Liquidity and Capital Resources
Following the completion of the Conversion, the Company initially will have
no business other than that of the Converted Association and investing the net
Conversion proceeds retained by it. Management believes that the net proceeds
to be retained by the Company, earnings on such proceeds and principal and
interest payments on the ESOP loan, together with dividends that may be paid
from the Converted Association to the Company following the Conversion, will
provide sufficient funds for its initial operations and liquidity needs;
however, no assurance can be given that the Company will not have a need for
additional funds in the future. The Converted Association will be subject to
certain regulatory limitations with respect to the payment of dividends to the
Company. See "Dividend Policy" and "Regulation -- Depository Institution
Regulation -- Dividend Restrictions." The Company intends to lend a portion of
the net proceeds retained from the Conversion to the ESOP to permit its purchase
of Common Stock in the Conversion. See "Use of Proceeds."
At September 30, 1996, the Association exceeded all regulatory minimum
capital requirements. For a detailed discussion of the OTS's regulatory capital
requirements, and for a tabular presentation of the Association's
40
<PAGE>
compliance with such requirements, see "Regulation -- Depository Institution
Regulation -- Capital Requirements," and Note 9 of Notes to Financial
Statements.
The Association's primary sources of funds consists of deposits, repayment
of loans and mortgage-backed securities, maturities of investments and interest-
bearing deposits, and funds provided from operations. While scheduled
repayments of loans and mortgage-backed securities and maturities of investment
securities are predicable sources of funds, deposit flows and loan prepayments
are greatly influenced by the general level of interest rates, economic
conditions and competition. The Association uses its liquidity resources
principally to fund existing and future loan commitments, to fund maturing
certificates of deposit and demand deposit withdrawals, to invest in other
interest-earning assets, to maintain liquidity, and to meeting operating
expenses. Management believes that loan repayments and other sources of funds
will be adequate to meet the Association's liquidity needs for the immediate
future.
The Association is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which may be varied at the
direction of the OTS depending upon economic conditions and deposit flows, is
based upon a percentage of deposits and short-term borrowings. The required
minimum ratio is currently 5%. The Association has historically maintained a
level of liquid assets in excess of regulatory requirements. The Association's
liquidity ratios at September 30, 1996 and 1995 were 27% and 41%, respectively.
The Association's relatively high liquidity ratios at September 30, 1996 and
1995 were reflective of accelerated loan prepayments, and management's
determination to refrain from investing excess liquidity in assets with longer
terms.
A major portion of the Association's liquidity consists of cash and cash
equivalents, which include investments in highly liquid, short-term deposits.
The level of these assets is dependent on the Association's operating,
investing, lending and financing activities during any given period. At
September 30, 1996, cash and cash equivalents totaled $4.1 million.
The primary investing activities of the Association include origination of
loans and purchase of investment securities. During the year ended September
30, 1996 purchase of investment securities and mortgage-backed securities
totaled $2.1 million, while loan originations totaled $3.8 million. These
investments were funded in part by loan and mortgage-backed prepayments of $2.5
million and investment securities maturities of $1.3 million.
Liquidity management is both a daily and long-term function of business
management. If the Association requires funds beyond its ability to generate
them internally, the Association believes that it could borrow funds from the
FHLB. At September 30, 1996, the Association had no outstanding advances from
the FHLB.
At September 30, 1996, the Association had $909,300 in outstanding
commitments to originate loans. The Association anticipates that it will have
sufficient funds available to meet its current loan origination commitments.
Certificates of deposit which are scheduled to mature in one year or less
totaled $9.8 million at September 30, 1996. Based on historical experience,
management believes that a significant portion of such deposits will remain with
the Association.
Another source of liquidity is anticipated net proceeds from the
Conversion. Following the completion of the Conversion, the Association will
receive at least 50% of the net proceeds from the Conversion. These funds are
expected to be used by the Association for its business activities, including
investments in interest-earning assets.
Impact of Inflation and Changing Prices
The Financial Statements and Notes thereto presented herein have been
prepared in accordance with generally accepted accounting principles, which
require the measurement of financial position and operating results in terms of
historical dollars without considering the change in the relative purchasing
power of money over time and due to inflation. The impact of inflation is
reflected in the increased cost of the Association's operations.
41
<PAGE>
Unlike most industrial companies, nearly all the assets and liabilities of the
Association are monetary in nature. As a result, interest rates have a greater
impact on the Association's performance than do the effects of general levels of
inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the price of goods and services.
Impact of New Accounting Standards
Accounting for ESOP. The Accounting Standards Division of the American
Institute of Certified Public Accountants approved Statement of Position ("SOP")
93-6, "Employers' Accounting for Employee Stock Ownership Plans," which is
effective for fiscal years beginning after December 15, 1993. SOP 93-6 changed,
among other things, the measure of compensation recorded by employers from the
cost of ESOP shares to the fair value of ESOP shares. To the extent that the
fair value of the Common Stock held by the ESOP that are committed to be
released directly to compensate employees, differs from the cost of such shares,
compensation expenses and a related charge or credit to additional paid-in
capital will be reported in the Company's financial statements. The adoption of
the ESOP by the Association and the application of SOP 93-6 is likely to result
in fluctuations in compensation expense as a result of changes in the fair value
of the Common Stock. However, any such compensation expense fluctuations will
result in an offsetting adjustment to paid-in capital, and therefore, total
capital will not be affected. See "Pro Forma Data."
Disclosure of Derivative Financial Instruments. In October 1994, the
Financial Accounting Standards Board ("FASB") issued SFAS No. 119 "Disclosure
about Derivative Financial Instruments and Fair Value of Financial Instruments."
This statement addresses the disclosure of derivative financial instruments
including the face amount, nature and terms. For derivatives held for trading,
disclosure of average and period end fair values and disaggregated gains and
losses is required. For derivatives held for purposes other than trading,
disclosure of objectives, strategies, policies on reporting and income
recognition method is required. This statement is effective for financial
statements for fiscal years ending after December 15, 1995. Currently the
Association does not own any derivative financial instruments and therefore SFAS
No. 119 should not have any impact on the financial statements.
Impairment of Long-Lived Assets. In March 1995, the FASB issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
This Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. This Statement requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In performing the
review for recoverability, the entity should estimate the future cash flows
expected to result from the use of the asset and its eventual disposition. If
the sum of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, an impairment loss is
recognized. Otherwise, an impairment loss is not recognized. Measurement of an
impairment loss for long-lived assets and identifiable intangibles that an
entity expects to hold and use should be based on the fair value of the asset.
The impact on the financial statements for implementation of the statement is
not expected to be material.
Mortgage Servicing Rights. In May 1995, the FASB issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights." This Statement amends FASB
Statement No. 65, "Accounting for Certain Mortgage Banking Activities" to
require that a mortgage banking enterprise recognize as separate assets rights
to service mortgage loans for others, however those servicing rights are
acquired. The total cost of the mortgage loans to be sold should be allocated
between the mortgage servicing rights and the loans based on their relative fair
values if it is practicable to estimate those fair values. If not, the entire
cost should be allocated to the mortgage loans. This statement applies
prospectively in fiscal years beginning after December 15, 1995. The impact on
the financial statements for implementation of the Statement is not expected to
be material.
42
<PAGE>
Accounting for Stock-Based Compensation. In October 1995, the FASB issued
SFAS No. 123, "Accounting for Stock-Based Compensation to Employees." This
Statement encourages entities to adopt the fair value based method of accounting
for employee stock options or other stock compensation plans. However, it
allows an entity to measure compensation cost for those plans using the
intrinsic value based method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Under the fair value based method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
Under the intrinsic value based method, compensation cost is the excess of the
quoted market price of the stock at grant date over the amount an employee must
pay to acquire the stock. Most fixed stock option plans -- the most common type
of stock compensation plan -- have no intrinsic value at grant date, and under
Opinion No. 25 no compensation cost is recognized for them. Compensation cost
is recognized for other types of stock based compensation plans under Opinion
No. 25, including plans with variable, usually performance-based, features.
This Statement requires that an employer's financial statements include certain
disclosures about stock-based employee compensation arrangements regardless of
the method used to account for them. This statement is effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The Company will adopt the Statement on the date the Company converts from a
federal mutual to a federal stock savings and loan association. The Company has
not determined which method it will use to account for the option at this time
and has not estimated the effect of adoption on the Company's financial
condition or results of operations.
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. In June 1996, the FASB issued SFAS No. 125
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." SFAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities
based on consistent application of a financial-components approach that focuses
on control. Under that approach, after a transfer of financial assets, an
entity recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished.
This statement is effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996, and is to
be applied prospectively. Earlier or retroactive application is not permitted.
The Association adopted the provisions of the Standard on October 1, 1996.
Based on the Association's current operating activities, management does not
believe that the adoption of this statement will have a material impact on the
Association's financial condition or results of operations.
BUSINESS OF THE COMPANY
The Company was organized at the direction of the Board of Directors of the
Association in February 1996 for the purpose of becoming a holding company to
own all of the outstanding capital stock of the Association. Upon completion of
the Conversion, the Association will become a wholly owned subsidiary of the
Company. For additional information, see "Rocky Ford Financial, Inc."
The Company currently is not an operating company. Following the
Conversion, the Company will be engaged primarily in the business of directing,
planning and coordinating the business activities of the Association. In the
future, the Company may become an operating company or acquire or organize other
operating subsidiaries, including other financial institutions, though there are
no current plans in this regard. Initially, the Company will not maintain
offices separate from those of the Association or employ any persons other than
its officers who will not be separately compensated for such service.
43
<PAGE>
BUSINESS OF THE ASSOCIATION
General
The Association's principal business currently consists of attracting
deposits from the general public and investing these funds in loans secured by
first mortgages on owner-occupied, single-family residences in the Association's
market area.
The Association derives its income principally from interest earned on
loans, as well as interest earned on mortgage-backed securities and deposits in
other depository institutions. The Association's principal expenses are
interest expense on deposits and borrowings (if necessary) and noninterest
expenses such as compensation and employee benefits, deposit insurance and other
miscellaneous expenses. Funds for these activities are provided principally by
deposits, repayments of outstanding loans and mortgage-backed securities and
operating revenues.
Market Area
The Association's market area for gathering deposits and making loans
is Otero County, Colorado, which is located in southeast Colorado, approximately
50 miles east of Pueblo, Colorado and 100 miles southeast of Colorado Springs,
Colorado.
Agricultural related businesses are the base of Otero County's
economy. The primary employers in Otero County are farming, retail, government
and service industries. As of 1990, Otero County had a population of 20,185.
Median family income for Otero County is an estimated $28,569 for 1996. Major
towns (population) in the county include La Junta (7,637), Rocky Ford (4,162),
Fowler (1,154), Swink (584), and Manzanola (437).
Lending Activities
General. The Association's loan portfolio totaled $12.3 million at
September 30, 1996, representing 60.27% of total assets at that date.
Substantially all loans are originated in the market area. At September 30,
1996, $12.1 million, or 98.74% of the Association's net loan portfolio consisted
of single-family, residential mortgage loans. Other loans secured by real
estate include non-residential real estate loans which amounted to $174,000 or
1.42% of the Association's net loan portfolio at September 30, 1996. To a
lesser extent, the Association also originates consumer loans secured by
deposits. At September 30, 1996, consumer loans totaled $102,000, or 0.83% of
the Association's net loan portfolio.
44
<PAGE>
Analysis of Loan Portfolio
Set forth below is selected data relating to the composition of the
Association's loan portfolio by type of loan at the dates indicated. At
September 30, 1996, the Association had no concentrations of loans exceeding 10%
of total loans other than as disclosed below.
<TABLE>
<CAPTION>
At September 30,
-----------------------------------
1996 1995
---------------- -----------------
Amount % Amount %
------- ------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Mortgage Loans:
One- to four-family............... $12,132 98.74% $10,915 99.37%
Non-residential................... 174 1.42 123 1.12
------- ------ ------- ------
Total real estate loans........ 12,306 100.15 11,038 100.49
Consumer loans on savings accounts.. 102 0.83 79 0.72
------- ------ ------- ------
Total loans......................... 12,408 100.98 11,117 101.21
------- ------ ------- ------
Less:
Deferred fees and discounts....... 61 0.50 73 0.66
Allowance for losses.............. 60 0.49 60 0.55
------- ------ ------- ------
Loan portfolio, net................. $12,287 100.00% $10,984 100.00%
======= ====== ======= ======
</TABLE>
45
<PAGE>
Loan Maturity Schedule
The following table sets forth certain information at September 30, 1996
regarding the dollar amount of loans maturing in the Association's portfolio
based on their contractual terms to maturity, including scheduled repayments of
principal. Demand loans, loans having no stated schedule of repayments and no
stated maturity, and overdrafts are reported as due in one year or less.
<TABLE>
<CAPTION>
Under One to Three to Five to Ten to Over
One Year Three Years Five Years Ten Years Twenty Years Twenty Years Total
-------- ----------- ---------- --------- ------------ ------------ -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans:
One- to four-family...... $ 64 $ 118 $ 797 $ 2,904 $ 7,339 $ 910 $ 12,132
Non-residential.......... -- 4 37 133 -- -- 174
Consumer loans on
savings accounts......... 63 39 -- -- -- -- 102
------- --------- --------- -------- -------- -------- --------
Total................. $ 127 $ 161 $ 834 $ 3,037 $ 7,339 $ 910 $ 12,408
======= ========= ========= ======== ======== ======== ========
</TABLE>
The next table sets forth at September 30, 1996, the dollar amount of all
loans due one year or more after September 30, 1996 which have predetermined
interest rates and have floating or adjustable interest rates.
<TABLE>
<CAPTION>
Predetermined Floating or
Rate Adjustable Rates
------------- ----------------
(In thousands)
<S> <C> <C>
Mortgage loans
One- to four-family...................... $ 12,068 $ --
Non-residential.......................... 174 --
Consumer loans on savings accounts.......... 39 --
----------- -----------
Total.................................. $ 12,281 $ --
=========== ===========
</TABLE>
46
<PAGE>
Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of loans is substantially less than
their contractual terms because of prepayments. In addition, due-on-sale clauses
on loans generally Scheduled contractual principal repayments of loans do not
reflect the actual life of such assets. The average life of loans is
substantially less than their contractual terms because of prepayments. In
addition, due-on-sale clauses on loans generally give the Association the right
to declare a loan immediately due and payable in the event, among other things,
that the borrower sells the real property subject to the mortgage and the loan
is not repaid. The average life of mortgage loans tends to increase when current
mortgage loan market rates are substantially higher than rates on existing
mortgage loans and, conversely, decrease when current mortgage loan market rates
are substantially lower than rates on existing mortgage loans.
Originations, Purchases and Sales of Loans. The Association generally has
authority to originate and purchase loans secured by real estate located
throughout the United States. Consistent with its emphasis on being a
community-oriented financial institution, the Association conducts substantially
all of its lending activities in its market area.
The following table sets forth certain information with respect to the
Association's loan origination activity for the periods indicated. The
Association has not purchased or sold any loans in the periods presented.
Origination, Purchase and Sale of Loans
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1996 1995
----------- -----------
(In thousands)
<S> <C> <C>
Net loans, beginning of period........................ $10,984 $10,361
Origination by type:
- -------------------
One- to four-family................................... $ 3,636 $ 2,457
Non-residential....................................... 80 --
Consumer loans on savings accounts.................... 37 178
------- -------
Total loans originated........................... 3,753 2,635
------- -------
Repayments............................................ 2,461 2,068
------- -------
Decrease (increase) in other items, net............... 11 56
------- -------
Net increase (decrease) in loans receivable, net. 1,303 623
------- -------
Net loans, end of period.............................. $12,287 $10,984
======= =======
</TABLE>
The Association's loan originations are derived from a number of sources,
including referrals by realtors, depositors and borrowers and advertising, as
well as walk-in customers. The Association's solicitation programs consist of
advertisements in local media, in addition to occasional participation in
various community organizations and events. Real estate loans are originated by
the Association's loan personnel. All of the Association's loan personnel are
salaried, and the Association does not compensate loan personnel on a commission
basis for loans originated. Loan applications are accepted at the Association's
office.
Loan Underwriting Policies. The Association's lending activities are
subject to the Association's written, non-discriminatory underwriting standards
and to loan origination procedures prescribed by the Association's Board of
Directors and its management. Detailed loan applications are obtained to
determine the borrower's ability to repay, and the more significant items on
these applications are verified through the use of credit reports, financial
statements and confirmations. All loans must be reviewed by the Association's
loan committee, which is comprised
47
<PAGE>
of the Association's Board of Directors, for which a quorum is required to
approve a loan. In addition, the full Board of Directors reviews and approves
all loans on a monthly basis.
Applications for single-family real estate loans are underwritten and
closed in accordance with the standards of FHLMC and Federal National Mortgage
Association ("FNMA") except that, consistent with banking practice in Colorado,
title opinions rather than title insurance are obtained. Generally, upon receipt
of a loan application from a prospective borrower, a credit report and
verifications are ordered to confirm specific information relating to the loan
applicant's employment, income and credit standing. If a proposed loan is to be
secured by a mortgage on real estate, an appraisal of the real estate is usually
undertaken by an appraiser approved by the Association's Board of Directors and
licensed or certified (as necessary) by the State of Colorado. In the case of
single-family residential mortgage loans, except when the Association becomes
aware of a particular risk of environmental contamination, the Association
generally does not obtain a formal environmental report on the real estate at
the time a loan is made. A formal environmental report may be required in
connection with nonresidential real estate loans.
It is the Association's policy to record a lien on the real estate securing
a loan and to obtain a title opinion from Colorado counsel which provides that
the property is free of prior encumbrances and other possible title defects.
Borrowers must also obtain hazard insurance policies prior to closing and, when
the property is in a flood plain as designated by the Department of Housing and
Urban Development, pay flood insurance policy premiums.
The Association is permitted to lend up to 100% of the appraised value of
the real property securing a mortgage loan. The Association is required by
federal regulations to obtain private mortgage insurance on that portion of the
principal amount of any loan that is greater than 90% of the appraised value of
the property. The Association will make a single-family residential mortgage
loan for owner-occupied property with a loan-to-value ratio of up to 80% on such
loans. For residential properties that are not owner-occupied, the Association
generally does not lend more than 80% of the appraised value. For all
residential mortgage loans, the Association may go up to 90% of appraised value
with private mortgage insurance. The federal banking agencies, including the
OTS, have adopted regulations that would establish new loan-to-value ratio
requirements for specific categories of real estate loans. See "Regulation --
Regulation of the Association -- Uniform Lending Standards."
Under applicable law, with certain limited exceptions, loans and extensions
of credit by a savings institution to a person outstanding at one time shall not
exceed 15% of the institution's unimpaired capital and surplus. Loans and
extensions of credit fully secured by readily marketable collateral may comprise
an additional 10% of unimpaired capital and surplus. Applicable law additionally
authorizes savings institutions to make loans to one borrower, for any purpose,
in an amount not to exceed the lesser of $30.0 million or 30% of unimpaired
capital and surplus to develop residential housing, provided certain
requirements are satisfied. Under these limits, the Association's loans to one
borrower were limited to $500,000 at September 30, 1996. At that date, the
Association had no lending relationships in excess of the loans-to-one-borrower
limit. At September 30, 1996, the Association's largest lending relationship was
a $186,000 relationship consisting of single-family residences, one of which
serves as the borrowers' primary residence. All loans within this relationship
were current and performing in accordance with their terms at September 30,
1996.
Interest rates charged by the Association on loans are affected principally
by competitive factors, the demand for such loans and the supply of funds
available for lending purposes. These factors are, in turn, affected by general
economic conditions, monetary policies of the federal government, including the
Federal Reserve Board, legislative tax policies and government budgetary
matters.
Single-Family Residential and Commercial Real Estate Lending. The
Association historically has been and continues to be an originator of single-
family, residential real estate loans in its market area. At September 30, 1996,
single-family residential mortgage loans, totaled approximately $12.1 million,
or 98.74% of the Association's net loan portfolio. The Association has no loans
secured by nonowner-occupied investment properties, no construction
48
<PAGE>
loans, and only $174,000 in loans on non-residential real estate. All loans
originated by the Association are maintained in its portfolio rather than sold
in the secondary market.
The Association only originates fixed-rate loans substantially all of which
have 10 years or 15 years to maturity. In each case, such loans are secured by
first mortgages on single-family, owner-occupied residential real property
located in the Association's market area. The Association's lending policy does
increase the Association's exposure to interest rate risk during periods of
rising interest rates. To reduce its interest rate risk associated with such
loans, the Association maintains a relatively high level of liquid assets. The
proceeds of the Conversion will also assist the Association in reducing this
exposure.
The Association's commercial real estate portfolio generally consists of
fixed rate loans secured by first mortgages on commercial real estate including
industrial properties, professional buildings and small retail establishments.
All properties are located in Otero County, Colorado. At September 30, 1996, the
Association had $174,000 of such loans, which comprised 1.42% of its loan
portfolio. Commercial real estate loans are originated on a fixed-rate basis
with terms of up to 15 years and are underwritten with loan-to-value ratios of
up to 70% of the lesser of the appraised value or the purchase price of the
property. The Association does not intend to significantly expand commercial
real estate lending following the Conversion.
Consumer and Other Lending. The consumer loans currently in the
Association's loan portfolio consist of loans secured by savings deposits. Such
savings account loans are usually made for up to 90% of the depositor's savings
account balance. The interest rate is normally 2.0% above the rate paid on such
deposit account serving as collateral, and the account must be pledged as
collateral to secure the loan. Interest generally is billed on a quarterly
basis. At September 30, 1996, loans on deposit accounts totaled $102,000, or
0.83% of the Association's net loan portfolio.
Loan Fees and Servicing. The Association receives fees in connection with
late payments and for miscellaneous services related to its loans. The
Association also charges a $150 document preparation fee and a $350 appraisal
fee for loan originations. The Association does not service loans for others.
Nonperforming Loans and Other Problem Assets. It is management's
policy to continually monitor its loan portfolio to anticipate and address
potential and actual delinquencies. When a borrower fails to make a payment on
a loan, the Association takes immediate steps to have the delinquency cured and
the loan restored to current status. Loans which are delinquent 26 days incur a
late fee of 4.0% of principal and interest due. As a matter of policy, the
Association will contact the borrower after the loan has been delinquent 30
days. If payment is not promptly received, the borrower is contacted again, and
efforts are made to formulate an affirmative plan to cure the delinquency.
Generally, after any loan is delinquent 90 days or more, formal legal
proceedings are commenced to collect amounts owed. Loans are placed on
nonaccrual status if the loan becomes past due more than 90 days unless such
loans are well-secured and in the process of collection. Loans are charged off
when management concludes that they are uncollectible. See Note 1 of Notes to
Financial Statements.
Real estate acquired by the Association as a result of foreclosure is
classified as real estate acquired through foreclosure until such time as it is
sold. When such property is acquired, it is initially recorded at estimated fair
value and subsequently at the lower of book value or fair value, less estimated
costs to sell. Costs relating to holding such real estate are charged against
income in the current period, while costs relating to improving such real estate
are capitalized until a saleable condition is reached. Any required write-down
of the loan to its fair value less estimated selling costs upon foreclosure is
charged against the allowance for loan losses. See Note 1 of Notes to Financial
Statements.
49
<PAGE>
The following table sets forth information with respect to the
Association's nonperforming assets at the dates indicated. Further, no loans
were recorded as restructured loans within the meaning of SFAS No. 15 at the
dates indicated.
<TABLE>
<CAPTION>
At September 30,
------------------
1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Total loans accounted for on a non-accrual basis:.. $ -- --
======= =======
Total accruing loans which are contractually
past due 90 days or more......................... $ -- --
======= =======
Total nonperforming loans...................... $ -- $ --
======= =======
Percentage of total loans.......................... NA% NA%
======= =======
Other non-performing assets (2).................... $ -- $ 17
======= =======
</TABLE>
- -----------------
(1) Non-accrual status denotes loans on which, in the opinion of management,
the collection of additional interest is unlikely. Payments received on a
non-accrual loan are either applied to the outstanding principal balance or
recorded as interest income, depending on management's assessment of the
collectibility of the loan.
(2) Other non-performing assets includes property acquired by the Association
through foreclosure or repossession. This property is carried at the lower
of its fair value less estimated selling costs or the principal balance of
the related loan, whichever is lower. Other non-performing assets also
includes real estate developed and held for sale.
At September 30, 1996, the Association had no loans outstanding that were
classified as non-accrual, 90 days past due or restructured, and no loans
outstanding that were not classified as non-accrual, 90 days past due or
restructured, but as to which known information about possible credit problems
of borrowers caused management to have serious concerns as to the ability of the
borrowers to comply with present loan repayment terms and may result in
disclosure as non-accrual, 90 days past due or restructured.
Federal regulations require savings institutions to classify their assets
on the basis of quality on a regular basis. An asset meeting one of the
classification definitions set forth below may be classified and still be a
performing loan. An asset is classified as substandard if it is determined to
be inadequately protected by the current retained earnings and paying capacity
of the obligor or of the collateral pledged, if any. An asset is classified as
doubtful if full collection is highly questionable or improbable. An asset is
classified as loss if it is considered uncollectible, even if a partial recovery
could be expected in the future. The regulations also provide for a special
mention designation, described as assets which do not currently expose a savings
institution to a sufficient degree of risk to warrant classification but do
possess credit deficiencies or potential weaknesses deserving management's close
attention. Such assets designated as special mention may include nonperforming
loans consistent with the above definition. Assets classified as substandard or
doubtful require a savings institution to establish general allowances for loan
losses. If an asset or portion thereof is classified loss, a savings
institution must either establish a specific allowance for loss in the amount of
the portion of the asset classified loss, or charge off such amount. Federal
examiners may disagree with a savings institution's classifications. If a
savings institution does not agree with an examiner's classification of an
asset, it may appeal this determination to the OTS Regional Director. The
Association regularly reviews its assets to determine whether any assets require
classification or re-classification. At September 30, 1996, the Association had
$57,000 in assets classified as special mention (which loan was brought current
on October 5, 1996), no assets classified as substandard, no assets classified
as doubtful and no assets
50
<PAGE>
classified as loss. Special mention assets consist primarily of residential real
estate loans secured by first mortgages. This classification is primarily used
by management as a "watch list" to monitor loans that exhibit any potential
deviation in performance from the contractual terms of the loan.
Allowance for Loan Losses. In originating loans, the Association
recognizes that credit losses will be experienced and that the risk of loss will
vary with, among other things, the type of loan being made, the creditworthiness
of the borrower over the term of the loan, general economic conditions and, in
the case of a secured loan, the quality of the security for the loan. It is
management's policy to maintain an adequate allowance for loan losses based on,
among other things, the Association's and the industry's historical loan loss
experience, evaluation of economic conditions, regular reviews of delinquencies
and loan portfolio quality and evolving standards imposed by federal bank
examiners. The Association increases its allowance for loan losses by charging
provisions for possible loan losses against the Association's income.
Management will continue to actively monitor the Association's asset
quality and allowance for loan losses. Management will charge off loans and
properties acquired in settlement of loans against the allowances for losses on
such loans and such properties when appropriate and will provide specific loss
allowances when necessary. Although management believes it uses the best
information available to make determinations with respect to the allowances for
losses and believes such allowances are adequate, future adjustments may be
necessary if economic conditions differ substantially from the economic
conditions in the assumptions used in making the initial determinations.
The Association's methodology for establishing the allowance for loan
losses takes into consideration probable losses that have been identified in
connection with specific assets as well as losses that have not been identified
but can be expected to occur. Management conducts regular reviews of the
Association's assets and evaluates the need to establish allowances on the basis
of this review. Allowances are established by the Board of Directors on a
quarterly basis based on an assessment of risk in the Association's assets
taking into consideration the composition and quality of the portfolio,
delinquency trends, current charge-off and loss experience, loan concentrations,
the state of the real estate market, regulatory reviews conducted in the
regulatory examination process and economic conditions generally. Specific
reserves will be provided for individual assets, or portions of assets, when
ultimate collection is considered improbable by management based on the current
payment status of the assets and the fair value of the security. At the date of
foreclosure or other repossession, the Association would transfer the property
to real estate acquired in settlement of loans initially at the lower of cost or
estimated fair value and subsequently at the lower of book value or fair value
less estimated selling costs. Any portion of the outstanding loan balance in
excess of fair value less estimated selling costs would be charged off against
the allowance for loan losses. If, upon ultimate disposition of the property,
net sales proceeds exceed the net carrying value of the property, a gain on sale
of real estate would be recorded.
Banking regulatory agencies, including the OTS, have adopted a policy
statement regarding maintenance of an adequate allowance for loan and lease
losses and an effective loan review system. This policy includes an arithmetic
formula for determining the reasonableness of an institution's allowance for
loan loss estimate compared to the average loss experience of the industry as a
whole. Examiners will review an institution's allowance for loan losses and
compare it against the sum of: (i) 50% of the portfolio that is classified
doubtful; (ii) 15% of the portfolio that is classified as substandard; and (iii)
for the portions of the portfolio that have not been classified (including those
loans designated as special mention), estimated credit losses over the upcoming
12 months given the facts and circumstances as of the evaluation date. This
amount is considered neither a "floor" nor a "safe harbor" of the level of
allowance for loan losses an institution should maintain, but examiners will
view a shortfall relative to the amount as an indication that they should review
management's policy on allocating these allowances to determine whether it is
reasonable based on all relevant factors.
51
<PAGE>
The following table sets forth an analysis of the Association's allowance
for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------
1996 1995
------ ------
(Dollars in thousands)
<S> <C> <C>
Balance at beginning of period..................... $ 60 $ 128
------- -------
Total charge-offs.................................. -- --
------- -------
Total recoveries................................... -- --
------- -------
Net loan charge-offs............................... -- --
------- -------
Provision (credits to provision) for loan losses... -- (68)
------- -------
Balance at end of period........................... $ 60 $ 60
======= =======
Allowance for loan losses to total non-performing
loans at end of period........................... NA NA
======= =======
Allowance for loan losses to net to average
loans outstanding at end of period............... 0.49% 0.55%
======= =======
</TABLE>
52
<PAGE>
The following table allocates the allowance for loan losses by loan
category at the dates indicated. The allocation of the allowance to each
category is not necessarily indicative of future losses and does not restrict
the use of the allowance to absorb losses in any category.
<TABLE>
<CAPTION>
September 30,
------------------------------------------
1996 1995
-------------------- --------------------
Percent Percent
of Loans of Loans
in Category in Category
to Total to Total
Amount Loans Amount Loans
------ ------------ ------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Real estate - mortgage:
Single-family residential...... $60 97.78% $60 98.18%
Non-residential................ -- 1.40 -- 1.10
Consumer loans on savings accounts. -- 0.82 -- 0.71
------ ------ ------ ------
Total allowance for loan losses $60 100.00% $60 100.00%
====== ====== ====== ======
</TABLE>
Investment Activities
General. The Association is permitted under federal law to make
certain investments, including investments in securities issued by various
federal agencies and state and municipal governments, deposits at the FHLB of
Topeka, certificates of deposit in federally insured institutions, certain
bankers' acceptances and federal funds. It may also invest, subject to certain
limitations, in commercial paper rated in one of the two highest investment
rating categories of a nationally recognized credit rating agency, and certain
other types of corporate debt securities and mutual funds. Federal regulations
require the Association to maintain an investment in FHLB stock and a minimum
amount of liquid assets which may be invested in cash and specified securities.
From time to time, the OTS adjusts the percentage of liquid assets which savings
banks are required to maintain. See "Regulation -- Depository Institution
Regulation -- Liquidity Requirements."
The Association makes investments in order to maintain the levels of
liquid assets required by regulatory authorities and manage cash flow, diversify
its assets, obtain yield and to satisfy certain requirements for favorable tax
treatment. The investment activities of the Association consist primarily of
investments in mortgage-backed securities and other investment securities,
consisting primarily of securities issued or guaranteed by the U.S. government
or agencies thereof. Typical investments include federally sponsored agency
mortgage pass-through and federally sponsored agency and mortgage-related
securities. Investment and aggregate investment limitations and credit quality
parameters of each class of investment are prescribed in the Association's
investment policy. The Association performs analyses on mortgage-related
securities prior to purchase and on an ongoing basis to determine the impact on
earnings and market value under various interest rate and prepayment conditions.
Under the Association's current investment policy, securities purchases must be
approved by the Association's Executive Vice President. The Board of Directors
reviews all securities transactions on a monthly basis.
The Association adopted SFAS No. 115 as of October 1, 1994. Pursuant
to SFAS No. 115, the Association has classified securities with an amortized
cost of $314,000 and an approximate market value of $585,000 at September 30,
1996 as available for sale. Management of the Association presently does not
intend to sell such securities and, based on the Association's current liquidity
level and the Association's access to borrowings through the FHLB of Topeka,
management currently does not anticipate that the Association will be placed in
a position of having to sell securities with material unrealized losses.
Securities designated as "held to maturity" are those assets which the
Association has the ability and intent to hold to maturity. Upon acquisition,
securities are classified as to the Association's intent, and a sale would only
be effected due to deteriorating investment quality. The held to maturity
investment portfolio is not used for speculative purposes and is carried at
amortized cost. In the event the Association sells securities from this
portfolio
53
<PAGE>
for other than credit quality reasons, all securities within the investment
portfolio with matching characteristics may be reclassified as assets available
for sale. Securities designated as "available for sale" are those assets which
the Association may not hold to maturity and thus are carried at market value
with unrealized gains or losses, net of tax effect, recognized in retained
earnings.
Mortgage-Backed and Related Securities. Mortgage-backed securities
represent a participation interest in a pool of single-family or multi-family
mortgages, the principal and interest payments on which are passed from the
mortgage originators through intermediaries that pool and repackage the
participation interest in the form of securities to investors such as the
Association. Such intermediaries may include quasi-governmental agencies such
as FHLMC, FNMA and GNMA which guarantee the payment of principal and interest to
investors, although all of the Association's mortgage-backed securities are
originated through GNMA. Mortgage-backed securities generally increase the
quality of the Association's assets by virtue of the guarantees that back them,
are more liquid than individual mortgage loans and may be used to collaterize
borrowings or other obligations of the Association.
Mortgage-related securities typically are issued with stated principal
amounts and the securities are backed by pools of mortgages that have loans with
interest rates that are within a range and have similar maturities. The
underlying pool of mortgages can be composed of either fixed-rate or adjustable-
rate mortgage loans. Mortgage-backed securities generally are referred to as
mortgage participation certificates or pass-through certificates. As a result,
the interest rate risk characteristics of the underlying pool of mortgages,
i.e., fixed-rate or adjustable-rate, as well as prepayment risk, are passed on
to the certificate holder. The life of a mortgage-backed pass-through security
is equal to the life of the underlying mortgages.
The actual maturity of a mortgage-backed security varies, depending on
when the mortgagors prepay or repay the underlying mortgages. Prepayments of
the underlying mortgages may shorten the life of the investment, thereby
adversely affecting its yield to maturity and the related market value of the
mortgage-backed security. The yield is based upon the interest income and the
amortization of the premium or accretion of the discount related to the
mortgage-backed security. Premiums and discounts on mortgage-backed securities
are amortized or accredited over the estimated term of the securities using a
level yield method. The prepayment assumptions used to determine the
amortization period for premiums and discounts can significantly affect the
yield of the mortgage-backed security, and these assumptions are reviewed
periodically to reflect the actual prepayment. The actual prepayments of the
underlying mortgages depend on many factors, including the type of mortgage, the
coupon rate, the age of the mortgages, the geographical location of the
underlying real estate collateralizing the mortgages and general levels of
market interest rates. The difference between the interest rates on the
underlying mortgages and the prevailing mortgage interest rates is an important
determinant in the rate of prepayments. During periods of falling mortgage
interest rates, prepayments generally increase, and, conversely, during periods
of rising mortgage interest rates, prepayments generally decrease. If the
coupon rate of the underlying mortgage significantly exceeds the prevailing
market interest rates offered for mortgage loans, refinancing generally
increases and accelerates the prepayment of the underlying mortgages.
Prepayment experience is more difficult to estimate for adjustable-rate
mortgage-backed securities.
The Association's mortgage-backed securities portfolio consists solely
of seasoned fixed-rate, mortgage-backed securities. The Association makes such
investments in order to manage cash flow, mitigate interest rate risk, diversify
assets, obtain yield, to satisfy certain requirements for favorable tax
treatment and to satisfy the qualified thrift lender test. See "Regulation --
Depository Institution Regulation -- Qualified Thrift Lender Test."
54
<PAGE>
The following table sets forth the carrying value of the Association's
investment securities at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
----------------------
1996 1995
------ ------
(Dollars in thousands)
<S> <C> <C>
U.S. Treasury securities................. $ 500 $2,700
Interest-bearing deposits................ 3,897 3,683
Mortgage-backed securities through GNMA.. 2,617 1,374
Federal Home Loan Bank stock............. 302 284
Federal Home Loan Mortgage Corp. stock... 282 161
------ ------
Total.............................. $7,598 $8,202
====== ======
</TABLE>
The following table sets forth information in the scheduled
maturities, amortized cost, market values and average yields for the
Association's investment portfolio at September 30, 1996.
<TABLE>
<CAPTION>
One Year or Less One to Five Years Over Five Years Total Investment Portfolio
------------------ ------------------ ------------------ ---------------------------
Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield
-------- -------- -------- -------- -------- -------- ------------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities..... $ -- -- $500 4.75% $ -- -- $ 500 4.75%
Interest-bearing deposits.... 3,897 5.70% -- -- -- 3,897 5.70%
Mortgage-backed securities... 30 7.00% 152 7.00% 2,435 7.00% 2,617 7.00%
Federal Home Loan Bank
stock...................... -- -- -- -- 302 6.60% 302 6.60%
Federal Home Loan
Mortgage Corp.............. -- -- -- -- 282 2.15% 282 2.15%
-------- -------- ------ ------
Total investment securities.. $3,927 5.70% $652 5.52% $3,019 6.49% $7,598 5.99%
======== ======== ====== ======
</TABLE>
The Association is required to maintain average daily balances of liquid
assets (cash, deposits maintained pursuant to Federal Reserve Board
requirements, time and savings deposits in certain institutions, obligations of
state and political subdivisions thereof, shares in mutual funds with certain
restricted investment policies, highly rated corporate debt, and mortgage loans
and mortgage-backed securities with less than one year to maturity or subject to
repurchase within one year) equal to a monthly average of not less than a
specified percentage (currently 5%) of its net withdrawable savings deposits
plus short-term borrowings. Monetary penalties may be imposed for failure to
meet liquidity requirements. The average liquidity ratio of the Association for
the month of September 30, 1996 was 40%. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
Deposit Activity and Other Sources of Funds
General. Deposits are the primary source of the Association's funds for
lending, investment activities and general operational purposes. In addition to
deposits, the Association derives funds from loan principal and interest
repayments, maturities of investment securities and mortgage-backed securities
and interest payments thereon. Although loan repayments are a relatively stable
source of funds, deposit inflows and outflows are significantly influenced by
general interest rates and money market conditions. Borrowings may be used on a
short-term basis to compensate for reductions in the availability of funds, or
on a longer term basis for general operational purposes. The Association has
access to borrow from the FHLB of Topeka, and the Converted Association will
continue to have access to FHLB of Topeka advances.
55
<PAGE>
Deposits. The Association attracts deposits principally from within
its market area by offering competitive rates on its deposit instruments,
including money market accounts, passbook savings accounts, Individual
Retirement Accounts, and certificates of deposit which range in maturity from
six months to six years. Deposit terms vary according to the minimum balance
required, the length of time the funds must remain on deposit and the interest
rate. Maturities, terms, service fees and withdrawal penalties for its deposit
accounts are established by the Association on a periodic basis. The Association
reviews its deposit mix and pricing on a weekly basis. In determining the
characteristics of its deposit accounts, the Association considers the rates
offered by competing institutions, lending and liquidity requirements, growth
goals and federal regulations. The Association does not accept brokered
deposits.
The Association attempts to compete for deposits with other
institutions in its market area by offering competitively priced deposit
instruments that are tailored to the needs of its customers. Additionally, the
Association seeks to meet customers' needs by providing convenient customer
service to the community, efficient staff and convenient hours of service.
Substantially all of the Association's depositors are Colorado residents who
reside in the Association's market area.
Savings deposits in the Association at September 30, 1996 were
represented by the various types of savings programs described below.
<TABLE>
<CAPTION>
Interest Minimum Percentage of
Rate (1) Term Category Balances Total Deposits
- -------- ------- -------- -------- --------------
(In Thousands)
<S> <C> <C> <C> <C>
Savings and transactions accounts
---------------------------------
3.30% None Passbook accounts $ 1,078 6.29%
4.15 None Money market accounts 3,271 19.08
------- ------
4,349 25.37
------- ------
Certificates of deposit
-----------------------
4.70 6 months Fixed term, fixed rate 1,757 10.25
5.18 12 months Fixed term, fixed rate 5,213 30.41
3.65 18 months Fixed term, fixed rate 8 0.05
5.58 24 months Fixed term, fixed rate 1,572 9.17
3.75 30 months Fixed term, fixed rate 35 0.20
5.40 36 months Fixed term, fixed rate 3,769 21.98
7.15 48 months Fixed term, fixed rate 25 0.15
7.75 72 months Fixed term, fixed rate 36 0.21
Other 381 2.22
------- ------
Total certificates of deposit 12,796 74.63
------- ------
Total deposits $17,145 100.00%
======= ======
- -----------------
</TABLE>
(1) Indicates weighted average interest rate at September 30, 1996.
56
<PAGE>
The following table sets forth the change in dollar amount of deposits in the
various types of accounts offered by the Association between the dates
indicated.
<TABLE>
<CAPTION>
Balance at Balance at
September % of Increase September, % of
30, 1996 Deposits (Decrease) 30, 1995 Deposits
---------- -------- ---------- ---------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Money market deposit.......... $ 3,271 19.08% $ 714 $ 2,557 15.31%
Savings deposits -- passbook.. 1,078 6.29 (1) 1,079 6.46
Certificates of deposit....... 11,284 65.81 (981) 12,265 73.43
Jumbo certificates............ 1,512 8.82 711 801 4.80
--------- ------ ----- --------- ------
$ 17,145 100.00% $ 443 $ 16,702 100.00%
========= ====== ===== ========= ======
</TABLE>
The following table sets forth the time deposits in the Association classified
by rates at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
--------------------------------
1996 1995
--------------- ---------------
Percent Percent
Amount Total Amount Total
------ ------ ------ ------
<S> <C> <C> <C> <C>
Certificates
- ------------
3.00 - 4.00................. 424 2.47% 967 5.79%
4.01 - 5.00................. 4,565 26.63 3,468 20.76
5.01 - 6.00................. 7,746 45.18 7,888 47.23
6.01 - 7.00................. -- 0.00 685 4.10
Over 7.00%.................. 61 0.36 58 0.35
------ ------ ------ ------
Total certificates.......... 12,796 74.63 13,066 78.23
------ ------ ------ ------
Total transaction accounts.. 4,349 25.37 3,636 21.77
Total deposits.............. 17,145 100.00% 16,702 100.00%
====== ====== ====== ======
</TABLE>
The following table sets forth the amount and maturities of time deposits at
September 30, 1996.
<TABLE>
<CAPTION>
Amount Due
------------------------------------------------
Less Than After
Rate One Year 1-2 Years 2-3 Years 3 Years Total
- ---- --------- --------- --------- ------- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
3.00 - 4.00%... $ 413 $ 10 $ -- $ -- $ 423
4.01 - 5.00%... 4,566 -- -- -- 4,566
5.01 - 7.00%... 4,751 2,195 800 -- 7,746
7.01 and Over.. 25 -- 36 -- 61
------ ------ --------- ------- -------
$9,755 $2,205 $ 836 $ -- $12,796
====== ====== ========= ======= =======
</TABLE>
57
<PAGE>
The following table indicates the amount of the Association's certificates
of deposit of $100,000 or more by time remaining until maturity as of September
30, 1996.
<TABLE>
<CAPTION>
Certificates
Maturity Period of Deposits
--------------- ------------
(In thousands)
<S> <C>
Three months or less........... $ 656
Over three through six months.. 113
Over six through 12 months..... 120
Over 12 months................. 623
------
Total........................ $1,512
======
</TABLE>
The following table sets forth the savings activities of the Association
for the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------
1996 1995
------ ------
(In thousands)
<S> <C> <C>
Opening balance................. $16,702 $17,137
Net increase (decrease) before
interest credited............. 295 (582)
Interest credited............... 148 147
------- -------
Ending balance.............. $17,145 $16,702
======= =======
Net increase (decrease)......... $ 443 $ (435)
======= =======
Percent increase (decrease)..... 2.65% (2.54)%
======= =======
</TABLE>
In the unlikely event the Association is liquidated after the Conversion,
depositors will be entitled to full payment of their deposit accounts prior to
any payment being made to the sole stockholder of the Converted Association or
the Association, which is the Company.
Borrowings. Savings deposits historically have been the primary source of
funds for the Association's lending, investments and general operating
activities. The Association is authorized, however, to use advances from the
FHLB of Topeka to supplement its supply of lendable funds and to meet deposit
withdrawal requirements. The FHLB of Topeka functions as a central reserve bank
providing credit for savings institutions and certain other member financial
institutions. As a member of the FHLB System, the Association is required to
own stock in the FHLB of Topeka and is authorized to apply for advances.
Advances are pursuant to several different programs, each of which has its own
interest rate and range of maturities. The Association has a Blanket Agreement
for advances with the FHLB under which the Association may borrow up to 25% of
assets (approximately $5.1 million), subject to normal collateral and
underwriting requirements. Advances from the FHLB of Topeka are secured by the
Association's stock in the FHLB of Topeka and first mortgage loans.
As of September 30, 1996, the Association had no advances outstanding.
58
<PAGE>
Subsidiary Activities
As a federally chartered savings bank, the Association is permitted to
invest an amount equal to 2% of its assets in subsidiaries, with an additional
investment of 1% of assets where such investment serves primarily community,
inner-city and community development purposes. Under such limitations, as of
September 30, 1996, the Association was authorized to invest up to approximately
$611,000 in the stock of or loans to subsidiaries, including the additional 1%
investment for community inner-city and community development purposes.
Institutions meeting their applicable minimum regulatory capital requirements
may invest up to 50% of their regulatory capital in conforming first mortgage
loans to subsidiaries in which they own 10% or more of the capital stock.
The Association does not have any subsidiaries.
Competition
The Association faces strong competition both in originating real estate
and consumer loans and in attracting deposits. The Association competes for real
estate and other loans principally on the basis of interest rates, the types of
loans it originates, the deposit products it offers and the quality of services
it provides to borrowers. The Association also competes by offering products
which are tailored to the local community. Its competition in originating real
estate loans comes primarily from other savings institutions, commercial banks
and mortgage bankers making loans secured by real estate located in the
Association's market area. Commercial banks, credit unions and finance companies
provide vigorous competition in consumer lending. Competition may increase as a
result of the continuing reduction of restrictions on the interstate operations
of financial institutions.
The Association attracts its deposits through its sole office primarily
from the local community. Consequently, competition for deposits is principally
from other savings institutions, commercial banks and brokers in the local
community as well as from the corporate credit unions sponsored by the large
private employers in the Association's market area. The Association competes for
deposits and loans by offering what it believes to be a variety of deposit
accounts at competitive rates, convenient business hours, a commitment to
outstanding customer service and a well-trained staff. The Association believes
it has developed strong relationships with local realtors and the community in
general.
Management considers its market area for gathering deposits to be Otero
County in Colorado. The Association estimates that it competes with 16 banks,
and 4 credit unions for deposits and loans. Based on data provided by a private
marketing firm, the Association estimates that at June 30, 1995, the latest date
for which information was available, it had 7.1% of deposits held by all
financial institutions in its market area.
Offices and Other Material Properties
The following table sets forth information regarding the Association's
sole office at September 30, 1996.
<TABLE>
<CAPTION>
Book Value at
Year Owned or September 30, Approximate
Opened Leased 1996 Square Footage
------ -------- ------------- --------------
<S> <C> <C> <C> <C>
Main office 1975 Owned $40,000 3,000
</TABLE>
The book value of the Association's investment in premises and equipment
totaled approximately $99,000 at September 30, 1996. See Note 6 of Notes to
Financial Statements.
59
<PAGE>
Employees
As of September 30, 1996, the Association had five full-time and no part-
time employees, none of whom were represented by a collective bargaining
agreement. Management considers the Association's relationships with its
employees to be good.
Legal Proceedings
From time to time, the Association is a party to various legal proceedings
incident to its business. At September 30, 1996, there were no legal proceedings
to which the Company or the Association was a party, or to which any of their
property was subject, which were expected by management to result in a material
loss to the Company or the Association. There are no pending regulatory
proceedings to which the Company, the Association or its subsidiaries is a party
or to which any of their properties is subject which are currently expected to
result in a material loss.
REGULATION
General
As a federally chartered savings association, the Association is subject
to extensive regulation by the OTS. The lending activities and other investments
of the Association must comply with such regulatory requirements, and the OTS
periodically examines the Association for compliance with various regulatory
requirements. The FDIC also has the authority to conduct special examinations.
The Association must file reports with the OTS describing its activities and
financial condition and is also subject to certain reserve requirements
promulgated by the Federal Reserve Board. This supervision and regulation is
intended primarily for the protection of depositors. Certain of these regulatory
requirements are referred to below or appear elsewhere herein.
Regulation of the Association
Regulatory Capital Requirements. Under OTS capital standards, savings
associations must maintain "tangible" capital equal to 1.5% of adjusted total
assets, "core" capital equal to 3.0% of adjusted total assets and a combination
of core and "supplementary" capital equal to 8.0% of "risk-weighted" assets. In
addition, the OTS has recently adopted regulations which impose certain
restrictions on savings associations that have a total risk-based capital ratio
that is less than 8.0%, a ratio of Tier 1 capital to risk-weighted assets of
less than 4.0% or a ratio of Tier 1 capital to adjusted total assets of less
than 4.0% (or 3.0% if the institution is rated Composite 1 under the OTS
examination rating system). See " -- Prompt Corrective Regulatory Action." For
purposes of this regulation, Tier 1 capital has the same definition as core
capital, which is defined as common stockholders' equity (including retained
earnings), noncumulative perpetual preferred stock and related surplus, minority
interests in the equity accounts of fully consolidated subsidiaries, certain
nonwithdrawable accounts and pledged deposits and "qualifying supervisory
goodwill." Core capital is generally reduced by the amount of the savings
association's intangible assets for which no market exists. Limited exceptions
to the deduction of intangible assets are provided for purchased mortgage
servicing rights and qualifying supervisory goodwill. Tangible capital is given
the same definition as core capital but does not include an exception for
qualifying supervisory goodwill and is reduced by the amount of all the savings
association's intangible assets with only a limited exception for purchased
mortgage servicing rights and purchased credit card relationship. Both core and
tangible capital are further reduced by an amount equal to a savings
association's debt and equity investments in subsidiaries engaged in activities
not permissible to national banks, other than subsidiaries engaged in activities
undertaken as agent for customers, or in mortgage banking activities and
subsidiary depository institutions or their holding companies. At September 30,
1996, the Association had no such investments.
Adjusted total assets are a savings association's total assets as
determined under GAAP, adjusted for certain goodwill amounts and increased by a
pro rated portion of the assets of subsidiaries in which the savings association
holds a minority interest, and which are not engaged in activities for which the
capital rules require deduction of its
60
<PAGE>
debt and equity investments. Adjusted total assets are reduced by the amount of
assets that have been deducted from capital, the portion of the savings
association's investments in subsidiaries that must be netted against capital
under the capital rules and, for purposes of the core capital requirement,
qualifying supervisory goodwill.
In determining compliance with the risk-based capital requirement, a
savings association is allowed to use both core capital and supplementary
capital provided the amount of supplementary capital used does not exceed the
savings association's core capital. Supplementary capital is defined to include
certain preferred stock issues, nonwithdrawable accounts and pledged deposits
that do not qualify as core capital, certain approved subordinated debt, certain
other capital instruments and a portion of the savings association's general
loss allowances. Total core and supplementary capital are reduced by the amount
of capital instruments held by other depository institutions pursuant to
reciprocal arrangements, the savings association's high loan-to-value ratio land
loans and non-residential construction loans and equity investments other than
those deducted from core and tangible capital. At September 30, 1996, the
Association had no high ratio land or nonresidential construction loans and had
no equity investments for which OTS regulations require a deduction from total
capital.
The risk-based capital requirement is measured against risk-weighted
assets, which equal the sum of each asset, and the credit-equivalent amount of
each off-balance sheet item after being multiplied by an assigned risk weight.
Under the OTS risk-weighting system, one- to four-family first mortgages that
are not more than 90 days past due with loan-to-value ratios under 80% are
assigned a risk weight of 50%. Consumer and residential construction loans are
assigned a risk weight of 100%. Mortgage-backed securities issued, or fully
guaranteed as to principal and interest by the FHLMC, are assigned a 20% risk
weight. Cash and U.S. Government securities backed by the full faith and credit
of the U.S. Government are given a 0% risk weight.
The table below presents the Association's capital position relative to
its various regulatory capital requirements at September 30, 1996.
<TABLE>
<CAPTION>
Percent of
Amount Assets(1)
------ ----------
(Dollars in thousands)
<S> <C> <C>
Tangible capital................ $2,607 12.90%
Tangible capital requirement.... 303 1.50
------ -----
Excess (deficit)............. $2,304 11.40%
====== =====
Core capital.................... $2,607 12.90%
Core capital requirement........ 607 3.00
------ -----
Excess (deficit)............. $2,000 9.90%
====== =====
Risk-based capital.............. $2,667 34.17%
Risk-based capital requirement.. 624 8.00
------ -----
Excess (deficit)............. $2,043 26.17%
====== =====
</TABLE>
- ------------------------
(1) Based on adjusted total assets for purposes of the tangible capital and
core capital requirements and risk-weighted assets for purpose of the
risk-based capital requirement.
The OTS requires savings institutions with more than a "normal" level of
interest rate risk to maintain additional total capital. A savings
institution's interest rate risk is measured in terms of the sensitivity of its
"net portfolio value" to changes in interest rates. Net portfolio value is
defined, generally, as the present value of expected cash inflows from existing
assets and off-balance sheet contracts less the present value of expected cash
outflows from existing liabilities. A savings institution will be considered to
have a "normal" level of interest rate
61
<PAGE>
risk exposure if the decline in its net portfolio value, after an immediate 200
basis point increase or decrease in market interest rates (whichever results in
the greater decline), is less than two percent of the current estimated economic
value of its assets. A savings institution with a greater than normal interest
rate risk is required to deduct from total capital, for purposes of calculating
its risk-based capital requirement, an amount (the "interest rate risk
component") equal to one-half the difference between the institution's measured
interest rate risk and the normal level of interest rate risk, multiplied by the
economic value of its total assets.
The OTS calculates the sensitivity of a savings institution's net portfolio
value based on data submitted by the institution in a schedule to its quarterly
Thrift Financial Report, and using the interest rate risk measurement model
adopted by the OTS. The amount of the interest rate risk component, if any, to
be deducted from a savings institution's total capital is based on the
institution's Thrift Financial Report filed two quarters earlier. Savings
institutions with less than $300 million in assets and a risk-based capital
ratio above 12% are generally exempt from filing the interest rate risk schedule
with their Thrift Financial Reports. However, the OTS will require any exempt
savings institution that it determines may have a high level of interest rate
risk exposure to file such schedule on a quarterly basis. The OTS has not yet
implemented these requirements.
In addition to requiring generally applicable capital standards for savings
institutions, the OTS is authorized to establish the minimum level of capital
for a savings institution at such amount or at such ratio of capital-to-assets
as the OTS determines to be necessary or appropriate for such institution in
light of the particular circumstances of the institution. The OTS may treat the
failure of any savings institution to maintain capital at or above such level as
an unsafe or unsound practice, and may issue a directive requiring any savings
institution which fails to maintain capital at or above the minimum level
required by the OTS to submit and adhere to a plan for increasing capital. Such
an order may be enforced in the same manner as an order issued by the FDIC.
Prompt Corrective Regulatory Action. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), the federal banking regulators
are required to take prompt corrective action if an insured depository
institution fails to satisfy certain minimum capital requirements. All
institutions, regardless of their capital levels, are restricted from making any
capital distribution or paying any management fees if the institution would
thereafter fail to satisfy the minimum levels for any of its capital
requirements. An institution that fails to meet the minimum level for any
relevant capital measure (an "undercapitalized institution") may be: (i) subject
to increased monitoring by the appropriate federal banking regulator; (ii)
required to submit an acceptable capital restoration plan within 45 days; (iii)
subject to asset growth limits; and (iv) required to obtain prior regulatory
approval for acquisitions, branching and new lines of businesses. A
"significantly undercapitalized" institution, as well as any undercapitalized
institution that does not submit an acceptable capital restoration plan, may be
subject to regulatory demands for recapitalization, broader application of
restrictions on transactions with affiliates, limitations on interest rates paid
on deposits, asset growth and other activities, possible replacement of
directors and officers, and restrictions on capital distributions by any bank
holding company controlling the institution. Any company controlling the
institution could also be required to divest the institution, or the institution
could be required to divest subsidiaries. The senior executive officers of a
significantly undercapitalized institution may not receive bonuses or increases
in compensation without prior approval and the institution is prohibited from
making payments of principal or interest on its subordinated debt. In their
discretion, the federal banking regulators may also impose the foregoing
sanctions on an undercapitalized institution if the regulators determine that
such actions are necessary to carry out the purposes of the prompt corrective
action provisions. If an institution's ratio of tangible capital to total
assets falls below a "critical capital level," the institution will be subject
to conservatorship or receivership within 90 days, unless periodic
determinations are made that forbearance from such action would better protect
the deposit insurance fund. Unless appropriate findings and certifications are
made by the appropriate federal bank regulatory agencies, a critically
undercapitalized institution must be placed in receivership if it remains
critically undercapitalized on average during the calendar quarter, beginning
270 days after the date it became critically undercapitalized.
62
<PAGE>
Under implementing regulations, the federal banking regulators, including the
OTS, generally measure a depository institution's capital adequacy on the basis
of the institution's total risk-based capital ratio (the ratio of its total
capital to risk-weighted assets), Tier 1 risk-based capital ratio (the ratio of
its core capital to risk-weighted assets) and leverage ratio (the ratio of its
core capital to adjusted total assets). Under the regulations, a savings
institution that is not subject to an order or written directive to meet or
maintain a specific capital level will be deemed "well capitalized" if it also
has: (i) a total risk-based capital ratio of 10% or greater; (ii) a Tier 1 risk-
based capital ratio of 6.0% or greater; and (iii) a leverage ratio of 5.0% or
greater. An "adequately capitalized" savings institution is a savings
institution that does not meet the definition of well capitalized and has: (i) a
total risk-based capital ratio of 8.0% or greater; (ii) a Tier 1 capital risk-
based ratio of 4.0% or greater; and (iii) a leverage ratio of 4.0% or greater
(or 3.0% or greater if the savings institution has a composite 1 CAMEL rating).
An "undercapitalized institution" is a savings institution that has (i) a total
risk-based capital ratio less than 8.0%; or (ii) a Tier 1 risk-based capital
ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0% (or 3.0% if
the institution has a composite 1 CAMEL rating). A "significantly
undercapitalized" institution is defined as a savings institution that has: (i)
a total risk-based capital ratio of less than 6.0%; or (ii) a Tier 1 risk-based
capital ratio of less than 3.0%; or (iii) a leverage ratio of less than 3.0%. A
"critically undercapitalized" savings institution is defined as a savings
institution that has a ratio of "tangible equity" to total assets of less than
2.0%. Tangible equity is defined as core capital plus cumulative perpetual
preferred stock (and related surplus) less all intangibles other than qualifying
supervisory goodwill and certain purchased mortgage servicing rights. The OTS
may reclassify a well capitalized savings institution as adequately capitalized
and may require an adequately capitalized or undercapitalized institution to
comply with the supervisory actions applicable to institutions in the next lower
capital category (but may not reclassify a significantly undercapitalized
institution as critically under-capitalized) if the OTS determines, after notice
and an opportunity for a hearing, that the savings institution is in an unsafe
or unsound condition or that the institution has received and not corrected a
less-than-satisfactory rating for any CAMEL rating category. At September 30,
1996 the Association was classified as "well capitalized" under OTS Regulations,
and Management of the Association believes that the Converted Association will,
immediately after the Conversion, also be classified as "well capitalized."
Qualified Thrift Lender Test. A savings institution that does not meet the
Qualified Thrift Lender test ("QTL Test") must either convert to a bank charter
or comply with the following restrictions on its operations: (i) the institution
may not engage in any new activity or make any new investment, directly or
indirectly, unless such activity or investment is permissible for a national
bank; (ii) the branching powers of the institution shall be restricted to those
of a national bank; (iii) the institution shall not be eligible to obtain any
advances from its FHLB; and (iv) payment of dividends by the institution shall
be subject to the rules regarding payment of dividends by a national bank. Upon
the expiration of three years from the date the institution ceases to be a QTL,
it must cease any activity, and not retain any investment not permissible for a
national bank and immediately repay any outstanding FHLB advances (subject to
safety and soundness considerations).
To qualify as a QTL, a savings institution must either qualify as a "domestic
building and loan association" under the Internal Revenue Code or maintain at
least 65% of its "portfolio" assets in Qualified Thrift Investments. Portfolio
assets are defined as total assets less intangibles, property used by a savings
institution in its business and liquidity investments in an amount not exceeding
20% of assets. Qualified Thrift Investments consist of: (i) loans, equity
positions, or securities related to domestic, residential real estate or
manufactured housing, and educational, small business and credit card loans;
(ii) 50% of the dollar amount of residential mortgage loans subject to sale
under certain conditions but do not include any intangible assets. Subject to a
20% of portfolio assets limit, however, savings institutions are able to treat
as Qualified Thrift Investments 200% of their investments in loans to finance
"starter homes" and loans for construction, development or improvement of
housing and community service facilities or for financing small businesses in
"credit-needy" areas.
A savings institution must maintain its status as a QTL on a monthly basis in
nine out of every 12 months. A savings institution that fails to maintain
Qualified Thrift Lender status will be permitted to requalify once, and if it
fails the QTL Test a second time, it will become immediately subject to all
penalties as if all time limits on such
63
<PAGE>
penalties had expired. Failure to qualify as a QTL results in a number of
sanctions, including the imposition of certain operating restrictions imposed on
national banks and a restriction on obtaining additional advances from the FHLB
System. Upon failure to qualify as a QTL for two years, a savings association
must convert to a commercial bank. At September 30, 1996, approximately 99% of
the Association's assets were invested in Qualified Thrift Investments.
Dividend Limitations. Under OTS regulations, the Association is not permitted
to pay dividends on its capital stock if its regulatory capital would thereby be
reduced below the amount then required for the liquidation account established
for the benefit of certain depositors of the Association at the time of its
conversion to stock form. In addition, savings institution subsidiaries of
savings and loan holding companies are required to give the OTS 30 days' prior
notice of any proposed declaration of dividends to the holding company.
Federal regulations impose limitations on the payment of dividends and other
capital distributions (including stock repurchases and cash mergers) by the
Association. Under these regulations, a savings institution that, immediately
prior to, and on a pro forma basis after giving effect to a proposed capital
distribution, has total capital (as defined by OTS regulation) that is equal to
or greater than the amount of its fully phased-in capital requirements (a "Tier
1 Association"), is generally permitted without OTS approval, after notice, to
make capital distributions during a calendar year in the amount equal to the
greater of (i) 75% of net income for the previous four quarters or (ii) up to
100% of its net income to date during the calendar year plus an amount that
would reduce by one-half the amount by which its capital-to-assets ratio
exceeded its fully phased-in capital requirement to assets ratio at the
beginning of the calendar year. A savings institution with total capital in
excess of current minimum capital requirements but not in excess of the fully
phased-in requirements (a "Tier 2 Association") is permitted, after notice, to
make capital distributions without OTS approval of up to 75% of its net income
for the previous four quarters, less dividends already paid for such period. A
savings institution that fails to meet current minimum capital requirements (a
"Tier 3 Association") is prohibited from making any capital distributions
without the prior approval of the OTS. Tier 1 Associations that have been
notified by the OTS that they are in need of more than normal supervision will
be treated as either a Tier 2 or Tier 3 Association. Unless the OTS determines
that the Association is an institution requiring more than normal supervision,
the Association is authorized to pay dividends, in accordance with the
provisions of the OTS regulations discussed above, as a Tier 1 Association.
Under the OTS' prompt corrective action regulations, the Association is also
prohibited from making any capital distributions if, after making the
distribution, the Association would have: (i) a total risk-based capital ratio
of less than 8.0%; (ii) a Tier 1 risk-based capital ratio of less than 4.0%; or
(iii) a leverage ratio of less than 4.0%. However, the OTS, after consultation
with the FDIC, may permit an otherwise prohibited stock repurchase if it is made
in connection with the issuance of additional shares in an equivalent amount,
and the repurchase will reduce the institution's financial obligations or
otherwise improve the institution's financial condition.
In addition to the foregoing, earnings of the Association appropriated to bad
debt reserves and deducted for Federal income tax purposes are not available for
payment of cash dividends or other distributions to stockholders without payment
of taxes at the then current tax rate by the Association on the amount of
earnings removed from the reserves for such distributions. See "Taxation."
Safety and Soundness Standards. Under FDICIA, as amended by the Riegle
Community Development and Regulatory Improvement Act of 1994 (the "CDRI Act"),
each Federal banking agency is required to establish safety and soundness
standards for institutions under its authority. On July 10, 1995, the Federal
banking agencies, including the OTS, released Interagency Guidelines
Establishing Standards for Safety and Soundness and published a final rule
establishing deadlines for submission and review of safety and soundness
compliance plans. The final rule and the guidelines went into effect on August
9, 1995. The guidelines require savings institutions to maintain internal
controls, information systems and audit systems that are appropriate for the
size, nature and scope of the institution's business. The guidelines also
establish certain basic standards for loan documentation, credit underwriting,
interest rate risk exposure, and asset growth. The guidelines further provide
that savings institutions
64
<PAGE>
should maintain safeguards to prevent the payment of compensation, fees and
benefits that are excessive or that could lead to material financial loss, and
should take into account factors such as comparable compensation practices at
comparable institutions. If the OTS determines that a savings institution is not
in compliance with the safety and soundness guidelines, it may require the
institution to submit an acceptable plan to achieve compliance with the
guidelines. A savings institution must submit an acceptable compliance plan to
the OTS within 30 days of receipt of a request for such a plan. Failure to
submit or implement a compliance plan may subject the institution to regulatory
sanctions. Management believes that the Association already meets substantially
all the standards adopted in the interagency guidelines, and therefore does not
believe that implementation of these regulatory standards will materially affect
the Association's operations.
Additionally, under FDICIA, as amended by the CDRI Act, the Federal banking
agencies are required to establish standards relating to the asset quality and
earnings that the agencies determine to be appropriate. On July 10, 1995, the
federal banking agencies, including the OTS, issued proposed guidelines relating
to asset quality and earnings. Under the proposed guidelines, a savings
institution should maintain systems, commensurate with its size and the nature
and scope of its operations, to identify problem assets and prevent
deterioration in those assets, as well as to evaluate and monitor earnings and
ensure that earnings are sufficient to maintain adequate capital and reserves.
Management believes that the asset quality and earnings standards, in the form
proposed by the banking agencies, would not have a material effect on the
Association's operations.
Deposit Insurance. The Association is required to pay assessments, based on a
percentage of its insured deposits, to the FDIC for insurance of its deposits by
the FDIC through the SAIF. Under the Federal Deposit Insurance Act, the FDIC is
required to set semi-annual assessments for SAIF-insured institutions at a level
necessary to maintain the designated reserve ratio of the SAIF at 1.25% of
estimated insured deposits, or at a higher percentage of estimated insured
deposits that the FDIC determines to be justified for that year by circumstances
indicating a significant risk of substantial future losses to the SAIF.
Under the FDIC's risk-based deposit insurance assessment system, the
assessment rate for an insured depository institution depends on the assessment
risk classification assigned to the institution by the FDIC, which is determined
by the institution's capital level and supervisory evaluations. Based on the
data reported to regulators for the date closest to the last day of the seventh
month preceding the semi-annual assessment period, institutions are assigned to
one of three capital groups -- well capitalized, adequately capitalized or
undercapitalized -- using the same percentage criteria as under the prompt
corrective action regulations. See " -- Prompt Corrective Regulatory Action."
Within each capital group, institutions are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority, and such other information as the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance fund. Subgroup A consists of financially sound institutions with only
a few minor weaknesses. Subgroup B consists of institutions that demonstrate
weaknesses which, if not corrected, could result in significant deterioration of
the institution and increased risk of loss to the deposit insurance fund.
Subgroup C consists of institutions that pose a substantial probability of loss
to the deposit insurance fund unless effective corrective action is taken.
For the past several semi-annual periods, institutions with SAIF-assessable
deposits, like the Association, have been required to pay higher deposit
insurance premiums than institutions with deposits insured by the BIF. In order
to recapitalize the SAIF and address the premium disparity, the recently-enacted
Deposit Insurance Funds Act of 1996 authorized the FDIC to impose a one-time
special assessment on institutions with SAIF-assessable deposits, based on the
amount determined by the FDIC to be necessary to increase the reserve levels of
the SAIF to the designated reserve ratio of 1.25% of insured deposits.
Institutions were assessed at the rate of 65.7 basis points based on the amount
of their SAIF-assessable deposits as of March 31, 1995. As a result of the
special assessment the Association incurred a pre-tax expense of $106,000 during
the year ended September 30, 1996.
The FDIC has proposed a rule that would lower the regular semi-annual SAIF
assessment rates by establishing a base assessment rate schedule ranging from 4
to 31 basis points effective October 1, 1996. The rule widens the range between
the lowest and highest assessment rates among healthy and troubled institutions
with the intent of creating an incentive for savings institutions to control
risk-taking behavior. The rule also prevents the
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<PAGE>
FDIC from collecting more funds than needed to maintain the SAIF's
capitalization at 1.25% of insured deposits. Until December 31, 1999, however,
SAIF-insured institutions will be required to pay assessments to the FDIC at the
rate of 6.6 basis points to help fund interest payments on certain bonds issued
by the Financing Corporation ("FICO"), an agency of the federal government
established to finance takeovers of insolvent thrifts. During this period, BIF
members will be assessed for these obligations at the rate of 1.3 basis points.
After December 31, 1999, both BIF and SAIF members will be assessed at the same
rate for FICO payments.
SAIF members are generally prohibited from converting to BIF, also
administered by the FDIC, or merging with or transferring assets to a BIF member
before the date on which the SAIF first meets or exceeds the designated reserve
ratio of 1.25% of insured deposits. However, the FDIC may approve such a
transaction in the case of a SAIF member in default or if the transaction
involves an insubstantial portion of the deposits of each participant. In
addition, mergers, transfers of assets and assumptions of liabilities may be
approved by the appropriate bank regulator so long as deposit insurance premiums
continue to be paid to the SAIF for deposits attributable to the SAIF members,
plus an adjustment for the annual rate of growth of deposits in the surviving
bank without regard to subsequent acquisitions. Each depository institution
participating in a SAIF-to-BIF conversion transaction is required to pay an exit
fee to SAIF equal to 0.90% of the deposits transferred and an entrance fee to
BIF based on the current reserve ratio of the BIF. A savings institution is not
prohibited from adopting a commercial bank or savings bank charter if the
resulting bank remains a SAIF member.
Transactions with Affiliates. Transactions between savings institutions and
any affiliate are governed by Sections 23A and 23B of the Federal Reserve Act.
An affiliate of a savings institution is any company or entity which controls,
is controlled by or is under common control with the savings institution. In a
holding company context, the parent holding company of a savings institution
(such as the Company) and any companies which are controlled by such parent
holding company are affiliates of the savings institution. Generally, Sections
23A and 23B (i) limit the extent to which the savings institution or its
subsidiaries may engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such institution's capital stock and surplus, and contain
an aggregate limit on all such transactions with all affiliates to an amount
equal to 20% of such capital stock and surplus, and (ii) require that all such
transactions be on terms substantially the same, or at least as favorable, to
the institution or subsidiary as those provided to a non-affiliate. The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of a guarantee and other similar types of transactions. In addition to the
restrictions imposed by Sections 23A and 23B, no savings institution may (i)
loan or otherwise extend credit to an affiliate (except for any affiliate which
engages only in activities which are permissible for savings and loan holding
companies), or (ii) purchase or invest in any stocks, bonds, debentures, notes
or similar obligations of any affiliate (except for affiliates which are
subsidiaries of the savings institution). Section 106 of the Bank Holding
Company Act ("BHCA"), which also applies to the Association, prohibits the
Association from extending credit to or offering any other services, or fixing
or varying the consideration for such extension of credit or service, on the
condition that the customer obtain some additional service from the institution
or certain of its affiliates or not obtain services of a competitor of the
institution, subject to certain exceptions.
Loans to Directors, Executive Officers and Principal Stockholders. Savings
institutions are also subject to the restrictions contained in Section 22(h) of
the Federal Reserve Act on loans to executive officers, directors and principal
stockholders. Under Section 22(h), loans to an executive officer and to a
greater than 10% stockholder of a savings institution, and certain affiliated
entities of either, may not exceed, together with all other outstanding loans to
such person and affiliated entities, the institution's loan to one borrower
limit (generally equal to 15% of the institution's unimpaired capital and
surplus and an additional 10% of such capital and surplus for loans fully
secured by certain readily marketable collateral). Section 22(h) also prohibits
loans, above amounts prescribed by the appropriate federal banking agency, to
directors, executive officers and greater than 10% stockholders of a savings
institution, and their respective affiliates, unless such loan is approved in
advance by a majority of the board of directors of the institution with any
"interested" director not participating in the voting. The Federal Reserve
Board has prescribed the loan amount (which includes all other outstanding loans
to such person), as to which such prior board of director approval is required,
as being the greater of $25,000 or 5% of capital and surplus (up to $500,000).
Further, the Federal Reserve Board, pursuant to Section 22(h), requires that
loans to directors, executive officers and principal stockholders be made on
terms substantially the same as offered in comparable transactions to other
persons.
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Section 22(h) also generally prohibits a depository institution from paying the
overdrafts of any of its executive officers or directors. Section 22(g) of the
Federal Reserve Act requires that loans to executive officers of depository
institutions not be made on terms more favorable than those afforded to other
borrowers, requires approval for such extensions of credit by the board of
directors of the institution, and imposes reporting requirements for and
additional restrictions on the type, amount and terms of credits to such
officers. In addition, Section 106 of the BHCA prohibits extensions of credit to
executive officers, directors, and greater than 10% stockholders of a depository
institution by any other institution which has a correspondent banking
relationship with the institution, unless such extension of credit is on
substantially the same terms as those prevailing at the time for comparable
transactions with other persons and does not involve more than the normal risk
of repayment or present other unfavorable features.
Liquidity Requirements. The Association is required to maintain average daily
balances of liquid assets (cash, certain time deposits, bankers' acceptances,
highly rated corporate debt and commercial paper, securities of certain mutual
funds, and specified United States government, state or federal agency
obligations) equal to the monthly average of not less than a specified
percentage (currently 5%) of its net withdrawable savings deposits plus short-
term borrowings. The Association is also required to maintain average daily
balances of short-term liquid assets at a specified percentage (currently 1%) of
the total of its net withdrawable savings accounts and borrowings payable in one
year or less. Monetary penalties may be imposed for failure to meet liquidity
requirements. The average regulatory liquidity ratio of the Association for the
month of September 1996 was 40%.
Federal Home Loan Bank System. The Association is a member of the FHLB, which
consists of 12 Federal Home Loan Banks subject to supervision and regulation by
the Federal Housing Finance Board ("FHFB"). The FHLBs provide a central credit
facility primarily for member institutions. As a member of the FHLB of Topeka,
the Association is required to acquire and hold shares of capital stock in the
FHLB of Topeka in an amount at least equal to 1% of the aggregate unpaid
principal of its home mortgage loans, home purchase contracts and similar
obligations at the beginning of each year, or 1/20 of its advances from the FHLB
of Topeka, whichever is greater. The Association was in compliance with this
requirement with investment in FHLB of Topeka stock at September 30, 1996, of
$302,000. The FHLB of Topeka is funded primarily from proceeds derived from the
sale of consolidated obligations of the FHLB System. It makes advances to
members in accordance with policies and procedures established by the FHFB and
the Board of Directors of the FHLB of Topeka. As of September 30, 1996, the
Association no advances and other borrowings from the FHLB of Topeka. See
"Business of the Association -- Deposit Activities and Other Sources of Funds --
Borrowings."
Federal Reserve System. Pursuant to regulations of the Federal Reserve Board,
a thrift institution must maintain average daily reserves equal to 3% on the
first $49.3 million of transaction accounts, plus 10% on the remainder. This
percentage is subject to adjustment by the Federal Reserve Board. Because
required reserves must be maintained in the form of vault cash or in a non-
interest bearing account at a Federal Reserve Bank, the effect of the reserve
requirement is to reduce the amount of the institution's interest-earning
assets. As of September 30, 1996, the Association met its reserve requirements.
Regulation of the Company
General. Following the Conversion, the Company will be a savings and loan
holding company within the meaning of the Home Owners' Loan Act, as amended
("HOLA"). As such, the Company will be registered with the OTS and subject to
OTS regulations, examinations, supervision and reporting requirements. As a
subsidiary of a savings and loan holding company, the Association will be
subject to certain restrictions in its dealings with the Company and affiliates
thereof. The Company also will be required to file certain reports with, and
otherwise comply with the rules and regulations of the SEC under the federal
securities laws.
Activities Restrictions. The Board of Directors of the Company presently
intends to operate the Company as a unitary savings and loan holding company.
There are generally no restrictions on the activities of a unitary savings and
loan holding company. However, if the Director of OTS determines that there is
reasonable cause to believe that the continuation by a savings and loan holding
company of an activity constitutes a serious risk to the financial safety,
soundness, or stability of its subsidiary savings association, the Director of
OTS may impose such
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restrictions as deemed necessary to address such risk, including limiting: (i)
payment of dividends by the savings institution, (ii) transactions between the
savings institution and its affiliates; and (iii) any activities of the savings
institution that might create a serious risk that the liabilities of the holding
company and its affiliates may be imposing on the savings institution.
Notwithstanding the above rules as to permissible business activities of unitary
savings and loan holding companies, if the savings institution subsidiary of
such a holding company fails to meet the QTL Test, then such unitary holding
company shall also presently become subject to the activities restrictions
applicable to multiple holding companies and unless the savings association
requalifies as a QTL within one year thereafter, register as, and become subject
to, the restrictions applicable to a bank holding company. See " -- Regulation
of the Association -- Qualified Thrift Lender Test."
If the Company were to acquire control of another savings association, other
than through merger or other business combination with the Association, the
Company would thereupon become a multiple savings and loan holding company.
Except where such acquisition is pursuant to the authority to approve emergency
thrift acquisitions and where each subsidiary savings institution meets the QTL
Test, the activities of the Company and any of its subsidiaries (other than the
Association or other subsidiary savings institutions) would thereafter be
subject to further restrictions. Among other things, no multiple savings and
loan holding company, or subsidiary thereof which is not a savings institution,
may commence or continue for a limited period of time after becoming a multiple
savings and loan holding company or subsidiary thereof, any business activity,
upon prior notice to, and no objection by the OTS, other than: (i) furnishing or
performing management services for a subsidiary savings institution; (ii)
conducting an insurance agency or escrow business; (iii) holding, managing, or
liquidating assets owned by or acquired from a subsidiary savings institution;
(iv) holding or managing properties used or occupied by a subsidiary savings
institution; (v) acting as trustee under deeds of trust; (vi) those activities
previously directly authorized by regulation as of March 5, 1987 to be engaged
in by multiple holding companies; or (vii) those activities authorized by the
Federal Reserve Board as permissible for savings and loan holding companies,
unless the Director of OTS by regulation prohibits or limits such activities for
savings and loan holding companies. Those activities described in (vii) above
must also be approved by the Director of OTS prior to being engaged in by a
multiple holding company.
Restrictions on Acquisitions. The HOLA generally prohibits savings and loan
holding companies from acquiring, without prior approval of the Director of OTS,
(i) control of any other savings institution or savings and loan holding company
or substantially all the assets thereof, or (ii) more than 5% of the voting
shares of a savings institution or holding company thereof which is not a
subsidiary. Except with the prior approval of the Director of OTS, no director
or officer of a savings and loan holding company or person owning or controlling
by proxy or otherwise more than 25% of such company's stock, may also acquire
control of any savings institution, other than a subsidiary savings institution,
or of any other savings and loan holding company.
The Director of OTS may only approve acquisitions resulting in the formation
of a multiple savings and loan holding company which controls savings
institutions in more than one state if: (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home or
branch office in the state of the institution to be acquired as of March 5,
1987; (ii) the acquiror is authorized to acquire control of the savings
institution pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act; or (iii) the statutes of the state in which the
institution to be acquired is located specifically permit institutions to be
acquired by state-chartered institutions or savings and loan holding companies
located in the state where the acquiring entity is located (or by a holding
company that controls such state-chartered savings institutions).
The OTS regulations permit federal associations to branch in any state or
states of the United States and its territories. Except in supervisory cases,
or when interstate branching is otherwise permitted by state law or other
statutory provision, a federal association may not establish an out-of-state
branch unless (i) the federal association qualifies as a QTL or as a "domestic
building and loan association" under (S)7701(a)(19) of the Code and the total
assets attributable to all branches of the association in the state would
qualify such branches taken as a whole as a QTL or for treatment as a domestic
building and loan association and (ii) such branch would not result in (a)
formation of a prohibited multi-state multiple savings and loan holding company
or (b) a violation of certain statutory restrictions on branching by savings
association subsidiaries of banking holding companies. Federal associations
generally may not establish new branches unless the association meets or exceeds
minimum regulatory capital
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requirements. The OTS will also consider the association's record of compliance
with the Community Reinvestment Act of 1977 in connection with any branch
application.
Under the BHCA, bank holding companies are specifically authorized to acquire
control of any savings association. Pursuant to rules promulgated by the
Federal Reserve Board, owning, controlling or operating a savings institution is
a permissible activity for savings and loan holding companies, if the savings
institution engages only in deposit-taking activities and lending and other
activities that are permissible for bank holding companies. A bank holding
company that controls a savings institution may merge or consolidate the assets
and liabilities of the savings institution with, or transfer assets and
liabilities to, any subsidiary bank which is a member of the BIF with the
approval of the appropriate federal banking agency and the Federal Reserve
Board. The resulting bank will be required to continue to pay assessments to
the SAIF at the rates prescribed for SAIF members on the deposits attributable
to the merged savings institution plus an annual growth increment. In addition,
the transaction must comply with the restrictions on interstate acquisitions of
commercial banks under the BHCA.
Federal Securities Law. The Company has filed with the SEC a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act"),
for the registration of the Common Stock to be issued in the Conversion. Upon
completion of the Conversion, the Common Stock will be registered with the SEC
under the Exchange Act and, under OTS regulations, generally may not be
deregistered for at least three years thereafter. The Company will be subject
to the information, proxy solicitation, insider trading restrictions and other
requirements of the Exchange Act.
The registration under the Securities Act of the Common Stock does not cover
the resale of such shares. Shares of the Common Stock purchased by persons who
are not affiliates of the Company may be resold without registration. Shares
purchased by an affiliate of the Company will be subject to the resale
restrictions of Rule 144 under the Securities Act. If the Company meets the
current public information requirements of Rule 144 under the Securities Act,
each affiliate of the Company who complies with the other conditions of Rule 144
(including those that require the affiliate's sale to be aggregated with those
of certain other persons) would be able to sell in the public market, without
registration, a number of shares not to exceed, in any three-month period, the
greater of (i) 1% of the outstanding shares of the Company or (ii) the average
weekly volume of trading in such shares during the preceding four calendar
weeks. Provision may be made in the future by the Company to permit affiliates
to have their shares registered for sale under the Securities Act under certain
circumstances. There are currently no demand registration rights outstanding.
However, in the event the Company at some future time determines to issue
additional shares from its authorized but unissued shares, the Company might
offer registration rights to certain of its affiliates who want to sell their
shares.
TAXATION
General
The Association files a consolidated federal income tax return based on the
fiscal year. After the Conversion, it is expected that the Company and the
Association, together with the Association's subsidiary, will file a
consolidated federal income tax return based on a fiscal year ending September
30. Consolidated returns have the effect of deferring gain or loss on
intercompany transactions and allowing companies included within the
consolidated return to offset income against losses under certain circumstances.
Federal Income Taxation
The Company and the Association will file a consolidated federal income tax
return.
Thrift institutions are subject to the provisions of the Code in the same
general manner as other corporations. Prior to recent legislation, institutions
such the Association which met certain definitional tests and other conditions
prescribed by the Code benefitted from certain favorable provisions regarding
their deductions from taxable income for annual additions to their bad debt
reserve. For purposes of the bad debt reserve deduction, loans were separated
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into "qualifying real property loans," which generally are loans secured by
interests in certain real property, and nonqualifying loans, which are all other
loans. The bad debt reserve deduction with respect to nonqualifying loans was
based on actual loss experience, however, the amount of the bad debt reserve
deduction with respect to qualifying real property loans could be based upon
actual loss experience (the "experience method") or a percentage of taxable
income determined without regard to such deduction (the "percentage of taxable
income method"). Legislation recently signed by the President repealed the
percentage of taxable income method of calculating the bad debt reserve. The
Association historically has elected to use the percentage method.
Earnings appropriated to an institution's bad debt reserve and claimed as a
tax deduction were not available for the payment of cash dividends or for
distribution to shareholders (including distributions made on dissolution or
liquidation), unless such amount was included in taxable income, along with the
amount deemed necessary to pay the resulting federal income tax.
Beginning with the first taxable year beginning after December 31, 1995,
savings institutions, such as the Association, will be treated the same as
commercial banks. Institutions with $500 million or more in assets will only be
able to take a tax deduction when a loan is actually charged off. Institutions
with less than $500 million in assets will still be permitted to make deductible
bad debt additions to reserves, but only using the experience method.
The Association's federal corporate income tax returns have not been audited
in the last five years.
Under provisions of the Revenue Reconciliation Act of 1993 ("RRA"), enacted on
August 10, 1993, the maximum federal corporate income tax rate was increased
from 34% to 35% for taxable income over $10.0 million, with a 3% surtax imposed
on taxable income over $15.0 million. Also under provisions of RRA, a separate
depreciation calculation requirement has been eliminated in the determination of
adjusted current earnings for purposes of determining alternative minimum
taxable income, rules relating to payment of estimated corporate income taxes
were revised, and certain acquired intangible assets such as goodwill and
customer-based intangibles were allowed a 15-year amortization period.
Beginning with tax years ending on or after January 1, 1993, RRA also provides
that securities dealers must use mark-to-market accounting and generally reflect
changes in value during the year or upon sale as taxable gains or losses. The
IRS has indicated that financial institutions which originate and sell loans
will be subject to the rule.
State Income Taxation
The State of Delaware imposes no income or franchise taxes on savings
institutions. The State of Colorado taxes the Association's federal taxable
income, adjusted for interest income received directly from federal agencies, at
a 5% rate.
MANAGEMENT OF THE COMPANY
The Board of Directors of the Company consists of the same individuals who
serve as directors or officers of the Association. Their biographical
information is set forth under "Management of the Association -- Directors."
The Board of Directors of the Company is divided into three classes. Directors
of the Company will serve for three year terms or until their successors are
elected and qualified, with approximately one-third of the directors being
elected at each annual meeting of stockholders, beginning with the first annual
meeting of stockholders following the Conversion.
The following individuals hold the offices in the Company set forth below
opposite their names.
Name Title
---- -----
Donald F. Gause Chairman of the Board of Directors
Keith E. Waggoner President and Chief Executive Officer
Wayne W. Whittaker Vice President
Francis E. Clute Secretary and Treasurer
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The executive officers of the Company are elected annually and hold office
until their respective successors have been elected and qualified or until
death, resignation or removal by the Board of Directors of the Company.
Since the formation of the Company, none of the executive officers, directors
or other personnel have received remuneration from the Company. Information
concerning the principal occupations, employment and compensation of the
directors and officers of the Company during the past five years is set forth
under "Management of the Association -- Directors." Executive officers and
directors of the Company will be compensated as described below under
"Management of the Association."
MANAGEMENT OF THE ASSOCIATION
Directors
Because the Association is a mutual savings and loan association, its members
have elected its Board of Directors. Upon completion of the Conversion, each
director of the Association immediately prior to the Conversion will continue to
serve as directors of the Association. The term of each director is three
years, and approximately one-third of the members of the Board of Directors are
elected each year. The Conversion will not affect the classes or terms of the
existing directors. Because the Company will own all the issued and outstanding
capital stock of the Converted Association following the Conversion, the Board
of Directors of the Company will elect the directors of the Converted
Association. Following the Conversion, Mr. Gause, who currently serves as
President of the Association, will become Chairman of the Board of Directors of
the Converted Association. Mr. Waggoner, who currently serves as Executive Vice
President of the Association, will be elected a Director and become President
and Chief Executive Officer of the Converted Association. They each will serve
in these same capacities for the Company.
The following table sets forth certain information with respect to the
individuals who serve currently as members of the Association's Board of
Directors. There are no arrangements or understandings between the Association
and any director pursuant to which such person has been elected a director of
the Association, and no director is related to any other director or executive
officer by blood, marriage or adoption.
<TABLE>
<CAPTION>
Age at
December 31,
Name 1996 Director Since Term to Expire
- ---- ------ -------------- --------------
<S> <C> <C> <C>
Donald F. Gause 65 1972 2000
Wayne W. Whittaker 65 1981 1999
Francis E. Clute 59 1987 1999
Norman L. Bailey 59 1992 1998
William E. Burrell 69 1987 1999
Brian H. Hancock 51 1991 2000
R. Dean Jones 58 1989 1998
Keith E. Waggoner (1) 50 1997 2000
</TABLE>
- ---------------
(1) Following the Conversion, Mr. Waggoner, President and Chief Executive
Officer and Director of the Company, will be elected as President and Chief
Executive Officer and Director of the Converted Association and the Company.
Presented below is certain information concerning the directors of the
Association. Unless otherwise stated, all directors have held the positions
indicated for at least the past five years.
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Donald F. Gause currently serves as a Director and President of the
Association. Mr. Gause was elected to the Board of Directors in 1972 and has
been President since 1990. Following the Conversion, Mr. Gause will become
Chairman of the Board of Directors of the Converted Association. He is also
Manager of Loves Shoes, Inc. a family owned and operated shoe store.
Wayne W. Whittaker has served as a Director and Vice President of the
Association since 1981 and has been a self-employed real estate and insurance
agent since 1953. He also serves as Corporate Secretary and Treasurer of Catlin
Canal Community, The Pisqah Reservoir and Ditch Company and Larkspur, Inc. Mr.
Whittaker's civic activities include being a block solicitor for the Leukemia
Society of America, Finance Chairman for the local Shrine Circus, active
membership in a local methodist church, committee member for the Sunshine
District of Methodist Church Building Committee, a director for the Otero County
Board of Realtors and involvement with the Shrine Children's Clinic. He is also
a participant in civic parades in Rocky Ford, La Junta and Fowler, Colorado.
Francis E. Clute served as a Director and Treasurer of the Association since
1987. He is the owner of Edco Metal Works, a machine shop specializing in
heating and air conditioning. Mr. Clute's civic involvement includes membership
in the Rocky Ford Lion's Club, Elks Lodge and Chamber of Commerce. He is also
active with the Rocky Ford Zoning Board and School District.
Norman L. Bailey has served as a Director of the Association since 1992. He
is currently serving as President of the La Junta Golf Club and La Junta
Capital.
William E. Burrell has served as a Director of the Association since 1987. He
works as an Advisor to Burrell Seeds, Inc. and D.V. Burrell Seed Growers Company
and is active with the Salvation Army.
Brian H. Hancock has been a self-employed Real Estate and Insurance Broker
since 1969 and a Director of the Association since 1991. He is also a member of
the Board of Directors of the Rocky Ford Housing Authority Nava Manor Complex.
R. Dean Jones has been a member of the Board of Directors of the Association
since 1989 and the owner of Jones Motors, Inc. since 1986. His past and current
community involvement includes being Chairman of the Board of the Colorado Auto
Dealers Association, President of La Junta Development, Inc., Trust Director of
the Colorado Auto Dealers Insurance Trust, member of the Board of the Buick
Dealer Council, member of the Board of Pikes Peak Hill Climb, Inc. and Director
of the National Auto Dealer Association.
Keith E. Waggoner has been Executive Vice President of the Association since
1985. His past and current civic activities include being President of the
Lion's Club, member of the Otero Junior College Advisory Board, President and
member of the La Junta Catholic Parish Counsel, President of the La Junta
Catholic Parish Finance Board and member of the Otero County Planning
Commission.
Committees of the Board of Directors
The Board of Directors of the Association meets monthly and may have
additional special meetings. During the year ended September 30, 1996, the
Board met twelve times. No director attended fewer than 75% in the aggregate of
the total number of Board meetings held during the year ended September 30, 1996
and the total number of meetings held by committees on which he served during
such fiscal year. The Association's Board of Directors has standing
Compensation, Asset/Liability Management, Nominating and Loan Review Committees.
The Board of Directors' Audit Committee consists of the entire Board of
Directors. The Board, in its capacity as the Audit Committee, met one time
during the year ended September 30, 1996 to examine and approve the audit report
prepared by the independent auditors of the Association to review and recommend
the independent auditors to be engaged by the Association, to review the
internal audit function and internal accounting controls, and to review and
approve conflict of interest and audit policies. Following the Conversion, it
is expected that the Audit Committee will be comprised of all non-employee
directors will meet at least quarterly.
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The Association's Nominating Committee consists of Directors R. Dean Jones,
Norman L. Bailey and Brian H. Hancock and is responsible for considering
potential nominees to the Board of Directors. During the year ended September
30, 1996, the Board of Directors met two times as a nominating committee.
Following the Conversion, it is expected that the Company's full Board of
Directors will act as a nominating committee for selecting the management
nominees for election as directors of the Company in accordance with the
Company's Bylaws. In its deliberations, the Board, functioning as a nominating
committee, considers the candidate's knowledge of the banking business and
involvement in community, business and civic affairs, and also considers whether
the candidate would provide for adequate representation of its market area.
The Board of Directors' Compensation Committee consists of the full Board of
Directors. The Compensation Committee evaluates the compensation and benefits
of the directors, officers and employees, recommends changes, and monitors and
evaluates employee performance. All compensation decisions are made by the full
Board of Directors. The Compensation Committee met one time during the fiscal
year ended September 30, 1996.
Executive Compensation
The following table sets forth the cash and noncash compensation for the last
fiscal year awarded to or earned by the Chief Executive Officer. No executive
officer of the Company earned salary and bonus in fiscal year 1996 exceeding
$100,000 for services rendered in all capacities to the Association.
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------------------
Other Annual All Other
Name Year Salary Bonus Compensation(1) Compensation
- ---- ---- ------ ----- --------------- ------------
<S> <C> <C> <C> <C> <C>
Keith E. Waggoner 1996 $41,544 $13,249 $ -- $ --
Vice President and Chief
Executive Officer
</TABLE>
- --------------------
(1) Executive officers of the Association receive indirect compensation in the
form of certain perquisites and other personal benefits. The amount of such
benefits received by the named executive officers in fiscal 1996 did not
exceed 10% of each of the executive officer's respective salary and bonus.
Director Compensation
The Association's directors receive fees of $400 per monthly meeting attended.
Through fiscal 1996 directors received a bonus directors' fee equal to 2% of the
net income of the Association (after employee profit sharing expense and before
taxes) and 6% of the net income of the Association over $400,000. Further, the
three directors who are also officers each receive 16% of the total pool for
employee profit sharing, and each of the other directors receive 13%. This Plan
has been terminated and will be replaced by the Retirement Plan for Directors
and Senior Officer described below. No fees are paid for serving on committees
of the Board of Directors. This fee includes any Executive, Compensation or
Lending Committee meeting. During fiscal year 1996, the Association's
directors' fees totaled $36,000.
Certain Benefit Plans and Agreements
In connection with the Conversion, the Company's and the Association's Boards
of Directors have approved certain stock incentive plans, an employment
agreement, and a cash-based incentive compensation plan. In addition, the
Association has an existing Retirement Plan for Directors and Senior Officer
which will remain in effect after the Conversion.
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Basis for Awards of Benefits and Compensation. The Company's and the
Association's Boards of Directors have evaluated and approved the terms of the
employment agreement and other benefits described below. In its review of the
benefits and compensation of the executive officers and the terms of the
employment agreement, the Boards of Directors considered a number of factors,
including the experience, tenure and ability of the executive officers, their
performance for the Association during their tenure and the various legal and
regulatory requirements regarding the levels of compensation which may be paid
to employees of savings associations.
Stock Option Plan. The Board of Directors of the Company intends to submit
the Option Plan for approval to stockholders at a meeting which is expected to
be held not earlier than six months following completion of the Conversion, but
may be held more than one year following completion of the Conversion. No
options shall be awarded under the Option Plan unless stockholder approval is
obtained.
The purpose of the Option Plan is to provide additional incentive to directors
and employees by facilitating their purchase of Common Stock. The Option Plan
will have a term of 10 years from the date of its approval by the Company's
stockholders, after which no awards may be made, unless the plan is earlier
terminated by the Board of Directors of the Company. Pursuant to the Option
Plan, a number of shares equal to 10% of the shares of Common Stock that are
issued in the Conversion (32,000 shares at the midpoint of the Estimated
Valuatoin Range) would be reserved for future issuance by the Company, in the
form of newly issued shares or treasury shares or shares held in a grantor
trust, upon exercise of stock options ("Options") or stock appreciation rights
("SARs"). Options and SARs are collectively referred to herein as "Awards." If
Awards should expire, become unexercisable or be forfeited for any reason
without having been exercised or having become vested in full, the shares of
Common Stock subject to such Awards would be available for the grant of
additional Awards under the Option Plan, unless the Option Plan shall have been
terminated.
It is expected that the Option Plan will be administered by a committee (the
"Option Committee") of at least two directors of the Company who (i) are
designated by the Board of Directors and (ii) are Non-employee Directors within
the meaning of the federal securities laws. It is expected that the Option
Committee initially will consist of directors Bailey, Jones, and Whittaker. The
Option Committee will select the employees to whom Awards are to be granted, the
number of shares to be subject to such Awards, and the terms and conditions of
such Awards (provided that any discretion exercised by the Option Committee must
be consistent with the terms of the Option Plan). Awards will be available for
grants to directors and key employees of the Company and any subsidiaries,
except that non-employee directors will not be eligible to receive discretionary
Awards. Consistent with applicable regulations, if the Option Plan is
implemented within one year following completion of the Conversion, no employee
will receive Awards covering more than 25% of the shares reserved for issuance
under the Option Plan, and non-employee directors will not receive awards
individually exceeding 5% of the shares available under the MRP or 30% in the
aggregate. It is expected that upon the implementation of the Option Plan, Mr.
Waggoner will receive an Award with respect to 25% of the shares reserved under
the Option Plan (8,000 shares at the midpoint of the Estimated Valuation Range)
and each director who is not an employee but is a director on the effective date
will receive an Award with respect to the lesser of (i) 5% of the shares
reserved under the Option Plan, and (ii) 30% of the shares reserved under the
Option Plan divided by the number of directors eligible to receive an Award on
the effective date. The initial grant of Options under the Option Plan is
expected to occur on the date the Option Plan receives stockholder approval.
It is intended that Options granted under the Option Plan will constitute both
incentive stock options (Options that afford favorable tax treatment to
recipients upon compliance with certain restrictions pursuant to Section 422 of
the Code and that do not result in tax deductions to the Company unless
participants fail to comply with Section 422 of the Code) ("ISOs"), and Options
that do not so qualify ("Non-ISOs"). The exercise price for Options may not be
less than 100% of the fair market value of the shares on the date of the grant.
The Option Plan permits the Option Committee to impose transfer restrictions,
such as a right of first refusal, on the Common Stock that optionees may
purchase. Awards may be transferred to family members or trusts under specified
circumstances, but may not otherwise be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent and distribution.
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No Option shall be exercisable after the expiration of ten years from the date
it is granted; provided, however, that in the case of any employee who owns more
than 10% of the outstanding Common Stock at the time an ISO is granted, the
option price for the ISO shall not be less than 110% of the fair market value of
the shares on the date of the grant, and the ISO shall not be exercisable after
the expiration of five years from the date it is granted. If the Option Plan
is implemented within one year after completion of the Conversion, Options are
expected to become exercisable at the rate of 20% per year, beginning one year
from the date of grant. If an optionee dies or terminates service due to
disability while serving as an employee or non-employee director, all unvested
Options will become 100% vested and immediately exercisable. If the Option Plan
is implemented more than one year after the completion of the Conversion, (i)
Options may become exercisable according to a different schedule and (ii) the
Options may also accelerate to 100% upon an optionee's retirement or termination
of service in connection with a change in control. Upon a participant's
exercise of an Option, the Company may, if provided by the Committee in the
underlying Option agreement, pay to the participant a cash amount up to but not
exceeding the amount of dividends, if any, declared on the underlying shares
between the date of grant and the date of exercise of the Option. An otherwise
unexpired Option shall, unless otherwise determined by the Option Committee,
cease to be exercisable upon (i) an employee's termination of employment for
"just cause" (as defined in the Option Plan), (ii) the date one year after an
employee terminates service for a reason other than just cause, death, or
disability, or (iii) the date two years after termination of such service due to
the employee's death. Options granted to non-employee directors will
automatically expire one year after termination of service on the Board of
Directors (two years in the event of death).
An SAR may be granted in tandem with all or any part of any Option or without
any relationship to any Option. Whether or not an SAR is granted in tandem with
an Option, exercise of the SAR will entitle the optionee to receive, as the
Option Committee prescribes in the grant, all or a percentage of the excess of
the then fair market value of the shares of Common Stock subject to the SAR at
the time of its exercise over the aggregate exercise price of the shares subject
to the SAR was granted. Payment to the optionee may be made in cash or shares
of Common Stock, as determined by the Option Committee.
The Company will receive no monetary consideration for the granting of Awards
under the Option Plan, and will receive no monetary consideration other than the
Option exercise price for each share issued to optionees upon the exercise of
Options. The Option exercise price may be paid in cash or Common Stock or a
combination of cash and Common Stock. Upon an optionee's exercise of any
Option, the Company intends to pay the optionee a cash amount equal to any
dividends declared on the underlying shares between the date of grant and the
date of exercise of the Option. The exercise of Options and SARs will be
subject to such terms and conditions established by the Option Committee as are
set forth in a written agreement between the Option Committee and the optionee
(to be entered into at the time an Award is granted). In the event that the
fair market value per share of the Common Stock falls below the option price of
previously granted Options or SARs, the Option Committee will have the
authority, with the consent of the optionee, to cancel outstanding Options or
SARs and to reissue new Options or SARs at the then current fair market price
per share of the Common Stock.
At any time following consummation of the Conversion, the Association or the
Company may contribute sufficient funds to a grantor trust to purchase, and such
trust may purchase, a number of shares of Common Stock equal to 10% of the
shares issued in the Conversion. Such shares would be held by the trust for
issuance to option holders upon the exercise of options in the event the Option
Plan is implemented. Whether such shares are purchased, and the timing of such
purchases, will depend on market and other conditions and the alternative uses
of capital available to the Company.
Employee Stock Ownership Plan. In connection with the Conversion, the
Company's Board of Directors intends to adopt an employee stock ownership plan
("ESOP"), effective as of October 1, 1996. Employees of the Company and its
subsidiaries who have attained age 21 and completed one year of service will be
eligible to participate in the ESOP. The Company will submit an application to
the IRS for a letter of determination as to the tax-qualified status of the
ESOP. Although no assurances can be given, the Company expects the ESOP to
receive a favorable letter of determination from the IRS.
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The ESOP is to be funded by contributions made by the Company or the
Association in cash or shares of Common Stock. The ESOP intends to borrow funds
from the Company in an amount sufficient to purchase 8% of the Common Stock
issued in the Conversion (25,000 shares at the midpoint of the Estimated
Valuation Range). This loan will be secured by the shares of Common Stock
purchased and earnings thereon. Shares purchased with such loan proceeds will
be held in a suspense account for allocation among participants as the loan is
repaid. The Company expects to contribute sufficient funds to the ESOP to repay
such loan over a ten-year period, plus such other amounts as the Company's Board
of Directors may determine in its discretion.
Contributions to the ESOP and shares released from the suspense account will
be allocated among participants on the basis of their annual wages subject to
federal income tax withholding, plus any amounts withheld under a plan qualified
under Sections 125 or 401(k) of the Code and sponsored by the Company or the
Association. Participants must be employed at least 500 hours in a plan year in
order to receive an allocation. Each participant's vested interest under the
ESOP is determined according to the following schedule: 0% for less than three
years of service with the Company or the Association; 100% for three or more
years of service. For vesting purposes, a year of service means any plan year
in which an employee completes at least 1,000 hours of service (whether before
or after the ESOP's October 1, 1996 effective date). Vesting accelerates to
100% upon a participant's attainment of age 65, death or disability or a change
in control. Forfeitures will be reallocated to participants on the same basis
as other contributions. Benefits are payable upon a participant's retirement,
death, disability or separation from service and will be paid in a lump sum in
whole shares of Common Stock (with cash paid in lieu of fractional shares).
Benefits paid to a participant in Common Stock that is not publicly traded on an
established securities market will be subject both to a right of first refusal
by the Company and to a put option by the participant. Dividends paid on
allocated shares are expected to be paid to participants, and dividends on
unallocated shares are expected to be used to repay the ESOP loan.
It is expected that the Company will administer the ESOP and that Directors
Burrell, Clute, and Hancock will be appointed as trustees of the ESOP (the "ESOP
Trustees"). The ESOP Trustees must vote all allocated shares held in the ESOP
in accordance with the instructions of the participants. Unallocated shares and
allocated shares for which no timely direction is received will be voted by the
ESOP Trustees in the same proportion as the participant-directed voting of
allocated shares.
Management Recognition Plan. The Company's Board of Directors intends to
submit the MRP for approval to stockholders at a meeting of the Company's
stockholders, which is expected to be held not earlier than six months following
completion of the Conversion. The purpose of the MRP is to enable the Company
and the Association to retain personnel of experience and ability in key
positions of responsibility. Those eligible to receive benefits under the MRP
will be such directors and key employees as are selected by a committee the
Company's Board of Directors (the "MRP Committee"). It is expected that the MRP
Committee will initially consist of Directors Bailey, Jones, and Whittaker. The
Company's directors are expected to act by majority as trustees of the trust
associated with the MRP (the "MRP Trust"). The trustees of the MRP Trust (the
"MRP Trustees") will have the responsibility to hold and invest all funds
contributed to the MRP Trust. Shares held in the MRP Trust will be voted by
the MRP Trustees in the same proportion as the trustee of the Company's ESOP
trust votes Common Stock held therein, and will be distributed as the award
vests.
At any time following consummation of the Conversion, the Association or the
Company will contribute sufficient funds to the MRP Trust so that the MRP Trust
can purchase a number of shares of Common Stock equal to up to a 4% of the
number of shares of Common Stock issued in the Conversion (12,800 shares at the
midpoint of the Estimated Valuation Range). Whether such shares purchased will
be purchased in the open market or newly issued by the Company, and the timing
of such purchases, will depend on market and other conditions and the
alternative uses of capital available to the Company. The compensation expense
for the Company for MRP awards will equal the fair market value of the Common
Stock on the date of the grant pro rated over the years during which vesting
occurs. The shares awarded pursuant to the MRP will be in the form of awards
which may be transferred to family members or trusts under specified
circumstances, but may not otherwise be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent and distribution. If the MRP is implemented within one year following
completion of the Conversion, the MRP awards will be
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payable over a period specified by the Board of Directors, which shall not be
faster than 20% per year, beginning one year from the date of the award.
Participants in the MRP may elect to defer all or a percentage of their MRP
awards that would have otherwise been transferred to the participants upon the
vesting of said awards. Dividends on unvested shares will be held in the MRP
trust for payment as vesting occurs. All shares subject to an MRP award held by
a participant whose service with the Company or the Association terminates due
to death or disability, shall be deemed 100% vested as of the participant's last
day of service with the Association or Company. If the MRP is implemented more
than one year after the closing of the Conversion, Awards may become vested
according to a different schedule, and it is expected that the awards will also
become 100% vested upon a participant's retirement or termination of service
with the Association or the Company in connection with a change in control of
the Association or the Company. If a participant terminates employment for
reasons other than death or disability (or retirement or a change in control, if
applicable), he or she forfeits all rights to the allocated shares under
restriction.
The Company's Board of Directors can terminate the MRP at any time, and, if it
does so, any shares not allocated will revert to the Company. If the MRP is
implemented within one year following consummation of the Conversion, no
employee will receive MRP awards covering more than 25% of the shares reserved
for issuance under the MRP, and non-employee directors will not receive awards
individually exceeding 5% of the shares available under the MRP or 30% in the
aggregate. It is expected that upon the implementation of the MRP, Mr. Waggoner
will receive an Award with respect to 25% of the shares reserved under the MRP
(3,200 shares at the midpoint of the Estimated Valuation Range) and each
director who is not an employee but is a director on the effective date shall
receive an Award with respect to the lesser of (i) 5% of the shares reserved
under the MRP, and (ii) 30% of the shares reserved under the MRP divided by the
number of directors eligible to receive an Award on the effective date. The
initial grant of awards under the MRP is expected to occur on the date the MRP
receives stockholder approval. No awards shall be made prior to stockholder
approval of the MRP.
Retirement Plan for Directors and Senior Officer. The Association's Board of
Directors has adopted the Rocky Ford Federal Savings and Loan Association
Retirement Plan for Directors and Senior Officer (the "Retirement Plan")
effective November 13, 1996 (the "Effective Date"), for the Association's senior
officer as of the plan's effective date and its directors (i) who are members of
the Association's Board of Directors (the "Board") at some time on or after the
plan's effective date, and (ii) who are not employees on the date of being both
nominated and elected (or re-elected) to the Board. Directors who become
participants will remain participants even if they later become employees of the
Association.
On the Effective Date, a Retirement Plan bookkeeping account was established
by the Association in the name of each participant, and each participant who was
a director on the Effective Date had his account credited with an amount equal
to the product of (i) $1,840 ($2,723 for director Gause), and (ii) his full
years of service as a director prior to the Effective Date. On each September 30
following the Effective Date, each participant who is a director (but not a
senior officer) on such date shall have his or her account credited with an
amount equal to the product of $1,840 ($2,723 for director Gause) and the safe
performance factor. The safe performance factor is determined based on the
Association's actual performance as compared to budgeted goals for return on
average assets, non-performing assets, and CAMEL rating, provided that the safe
performance factor may not exceed 1.2. Also on the Effective Date, the
Retirement Plan account of Mr. Waggoner, the senior officer, was credited with
an amount equal to $4,000 for each full year of his service with the Association
prior to such date. On the September 30 occurring during each of the next
eleven years following the Effective Date, Mr. Waggoner's account will be
credited an additional amount equal to $20,669 times the safe performance
factor, provided he is an employed by the Association on such date. Amounts
credited to accounts of participants on the Effective Date became 50% vested on
the Effective Date, with the remainder vesting on March 31, 1997. Amounts
credited to participants' accounts after the Effective Date will be fully vested
at all times. Until distributed in accordance with the terms of the Retirement
Plan, each participant's account will be credited with a rate of return on any
amounts previously credited. Prior to the Conversion, this rate of return
equals the highest rate of interest paid by the Association on certificates of
deposit having a term of one year. After the Conversion that rate of return
will equal the dividend-adjusted rate of return on the Company's common stock.
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In the event of the Mr. Waggoner's disability or death, his account will be
credited with an amount equal to the difference (if any) between (i) 50% of the
present value of all benefits which would have been credited to his account if
he had otherwise remained employed by the Association to age 62, and (ii) the
benefits which are actually credited to his account at the time of his
termination. If his employment terminates in connection with or following a
change in control, his account will be credited with an amount equal to the
difference (if any) between (i) 100% of the present value of all benefits which
would have been credited to his account if he had otherwise remained employed by
the Association to age 62, and (ii) the benefits which are actually credited to
his account at the time of his termination, subject to applicable "golden
parachute" limitations under (S)280G of the Internal Revenue Code. "Change in
control" is defined the same as under the Employment Agreement described below.
Participants' accounts under the Retirement Plan will be paid, in cash, in ten
substantially equal annual installments, beginning during the first quarter of
the calendar year which next follows the calendar year in which the participant
ceases to be a director or senior officer (whichever shall first occur).
Notwithstanding the foregoing, a participant may elect to receive Retirement
Plan benefits in a lump sum or over a period shorter than ten years. In the
event of a participants' death, the balance of his Retirement Plan account will
be paid in a lump sum (unless the Participant elects a distribution period up to
ten years) to his designated beneficiary, or if none, his estate.
Any benefits accrued under the Retirement Plan will be paid from the
Association's general assets. The Association has established a trust in order
to hold assets with which to pay benefits. Trust assets will be subject to the
claims of the Association's general creditors. In the event a participant
prevails over the Association in a legal dispute as to the terms or
interpretation of the Retirement Plan, he or she will be reimbursed for his or
her legal and other expenses.
Incentive Compensation Plan. The Association's Board of Directors intends to
adopt the Incentive Compensation Plan, effective October 1, 1996. The Incentive
Compensation Plan is administered by a committee (the "Incentive Compensation
Committee") which is expected to consist of non-employee directors Bailey,
Jones, and Whittaker. Under the plan, employees will receive annual cash bonus
awards from a bonus pool determined under a performance-based formula. The
bonus pool will equal the multiple of (i) a dollar amount set by the Incentive
Compensation Committee for the fiscal year ($30,000 for fiscal year ending
September 30, 1997), times (ii) the ROAA factor, times (iii) the NPA factor,
times (iv) the CAMEL factor. The ROAA factor equals the ratio of the
Association's actual return on average assets to budgeted return on average
assets. The NPA factor will equal 1.0 as long as the ratio of the Association's
non-performing assets and real-estate-owned to its total loans and real-estate-
owned ("NPA Ratio") is less than or equal to 1%, and will be reduced ratably to
0 for NPA Ratios equalling or exceeding 2%. The CAMEL Factor will equal 1.2 for
a CAMEL rating of 1, 1.0 for a CAMEL rating of 2, and 0 for CAMEL ratings of 3
or higher. In determining performance for a fiscal year, the Incentive
Compensation Committee will have the discretion to take into account or
disregard extraordinary financial events. Mr. Waggoner is expected to receive
approximately 50% of the annual bonus pool, with the remaining 50% divided pro
rata among the Association's remaining employees based on compensation. The
Incentive Compensation Committee will have the authority to make discretionary
allocations of the bonus pool where they deem it appropriate and necessary.
The Incentive Compensation Plan has an indefinite term, and the Association
has the right at any time to terminate or amend the Incentive Compensation Plan
for any reason; provided, that no amendment or termination may, without the
consent of the participant or, if applicable, the participant's beneficiary,
adversely affect such participant's or beneficiary's rights with respect to
benefits accrued as of the date of such amendment or termination.
Employment Agreement. The Company and the Association intend to enter into
employment agreements (the "Employment Agreements") under which Keith E.
Waggoner (the "Employee") would serve as President of the Association and
President of the Company. In such capacities, the Employee is responsible for
overseeing all operations of the Association and the Company, and for
implementing the policies adopted by the Boards of Directors. Such Boards
believe that the Employment Agreements assure fair treatment of the Employee in
his career with the Company and the Association by assuring him of some
financial security.
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The Employment Agreements will become effective upon their execution and will
provide for a term of three years, with an annual base salary equal to the
Employee's existing base salary rate in effect on the effective date. On each
anniversary date of the commencement of the Employment Agreements, the term of
the Employee's employment will be extended for an additional one-year period
beyond the then effective expiration date, upon a determination by the Board of
Directors that the performance of the Employee has met the required performance
standards and that such Employment Agreements should be extended. The
Employment Agreements provide the Employee with a salary review by the Board of
Directors not less often than annually, as well as with inclusion in any
discretionary bonus plans, retirement and medical plans, customary fringe
benefits, vacation and sick leave. The Employment Agreements shall terminate
upon the Employee's death, may terminate upon the Employee's disability and are
terminable by the Association for "just cause" (as defined in the Employment
Agreements). In the event of termination for just cause, no severance benefits
are available. If the Company or the Association terminates the Employee
without just cause, the Employee will be entitled to a continuation of his
salary and benefits from the date of termination through the remaining term of
the Employment Agreements plus an additional 12 month's salary and, at the
Employee's election, either continued participation in benefit plans which the
Employee would have been eligible to participate in through the Employment
Agreements' expiration date or the cash equivalent thereof. If the Employment
Agreements are terminated due to the Employee's "disability" (as defined in the
Employment Agreements), the Employee will be entitled to a continuation of his
salary and benefits through the date of such termination, including any period
prior to the establishment of the Employee's disability. In the event of the
Employee's death during the term of the Employment Agreements, his estate will
be entitled to receive his salary through the last day of the calendar month in
which the Employee's death occurred. The Employee is able to voluntarily
terminate his Employment Agreements by providing 90 days' written notice to the
Boards of Directors of the Association and the Company, in which case the
Employee is entitled to receive only his compensation, vested rights, and
benefits up to the date of termination.
In the event of (i) the Employee's involuntary termination of employment other
than for "just cause" during the period beginning six months before a change in
control and ending on the later of the second anniversary of the change in
control or the expiration date of the Employment Agreements (the "Protected
Period"), (ii) the Employee's voluntary termination within 90 days of the
occurrence of certain specified events occurring during the Protected Period
which have not been consented to by the Employee, or (iii) the Employee's
voluntary termination of employment for any reason within the 30-day period
beginning on the date of the change in control, the Employee will be paid within
10 days of such termination (or the date of the change in control, whichever is
later) an amount equal to the difference between (i) 2.99 times his "base
amount," as defined in Section 280G(b)(3) of the Internal Revenue Code, and (ii)
the sum of any other parachute payments, as defined under Section 280G(b)(2) of
the Internal Revenue Code, that the Employee receives on account of the change
in control. A "change in control" is deemed to occur where (i) as a result of,
or in connection with, any initial public offering, tender offer or exchange
offer, merger or other business combination, sale of assets or contested
election, any combination of the foregoing transactions, or any similar
transaction, the persons who were directors of the Association before such
transaction cease to constitute a majority of the Board of Directors of the
Association or any successor to the Association; (ii) the Association transfers
substantially all of its assets to another corporation which is not an affiliate
of the Association; (iii) the Association sells substantially all of the assets
of an affiliate which accounted for 50% or more of the controlled group's assets
immediately prior to such sale; (iv) any "person" including a "group" is or
becomes the "beneficial owner", directly or indirectly, of securities of the
Association representing twenty-five percent (25%) or more of the combined
voting power of the Association's outstanding securities (with the terms in
quotation marks having the meaning set forth under the federal securities laws);
or (v) the Association is merged or consolidated with another corporation and,
as a result of the merger or consolidation, less than seventy percent (70%) of
the outstanding voting securities of the surviving or resulting corporation is
owned in the aggregate by the former stockholders of the Association. The
Employment Agreement with the Association provides that within 10 business days
of a change in control, the Association shall fund, or cause to be funded, a
trust in the amount of 2.99 times the Employee's base amount, that will be used
to pay the Employee amounts owed to him. The aggregate payment that would be
made to Mr. Waggoner assuming his termination of employment under the foregoing
circumstances at September 30, 1996 would have been approximately $164,000.
These provisions may have an anti-takeover effect by making it more expensive
for a potential acquiror to obtain control of the Company. For more
information, see "Certain Anti-Takeover Provisions in the Certificate of
Incorporation and Bylaws -- Additional Anti-Takeover Provisions." In the event
that the Employee prevails over the Company and the Association, or obtains a
written settlement, in a legal dispute as to the Employment Agreement, he will
be reimbursed for his legal and other expenses.
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Transactions with Management
The Association offers loans to its directors and officers. These loans
currently are made in the ordinary course of business with the same collateral,
interest rates and underwriting criteria as those of comparable transactions
prevailing at the time and to not involve more than the normal risk of
collectibility or present other unfavorable features. Under current law, the
Association's loans to directors and executive officers are required to be made
on substantially the same terms, including interest rates, as those prevailing
for comparable transactions and must not involve more than the normal risk of
repayment or present other unfavorable features. Furthermore, all loans to such
persons must be approved in advance by a disinterested majority of the Board of
Directors. At September 30, 1996, the Association had $167,000 in loans
outstanding to directors and executive officers, which is 3.2% of pro forma
stockholders equity at the midpoint of the Estimated Valuation Range. None of
these loans had favorable terms.
THE CONVERSION
The OTS has approved the Plan, subject to the Plan's approval by the members
of the Association entitled to vote on the matter and subject to the
satisfaction of certain other conditions imposed by the OTS in its approval.
Approval by the OTS, however, does not constitute a recommendation or
endorsement of the Plan.
General
On January 14, 1997, the Board of Directors of the Association unanimously
adopted, subject to approval by the OTS and the members of the Association, the
Plan, pursuant to which the Association would convert from a federal mutual
savings and loan association to a federal capital stock savings and loan
association as a wholly owned subsidiary of the Company. The OTS has approved
the Plan, subject to its approval by the members of the Association at the
Special Meeting called for that purpose to be held on ____________, 1997.
The Conversion will be accomplished through the amendment of the Association's
existing Federal Mutual Charter and Bylaws to read in the form of a Federal
Stock Charter and Bylaws to authorize the issuance of capital stock by the
Converted Association, the issuance of all the Converted Association's capital
stock to be outstanding upon consummation of the Conversion to the Company and
the offer and sale of the Common Stock of the Company. Upon issuance of the
Converted Association's shares of capital stock to the Company, the Converted
Association will be a wholly owned subsidiary of the Company.
The Company has received approval from the OTS to become the holding company
of the Converted Association subject to the satisfaction of certain conditions
and to acquire all of the common stock of the Converted Association to be issued
in the Conversion in exchange for at least 50% of the net proceeds from the sale
of Common Stock in the Conversion. The Conversion will be effected only upon
completion of the sale of all of the shares of Common Stock to be issued by the
Company pursuant to the Plan.
The aggregate purchase price of the Common Stock to be issued in the
Conversion will be within the Estimated Valuation Range of between $2,720,000
and $3,680,000, which may be increased to $4,232,000, based upon an independent
appraisal of the estimated pro forma market value of the Common Stock prepared
by Ferguson. All shares of the Common Stock to be issued and sold in the
Conversion will be sold at the same price. The independent appraisal will be
updated, if necessary, and the final price of the shares of the Common Stock
will be determined at the completion of the Subscription and Community
Offerings. Ferguson is experienced in the valuation and appraisal of financial
institutions. For additional information, see " -- Stock Pricing and Number of
Shares to be Issued."
The following is a brief summary of material aspects of the Conversion. The
summary is qualified in its entirety by reference to the provisions of the Plan.
A copy of the Plan is available for inspection at the office of the Association
and at the office of the OTS. The Plan is also filed as an exhibit to the
Registration Statement of which this Prospectus is a part, copies of which may
be obtained from the SEC. See "Additional Information."
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Offering of Common Stock
Under the Plan, the Company is offering shares of the Common Stock first to
the Association's Eligible Account Holders, second to the ESOP, third to
Supplemental Eligible Account Holders and fourth to its Other Members who are
not Eligible Account Holders or Supplemental Eligible Account Holders in the
Subscription Offering. Subscription Rights received in any of the foregoing
categories will be subordinated to the Subscription Rights received by those in
a prior category, with the exception that any shares of Common Stock sold in
excess of the maximum of the Estimated Valuation Range may first be sold to the
ESOP. To the extent shares remain available for purchase after the Subscription
Offering, the Company may offer any such remaining shares to the general public
in the Community Offering. In the Community Offering, preference will be given
to natural persons and trusts of natural persons who are permanent residents of
the Local Community. The term "resident" as used in relation to the preference
afforded natural persons in the Local Community means any natural person who
occupies a dwelling within the Local Community, has an intention to remain
within the Local Community for a period of time (manifested by establishing a
physical, ongoing, nontransitory presence within the Local Community) and
continues to reside in the Local Community at the time of the Subscription and
Community Offerings. The Association may utilize deposit or loan records or
such other evidence provided to it to make the determination whether a person is
residing in the Local Community. To the extent the person is a corporation or
other business entity, the principal place of business or headquarters shall be
within the Local Community. To the extent the person is a personal benefit
plan, the circumstance of the beneficiary shall apply with respect to this
definition. In the case of all other benefit plans, circumstances of the
trustee shall be examined for purposes of this definition. In all cases,
however, such determination shall be in the sole discretion of the Association.
The occurrence of the Community Offering is subject to the availability of
shares of the Common Stock for purchase after satisfaction of all subscriptions
in the Subscription Offering. Additionally, all purchases in the Community
Offering are subject to the maximum and minimum purchase limitations set forth
in the Plan and the right of the Company to reject any such orders, in whole or
in part.
As part of the Community Offering, the Plan provides that, if feasible, all
shares of Common Stock not purchased in the Subscription and Community
Offerings, if any, may be offered for sale to the general public in a Syndicated
Community Offering through selected dealers to be formed and managed by Trident
Securities. See " -- Syndicated Community Offering."
If the Community Offering and Syndicated Community Offering are determined not
to be feasible, the Association will immediately consult with the OTS to
determine the most viable alternative available to effect the completion of the
Conversion. Should no viable alternative exist, the Association may terminate
the Conversion with the concurrence of OTS. The Plan provides that the
Conversion must be completed within 24 months after the date of the approval of
the Plan by the members of the Association. In the event that the Conversion is
not effected, the Association will remain a federal mutual savings and loan
association, all subscription funds will be promptly returned to subscribers
with interest earned thereon and all withdrawal authorizations will be
cancelled. The completion of the Conversion is subject to market conditions and
other factors beyond the Association's control. No assurance can be given as to
the length of time after approval of the Plan at the Special Meeting that will
be required to complete the sale of the Common Stock to be offered in the
Conversion. If delays are experienced, significant changes may occur in the
estimated pro forma market value of the Company and the Converted Association
upon consummation of the Conversion, together with corresponding changes in the
offering price and the net proceeds realized by the Association from the sale of
the Common Stock. The Association would also incur substantial additional
printing, legal and accounting expenses in completing the Conversion. In the
event the Conversion is terminated, the Association would be required to charge
all Conversion-related expenses against current income.
Business Purposes
The Association's Board of Directors has formed the Company to serve upon
consummation of the Conversion as a holding company with the Converted
Association as its subsidiary. The portion of the net proceeds from the sale of
the Common Stock in the Conversion to be distributed to the Converted
Association by the
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Company will substantially increase the Converted Association's capital position
which will in turn increase the amount of funds available for lending and
investment, provide a "cushion" to compensate for the Association's negative
interest rate risk position, and provide greater resources to support both
current operations and future expansion by the Association, although there are
no current agreements or understandings for such expansion. The holding company
structure will provide greater flexibility than the Association alone would have
for diversification of business activities and geographic expansion. Management
believes that this increased capital and operating flexibility will enable the
Association to compete more effectively with other types of financial services
organizations. In addition, the Conversion will also enhance the future access
of the Company and the Association to the capital markets.
The potential impact of Conversion upon the Association's capital base is
significant. The Association had total equity in accordance with generally
accepted accounting principles of $2.8 million, or 13.63% of assets, at
September 30, 1996. Assuming approximately $2.85 million (based on the sale of
320,000 shares of Common Stock at the midpoint of the Estimated Valuation Range)
of net proceeds are realized from the sale of the Common Stock (see "Pro Forma
Data"), and after deducting amounts necessary to fund the ESOP and MRP, the
Company's consolidated stockholders' equity would have been approximately $5.2
million as of September 30, 1996. The Converted Association's ratio of tangible
capital to adjusted total assets would increase to 16.96% after the Conversion.
See "Historical and Pro Forma Regulatory Capital Compliance." The investment of
the net proceeds from the sale of the Common Stock will provide the Converted
Association with additional income to further increase its capital position.
The additional capital may also assist the Converted Association in offering new
programs and expanded services to its customers.
After completion of the Conversion, the unissued Common Stock and preferred
stock authorized by the Company's Certificate of Incorporation will permit the
Company, subject to market conditions, to raise additional equity capital
through further sales of securities and to issue securities in connection with
possible acquisitions. At the present time, the Company has no plans with
respect to additional offerings of securities, other than the issuance of
additional shares under the MRP or Option Plan, if implemented. Following
completion of Conversion, the Company also will be able to use stock-related
incentive programs to attract and retain executive and other personnel for
itself and its subsidiaries. See "Management of the Association -- Certain
Benefit Plans and Agreements."
Effect of Conversion to Stock Form on Depositors and Borrowers of the
Association
General. Each depositor in a mutual savings institution such as the
Association has both a deposit account and a pro rata interest in the retained
earnings of that institution based upon the balance in his or her deposit
account. However, this interest is tied to the depositor's account and has no
tangible market value separate from such deposit account. Any other depositor
who opens a deposit account obtains a pro rata interest in the retained earnings
of the institution without any additional payment beyond the amount of the
deposit. A depositor who reduces or closes his or her account receives a
portion or all of the balance in the account but nothing for his or her
ownership interest, which is lost to the extent that the balance in the account
is reduced.
Consequently, depositors normally do not have a way to realize the value of
their ownership, which has realizable value only in the unlikely event that the
mutual institution is liquidated. In such event, the depositors of record at
that time, as owners, would share pro rata in any residual retained earnings
after other claims are paid.
Upon consummation of the Conversion, permanent nonwithdrawable capital stock
will be created to represent the ownership of the institution. The stock is
separate and apart from deposit accounts and is not and cannot be insured by the
FDIC. Transferable certificates will be issued to evidence ownership of the
stock, which will enable the stock to be sold or traded, if a purchaser is
available, with no effect on any account held in the Association. Under the
Plan, all of the capital stock of the Converted Association will be acquired by
the Company in exchange for a portion of the net proceeds from the sale of the
Common Stock in the Conversion. The Common Stock will represent an ownership
interest in the Company and will be issued upon consummation of the Conversion
to persons who elect to participate in the Conversion by purchasing the shares
being offered.
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Continuity. During the Conversion process, the normal business of the
Association of accepting deposits and making loans will continue without
interruption. The Converted Association will continue to be subject to
regulation by the OTS and the FDIC, and FDIC insurance of accounts will continue
without interruption. After the Conversion, the Converted Association will
continue to provide services for depositors and borrowers under current policies
and by its present management and staff.
The Board of Directors serving the Association at the time of the Conversion
will serve as the Board of Directors of the Converted Association after the
Conversion, with the addition of Chief Executive Officer Keith Waggoner.
Following the Conversion, the Board of Directors of the Company will consist of
the individuals serving on the Board of Directors of the Association. All
officers of the Association at the time of the Conversion will retain their
positions with the Converted Association after the Conversion.
Voting Rights. Upon the completion of the Conversion, depositor and borrower
members as such will have no voting rights in the Converted Association or the
Company and, therefore, will not be able to elect directors of the Converted
Association or the Company or to control their affairs. Currently these rights
are accorded to depositors of the Association. Subsequent to the Conversion,
voting rights will be vested exclusively in the stockholders of the Company
which, in turn, will own all of the stock of the Converted Association. Each
holder of Common Stock shall be entitled to vote on any matter to be considered
by the stockholders of the Company, subject to the provisions of the Company's
Certificate of Incorporation.
After the Association Conversion, holders of Savings Accounts in and obligors
on loans of the Converted Association will not have voting rights in the
Association. Exclusive voting rights with respect to the Company shall be
vested in the holders of the Common Stock, holders of Savings Accounts in and
obligors on loans of the Converted Association and the Association will not have
any voting rights in the Company except and to the extent that such persons
become stockholders of the Company, and the Company will have exclusive voting
rights with respect to the Converted Association's capital stock.
Deposit Accounts and Loans. THE ASSOCIATION'S DEPOSIT ACCOUNTS, THE BALANCES
OF INDIVIDUAL ACCOUNTS AND EXISTING FEDERAL DEPOSIT INSURANCE COVERAGE WILL NOT
BE AFFECTED BY THE CONVERSION. Furthermore, the Conversion will not affect the
loan accounts, the balances of these accounts and the obligations of the
borrowers under their individual contractual arrangements with the Association.
Tax Effects. The Association has received an opinion from its special
counsel, Housley Kantarian & Bronstein, P.C., Washington, D.C., as to the
material federal income tax consequences of the Conversion to the Association,
and as to the generally applicable material federal income tax consequences of
the Conversion to the Association's account holders and to persons who purchase
Common Stock in the Conversion. The opinion provides that the Conversion will
constitute a reorganization for federal income tax purposes under Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended ("Code"). Among
other things, the opinion also provides that: (i) no gain or loss will be
recognized by the Association in its mutual or stock form by reason of the
Conversion; (ii) no gain or loss will be recognized by its account holders upon
the issuance to them of accounts in the Converted Association in stock form
immediately after the Conversion, in the same dollar amounts and on the same
terms and conditions as their accounts at the Association immediately prior to
the Conversion; (iii) the tax basis of each account holder's interest in the
liquidation account will be equal to the value, if any, of that interest; (iv)
the tax basis of the Common Stock purchased in the Conversion will be equal to
the amount paid therefor increased, in the case of Common Stock acquired
pursuant to the exercise of Subscription Rights, by the fair market value, if
any, of the Subscription Rights exercised; (v) the holding period for the Common
Stock purchased in the Conversion will commence upon the exercise of such
holder's Subscription Rights and otherwise on the day following the date of such
purchase; and (vi) gain or loss will be recognized to account holders upon the
receipt of liquidation rights or the receipt or exercise of Subscription Rights
in the Conversion, to the extent such liquidation rights and Subscription Rights
are deemed to have value, as discussed below.
The opinion of Housley Kantarian & Bronstein, P.C., is based in part upon, and
subject to the continuing validity in all material respects through the date of
the Conversion of, various representations of the Association and
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upon certain assumptions and qualifications, including that the Conversion is
consummated in the manner and according to the terms provided in the Plan. Such
opinion is also based upon the Code, regulations now in effect or proposed
thereunder, current administrative rulings and practice and judicial authority,
all of which are subject to change and such change may be made with retroactive
effect. Unlike private letter rulings received from the Internal Revenue Service
("IRS"), an opinion is not binding upon the IRS and there can be no assurance
that the IRS will not take a position contrary to the positions reflected in
such opinion, or that such opinion will be upheld by the courts if challenged by
the IRS.
Housley Kantarian & Bronstein, P.C. has advised the Association that an
interest in a liquidation account has been treated by the IRS, in a series of
private letter rulings which do not constitute formal precedent, as having
nominal, if any, fair market value and therefore it is likely that the interests
in the liquidation account established by the Association as part of the
Conversion will similarly be treated as having nominal, if any, fair market
value. Accordingly, it is likely that such depositors of the Association who
receive an interest in such liquidation account established by the Association
pursuant to the Conversion will not recognize any gain or loss upon such
receipt.
Housley Kantarian & Bronstein, P.C. has further advised the Association that
the federal income tax treatment of the receipt of Subscription Rights pursuant
to the Conversion is uncertain, and recent private letter rulings issued by the
IRS have been in conflict. For instance, the IRS adopted the position in one
private ruling that Subscription Rights will be deemed to have been received to
the extent of the minimum pro rata distribution of such rights, together with
the rights actually exercised in excess of such pro rata distribution, and with
gain recognized to the extent of the combined fair market value of the pro rata
distribution of Subscription Rights plus the Subscription Rights actually
exercised. Persons who do not exercise their Subscription Rights under this
analysis would recognize gain upon receipt of rights equal to the fair market
value of such rights, regardless of exercise, and would recognize a
corresponding loss upon the expiration of unexercised rights that may be
available to offset the previously recognized gain. Under another IRS private
ruling, Subscription Rights were deemed to have been received only to the extent
actually exercised. This private ruling required that gain be recognized only
if the holder of such rights exercised such rights, and that no loss be
recognized if such rights were allowed to expire unexercised. There is no
authority that clearly resolves this conflict among these private rulings, which
may not be relied upon for precedential effect. However, based upon express
provisions of the Code and in the absence of contrary authoritative guidance,
Housley Kantarian & Bronstein, P.C. has provided in its opinion that gain will
be recognized upon the receipt rather than the exercise of Subscription Rights.
Further, also based upon a published IRS ruling and consistent with recognition
of gain upon receipt rather than exercise of the Subscription Rights, Housley
Kantarian & Bronstein, P.C. has provided in its opinion that the subsequent
exercise of the Subscription Rights will not give rise to gain or loss.
Regardless of the position eventually adopted by the IRS, the tax consequences
of the receipt of the Subscription Rights will depend, in part, upon their
valuation for federal income tax purposes.
If the Subscription Rights are deemed to have a fair market value, the receipt
of such rights will be taxable to Eligible Account Holders, Supplemental
Eligible Account Holders and other eligible members who exercise their
Subscription Rights, even though such persons would not have received any cash
from which to pay taxes on such taxable income. The Association could also
recognize a gain on the distribution of such Subscription Rights in an amount
equal to their aggregate value. In the opinion of Ferguson & Co., LLP., whose
opinion is not binding upon the IRS, the Subscription Rights do not have any
value, based on the fact that such rights are acquired by the recipients without
cost, are non-transferable and of short duration and afford the recipients the
right only to purchase shares of the Common Stock at a price equal to its
estimated fair market value, which will be the same price as the price paid by
purchasers in the Community Offering for unsubscribed shares of Common Stock.
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members are encouraged to consult with their own tax advisors as to the tax
consequences in the event that the Subscription Rights are deemed to have a fair
market value. Because the fair market value, if any, of the Subscription Rights
issued in the Conversion depends primarily upon the existence of certain facts
rather than the resolution of legal issues, Housley Kantarian & Bronstein, P.C.,
has neither adopted the opinion of Ferguson & Co., LLP., as its own nor
incorporated such opinion of Ferguson & Co., LLP. in its opinion issued in
connection with Conversion.
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The Association has also received the opinion of Grimsley, White & Company
that no gain or loss will be recognized as a result of the Conversion for
purposes of Colorado income tax laws.
THE FEDERAL AND STATE INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT PURPORT
TO CONSIDER ALL ASPECTS OF FEDERAL AND STATE INCOME TAXATION WHICH MAY BE
RELEVANT TO EACH ELIGIBLE ACCOUNT HOLDER, SUPPLEMENTAL ACCOUNT HOLDER AND OTHER
MEMBER ENTITLED TO SPECIAL TREATMENT UNDER THE INTERNAL REVENUE CODE, SUCH AS
TRUSTS, INDIVIDUAL RETIREMENT ACCOUNTS, OTHER EMPLOYEE BENEFIT PLANS, INSURANCE
COMPANIES AND ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS
AND OTHER MEMBERS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES. DUE
TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH ELIGIBLE ACCOUNT HOLDER,
SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER AND OTHER MEMBER IS URGED TO CONSULT HIS OR
HER OWN TAX AND FINANCIAL ADVISOR AS TO THE EFFECT OF SUCH FEDERAL AND STATE
INCOME TAX CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS AND CIRCUMSTANCES,
INCLUDING THE RECEIPT AND EXERCISE OF SUBSCRIPTION RIGHTS, AND ALSO AS TO ANY
OTHER TAX CONSEQUENCES ARISING OUT OF THE CONVERSION.
Liquidation Account. In the unlikely event of a complete liquidation of the
Association in its present mutual form, each holder of a deposit account in the
Association would receive his pro rata share of any assets of the Association
remaining after payment of claims of all creditors (including the claims of all
depositors to the withdrawal value of their accounts). His pro rata share of
such remaining assets would be the same proportion of such assets as the value
of his deposit account was to the total of the value of all deposit accounts in
the Association at the time of liquidation.
After the Conversion, each deposit account holder on a complete liquidation
would have a claim of the same general priority as the claims of all other
general creditors of the Association. Therefore, except as described below, a
claim of such account holder would be solely in the amount of the balance in the
related deposit account plus accrued interest, and the account holder would have
any interest in the value of the Association above that amount.
The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
the net worth of the Association as of the date of its latest statement of
financial condition contained in the final Prospectus. Each Eligible Account
Holder (a person with a deposit account in the Association on December 31, 1995)
and each Supplemental Eligible Account Holder (a person with a qualifying
deposit in the Association on March 31, 1997) would be entitled, on a complete
liquidation of the Converted Association after completion of the Conversion, to
an interest in the liquidation account. Each Eligible Account Holder would have
an initial interest in such liquidation account for each deposit account held in
the Association on December 31, 1995 and each Supplemental Eligible Account
Holder would have an initial interest in such liquidation account for each
qualifying deposit held in the Association on March 31, 1997. The interest as
to each qualifying deposit account would be in the same proportion of the total
liquidation account as the balance of such qualifying deposit account was to the
balance in all deposit accounts of Eligible Account Holders and Supplemental
Eligible Account Holders on such respective date. However, if the amount in the
qualifying deposit account on any annual closing date (September 30) of the
Association subsequent to the relevant eligibility date is less than the amount
in such account on the relevant eligibility date, or any subsequent closing
date, then the Eligible Account Holder's or Supplemental Eligible Account
Holder's interest in the liquidation account would be reduced from time to time
by an amount proportionate to any such reductions, and such interest would cease
to exist if he or she ceases to maintain an account at the Converted Association
that has the same Social Security number as appeared on his or her account(s) at
the relevant eligibility date. The interest in the liquidation account would
never be increased, notwithstanding any increase in the related deposit account
after the Conversion.
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Any assets remaining after the above liquidation rights of Eligible Account
Holders and Supplemental Eligible Account Holders were satisfied would be
distributed to the entity or persons holding the Converted Association's capital
stock at that time.
A merger, consolidation, sale of bulk assets or similar combination or
transaction with an FDIC-insured institution in which the Converted Association
is not the surviving insured institution would not be considered to be a
"liquidation" under which distribution of the liquidation account could be made.
In such a transaction, the liquidation account would be assumed by the surviving
institution.
The creation and maintenance of the liquidation account will not restrict the
use or application of any of the capital accounts of the Converted Association,
except that the Converted Association may not declare or pay a cash dividend on,
or repurchase any of, its capital stock if the effect of such dividend or
repurchase would be to cause its retained earnings to be reduced below the
aggregate amount then required for the liquidation account.
Subscription Offering
Nontransferable Subscription Rights to subscribe for shares of the Common
Stock have been issued to all persons entitled to subscribe for stock in the
Subscription Offering at no cost to such persons. The amount of the Common
Stock which these parties may subscribe for will be determined, in part, by the
total stock to be issued, and the availability of stock for purchase under the
categories set forth in the Plan.
Preference categories have been established for the allocation of the Common
Stock to the extent that shares are available. These categories are as follows:
Subscription Category No. 1 is reserved for the Association's Eligible
Account Holders, i.e., qualifying depositors of the Association on December
31, 1995, who will each receive nontransferable Subscription Rights to
subscribe for Common Stock in the Subscription Offering. Pursuant to the Plan,
an Eligible Account Holder may purchase Common Stock in the Conversion in an
amount equal to the greater of (i) the lesser of 5% of the shares issued in
the Conversion or $150,000, (ii) one-tenth of one percent of the total
offering of shares of Common Stock, or (iii) 15 times the product (rounded
down to the next whole number) obtained by multiplying the total number of
shares of Common Stock to be issued by a fraction of which the numerator is
the amount of the Qualifying Deposit of the Eligible Account Holder and the
denominator is the total amount of Qualifying Deposits of all Eligible Account
Holders in the Converted Association in each case on the Eligibility Record
Date (i.e., December 31, 1995). The Plan further provides that no person
(together with associates and persons acting in concert therewith) may
purchase in the aggregate more than the lesser of 5% of the shares issued in
the Conversion or $150,000 of the aggregate value of shares of Common Stock
offered in the Conversion. See "-- Limitations on Purchases of Shares." If the
exercise of Subscription Rights in this category results in an
oversubscription, shares shall be allocated among subscribing Eligible Account
Holders so as to permit each such Eligible Account Holder, to the extent
possible, to purchase a number of shares sufficient to make his total
allocation equal 100 shares or the amount subscribed for, whichever is less.
Any shares not so allocated shall be allocated among the subscribing Eligible
Account Holders on an equitable basis related to the amounts of their
respective qualifying deposits, as compared to the total qualifying deposits
of all subscribing Eligible Account Holders. TO ENSURE A PROPER ALLOCATION OF
COMMON STOCK, EACH ELIGIBLE ACCOUNT HOLDER MUST LIST ON HIS STOCK ORDER FORM
ALL ACCOUNTS IN WHICH HE HAS AN OWNERSHIP INTEREST. FAILURE TO LIST ALL SUCH
QUALIFYING DEPOSIT ACCOUNTS MAY RESULT IN THE INABILITY OF THE COMPANY OR THE
ASSOCIATION TO FILL ALL OR PART OF A SUBSCRIPTION ORDER. NEITHER THE COMPANY,
THE ASSOCIATION NOR ANY OF THEIR AGENTS SHALL BE RESPONSIBLE FOR ORDERS ON
WHICH ALL QUALIFYING DEPOSIT ACCOUNTS HAVE NOT BEEN FULLY AND ACCURATELY
DISCLOSED. A qualifying deposit is the amount (required to be at least $50.00)
contained in a deposit account in the Association on December 31, 1995.
Subscription Rights received by directors and officers of the Association in
this category based on their increased deposits in the Association in the one-
year period preceding December 31, 1995 are subordinated to the Subscription
Rights of other Eligible Account Holders.
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Subscription Category No. 2 is reserved for the Association's tax-
qualified employee stock benefit plans, i.e., the ESOP, which shall receive
nontransferable Subscription Rights to purchase in the aggregate up to 10% of
the shares issued in the Conversion and which is expected to purchase 8% of
the Common Stock offered in the Conversion. Any shares of Common Stock sold in
excess of the maximum of the Estimated Valuation Range may be first sold to
the ESOP.
Subscription Category No. 3 is reserved for the Association's
Supplemental Eligible Account Holders, i.e., qualifying depositors of the
Association on the last day of the calendar quarter preceding OTS approval of
the Plan (March 31, 1997) who will each receive nontransferable Subscription
Rights to subscribe for Common Stock in the Subscription Offering. Pursuant to
the Plan, a Supplemental Eligible Account Holder may purchase Common Stock in
the Conversion in an amount equal to the greater of (i) the lesser of 5% of
the shares issued in the Conversion or $150,000, (ii) one-tenth of one percent
of the total offering of shares of Common Stock, or (iii) 15 times the product
(rounded down to the next whole number) obtained by multiplying the total
number of shares of Common Stock to be issued by a fraction of which the
numerator is the amount of the Qualifying Deposit of the Supplemental Eligible
Account Holder and the denominator is the total amount of Qualifying Deposits
of all Supplemental Eligible Account Holders in the Converted Association in
each case on the Supplemental Eligibility Record Date (i.e., March 31, 1997).
The Plan further provides that no person (together with associates and persons
acting in concert therewith) may purchase in the aggregate more than the
lesser of 5% of the shares issued in the Conversion or $150,000 of the
aggregate value of shares of Common Stock offered in the Conversion. See " --
Limitations on Purchases of Shares." If the exercise of Subscription Rights in
this category results in an oversubscription, shares shall be allocated among
subscribing Supplemental Eligible Account Holders, so as to permit each such
Supplemental Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his total allocation equal 100 shares or
the amount subscribed for, whichever is less, and any shares not so allocated
shall be allocated among the subscribing Supplemental Eligible Account Holders
on an equitable basis related to the amounts of their respective qualifying
deposits, as compared to the total qualifying deposits of all subscribing
Supplemental Eligible Account Holders. TO ENSURE A PROPER ALLOCATION OF COMMON
STOCK, EACH SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER MUST LIST ON HIS STOCK ORDER
FORM ALL ACCOUNTS IN WHICH HE HAS AN OWNERSHIP INTEREST. FAILURE TO LIST ALL
SUCH DEPOSIT ACCOUNTS MAY RESULT IN THE INABILITY OF THE COMPANY OR THE
ASSOCIATION TO FILL ALL OR PART OF A SUBSCRIPTION ORDER. NEITHER THE COMPANY,
THE ASSOCIATION NOR ANY OF THEIR AGENTS SHALL BE RESPONSIBLE FOR ORDERS ON
WHICH ALL QUALIFYING DEPOSIT ACCOUNTS HAVE NOT BEEN FULLY AND ACCURATELY
DISCLOSED. A qualifying deposit is the amount (required to be at least $50.00)
contained in a deposit account in the Association on March 31, 1997.
Subscription Rights received by directors and officers of the Association in
this category based on their increased deposits in the Association in the one-
year period preceding March 31, 1997 are subordinated to the Subscription
Rights of other Supplemental Eligible Account Holders. Subscriptions in this
Category No. 3 will be filled only to the extent that there are sufficient
shares of Common Stock remaining after satisfaction of subscriptions by
Category Nos. 1 and 2.
Subscription Category No. 4 is reserved for Other Members, i.e.,
certain depositors and borrowers who are members of the Association as of the
Voting Record Date entitled to vote at the Special Meeting but who are not
otherwise Eligible Account Holders or Supplemental Eligible Account Holders.
To the extent then available following subscriptions by Eligible Account
Holders, tax-qualified employee stock benefit plans and Supplemental Eligible
Account Holders, Other Members will receive, without payment therefor,
nontransferable Subscription Rights to subscribe for Common Stock in the
Subscription Offering up to the lesser of 5% of the shares issued in the
Conversion or $150,000. See "-- Limitations on Purchases of Shares." In the
event that Other Members subscribe for a number of shares which, when added to
the shares subscribed for by Eligible Account Holders, tax-qualified employee
stock benefit plans and Supplemental Eligible Account Holders, is in excess of
the total number of shares offered in the Conversion, the subscriptions of
such Other Members will be allocated pro rata among subscribing Other Members
on an equitable basis as determined by the Board of Directors.
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The Company will make reasonable efforts to comply with the securities laws of
all states in the United States in which persons entitled to subscribe for the
Common Stock pursuant to the Plan reside. However, no person will be offered or
allowed to purchase any Common Stock under the Plan if he resides in a foreign
country or in a state of the United States with respect to which any or all of
the following apply: (i) a small number of persons otherwise eligible to
subscribe for shares under the Plan reside in such state or foreign country;
(ii) the granting of Subscription Rights or the offer or sale of shares of
Common Stock to such persons would require the Company or the Association or
their employees to register, under the securities laws of such state, as a
broker, dealer, salesman or agent or to register or otherwise qualify its
securities for sale in such state or foreign country; and (iii) such
registration or qualification would be impracticable for reasons of cost or
otherwise. No payments will be made in lieu of the granting of Subscription
Rights to any such person.
Community Offering
To the extent shares remain available for purchase after the Subscription
Offering, the Company may offer any such remaining shares of the Common Stock to
members of the general public to whom the Company delivers a copy of this
Prospectus and a Stock Order Form in the Community Offering. The occurrence of
the Community Offering is subject to the availability of shares of Common Stock
for purchase after satisfaction of all orders received in the Subscription
Offering. THE COMMUNITY OFFERING, IF ANY, MAY COMMENCE WITHOUT NOTICE AT ANY
TIME AFTER THE COMMENCEMENT OF THE SUBSCRIPTION OFFERING AND MAY TERMINATE AT
ANY TIME WITHOUT NOTICE, BUT MAY NOT TERMINATE LATER THAN __________, 1997. THE
RIGHT OF ANY PERSON TO PURCHASE SHARES IN THE COMMUNITY OFFERING, IF ANY, IS
SUBJECT TO THE ABSOLUTE RIGHT OF THE COMPANY AND THE ASSOCIATION TO ACCEPT OR
REJECT SUCH PURCHASES IN WHOLE OR IN PART. THE COMPANY PRESENTLY INTENDS TO
TERMINATE THE COMMUNITY OFFERING, IF ANY, AS SOON AS IT HAS RECEIVED ORDERS FOR
SUFFICIENT SHARES AVAILABLE FOR PURCHASE IN THE CONVERSION.
If all of the Common Stock offered in the Subscription Offering is subscribed
for, there will be no Community Offering. In the event an insufficient number
of shares are available to fill orders in the Community Offering, the available
shares will be allocated by the Company in its discretion that a preference
shall be given to natural persons and trusts of natural persons who are
permanent residents of the Local Community. Orders received in the Community
Offering shall be allocated with 100 share (or lesser) orders filled first, and
remaining orders filled pro-rata, based on the size of the order, until all
orders have been filled, with a preference given to permanent residents of the
Local Community. If the Community Offering extends beyond 45 days following the
expiration of the Subscription Offering, subscribers will have the right to
increase, decrease or rescind subscriptions for stock previously submitted.
Purchasers in the Community Offering, together with their associates and groups
acting in concert, are each eligible to purchase up to the lesser of 5% of the
shares issued in the Conversion or $150,000 of the Common Stock issued in the
Conversion.
Except as noted below, cash and checks received in the Community Offering will
be placed in segregated savings accounts (each insured by the FDIC up to the
applicable $100,000 limit) established specifically for this purpose. Interest
will be paid on orders made by check, in cash or by money order at the
Association's passbook rate from the date the payment is received by the Company
until the consummation of the Conversion. In the event that the Conversion is
not consummated for any reason, all funds submitted pursuant to the Community
Offering will be promptly refunded with interest as described above.
Syndicated Community Offering
As part of the Community Offering, all shares of Common Stock not purchased in
the Subscription and Community Offerings, if any, may be offered for sale to the
general public in a Syndicated Community Offering through selected dealers to be
formed and managed by Trident Securities. The Syndicated Community Offering, if
any, will be conducted to achieve the widest distribution of Common Stock
subject to the Company and the Association having the right to reject orders in
whole or in part in their sole discretion in the Syndicated Community Offering.
Neither Trident Securities nor any registered broker-dealer shall have any
obligation to take or purchase any shares of the Common Stock in the Syndicated
Community Offering. Common Stock sold in the Syndicated Community Offering will
be sold at the same price as in the Subscription and Community Offerings.
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Individual purchasers in the Syndicated Community Offering may purchase up to
the lesser of 5% of the shares issued in the Conversion or $150,000 of the
Common Stock in the Conversion with any associate or group of persons acting in
concert. The Association shall be responsible for the payment of selling
commissions to other NASD firms and licensed brokers participating in the
Syndicated Community Offering. Other firms may participate under selected
dealers agreements, and Trident Securities and such selected dealers may receive
fees which are not expected to exceed 4.5% of the amount of the stock sold by
the selected dealers in the Syndicated Community Offering. In addition, Trident
would receive a fee of 1.0% for managing the Syndicated Community Offering.
During the Syndicated Community Offering, selected dealers may only solicit
indications of interest from their customers to place orders with the Company as
of a certain date ("Order Date") for the purchase of shares of common Stock.
When and if Trident Securities and the Company believe that enough indications
and orders have been received in the Offerings to consummate the Conversion,
Trident Securities will request, as of the Order Date, selected dealers to
submit orders to purchase shares for which they have received indications of
interest from their customers. Selected dealers will send confirmations of the
orders to such customers on the next business day after the Order Date.
Selected dealers may debit the accounts of their customers on a date which will
be three business days from the Order Date ("Settlement Date"). Customers who
authorize selected dealers to debit their brokerage accounts are required to
have the funds for payment in their account on but not before the Settlement
Date. On the Settlement Date, selected dealers will remit funds to the account
that the Company established for each selected dealer. After payment has been
received by the Company from selected dealers, funds will earn interest at the
Association's passbook savings rate until the consummation of the Conversion.
In the event the Conversion is not consummated as described above, funds with
interest will be returned promptly to the selected dealers, who, in turn, will
promptly credit its customers' brokerage account.
The Syndicated Community Offering, if any, will terminate no more than 45 days
following the completion of the Subscription Offering, unless extended by the
Company with the approval of the OTS. The Syndicated Community Offering may run
concurrently with the Subscription and Community Offerings or subsequent to such
offerings.
Subscriptions for Stock in Subscription and Community Offerings
Expiration Date. The Subscription Offering will expire at 12:00 Noon, local
time, on __________, 1997 unless extended by the Board of Directors of the
Association for up to an additional 45 days, to no later than __________, 1997.
Such date and time are referred to herein as the "Expiration Date."
Subscription rights not exercised prior to the Expiration Date will be void.
The Community Offering, if any, may terminate at any time without notice, but
may not terminate later than __________, 1997.
Orders will not be executed by the Company until at least the minimum number
of shares of Common Stock offered hereby have been subscribed for or sold. If
all shares of Common Stock have not been subscribed for or sold within 45 days
of the end of the Subscription Offering (unless such period is extended with
consent of the OTS), all funds delivered to the Company pursuant to the
Subscription Offering will be promptly returned to the subscribers with interest
and all charges to savings accounts will be rescinded.
Use of Stock Order Forms and Certification Forms. Rights to subscribe may
only be exercised by completion of Stock Order Forms and certification forms.
Any person receiving a Stock Order Form who desires to subscribe for shares of
stock must do so prior to the Expiration Date by delivering (by mail or in
person) to the office of the Association a properly executed and completed Stock
Order Form and certification form, together with full payment for all shares for
which the subscription is made. All checks or money orders must be made payable
to "Rocky Ford Financial, Inc." The Stock Order Form and certification form
must be received by the Expiration Date. All subscription rights under the Plan
will expire on the Expiration Date, whether or not the Company has been able to
locate each person entitled to such subscription rights. ONCE TENDERED,
SUBSCRIPTION ORDERS CANNOT BE REVOKED.
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Each subscription right may be exercised only by the person to whom it is
issued and only for his or her own account. THE SUBSCRIPTION RIGHTS GRANTED
UNDER THE PLAN ARE NONTRANSFERABLE; PERSONS WHO ATTEMPT TO TRANSFER THEIR
SUBSCRIPTION RIGHTS MAY LOSE THE RIGHT TO SUBSCRIBE FOR STOCK IN THE CONVERSION
AND MAY BE SUBJECT TO OTHER SANCTIONS AND PENALTIES IMPOSED BY THE OTS. Each
person subscribing for shares is required to represent to the Company that he or
she is purchasing such shares for his or her own account and that he or she has
no agreement or understanding with any other person for the sale or transfer of
such shares.
In the event Stock Order Forms (i) are not delivered and are returned to the
Company by the United States Postal Service or the Company is unable to locate
the addressee, or (ii) are not returned or are received after the Expiration
Date, or (iii) are defectively completed or executed, or (iv) are not
accompanied by the full required payment for the shares subscribed for
(including instances where a savings account or certificate balance from which
withdrawal is authorized is insufficient to fund the amount of such required
payment), the subscription rights of the person to whom such rights have been
granted will lapse as though such person failed to return the completed Stock
Order Form within the time period specified. However, the Company or the
Association may, but will not be required to, waive any irregularity on any
Stock Order Form or require the submission of corrected Stock Order Forms or the
remittance of full payment for subscribed shares by such date as the Company or
the Association may specify. The interpretation by the Company and the
Association of the terms and conditions of the Plan and of the Stock Order Form
will be final.
Payment for Shares. Payment for all subscribed shares of Common Stock will be
required to accompany all completed Stock Order Forms for subscriptions to be
valid. Payment for subscribed shares may be made (i) in cash, if delivered in
person, (ii) by check or money order, or (iii) by authorization of withdrawal
from deposit accounts maintained with the Association. Appropriate means by
which such withdrawals may be authorized are provided in the Stock Order Form.
Once such a withdrawal has been authorized, none of the designated withdrawal
amount may be used by a subscriber for any purpose other than to purchase stock
for which subscription has been made while the Plan remains in effect. In the
case of payments authorized to be made through withdrawal from deposit accounts,
all sums authorized for withdrawal will continue to earn interest at the
contract rate until the date of consummation of the sale. In the case of
payments made in cash or by check or money order such funds will be placed in a
segregated savings account established for each subscriber specifically for this
purpose (each insured by the FDIC up to the applicable $100,000 limit) and
interest will be paid at the Association's passbook rate from the date payment
is received until the Conversion is completed or terminated. Interest penalties
for early withdrawal applicable to certificate accounts will not apply to
withdrawals authorized for the purchase of shares; however, if a partial
withdrawal results in a certificate account with a balance less than the
applicable minimum balance requirement, the certificate evidencing the remaining
balance will earn interest at the Association's passbook rate subsequent to the
withdrawal. An executed Stock Order Form, once received by the Company, may not
be modified, amended or rescinded without the consent of the Company, unless the
Conversion is not completed within 45 days of the termination of the
Subscription Offering. If an extension of the period of time to complete the
Conversion is approved by the OTS, subscribers will be resolicited and must
affirmatively reconfirm their orders prior to the expiration of the
resolicitation offering, or their subscription funds will be promptly refunded.
Subscribers may also modify or cancel their subscriptions. Interest will be
paid on such funds at the Association's passbook rate during the 45-day period
and any approved extension period. Wired funds will not be accepted for the
payment for shares of Common Stock.
Owners of self-directed IRAs or other self-directed tax-qualified retirement
plans, may use the assets of such IRAs or plans to purchase shares of Common
Stock in the Subscription and Community Offerings, provided that such IRAs or
plans are not maintained at the Association. Persons with IRAs or plans
maintained at the Association must have their accounts transferred to an
unaffiliated institution or broker to purchase shares of Common Stock in the
Subscription and Community Offerings. Depositors interested in using funds in
an Association IRA or plan to purchase Common Stock should contact the
Association's Stock Information Center at (___) ________ as soon as possible but
no later than seven days prior to closing of the offering period, so that the
necessary forms may be forwarded for execution and returned at least one week
prior to the Expiration Date of the Subscription Offering.
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The ESOP will not be required to pay for the shares subscribed for at the time
it subscribes, but may pay for such shares upon consummation of the Subscription
and Community Offerings, if all shares are sold, or upon consummation of any
subsequent offering, if shares remain to be sold in such an offering.
Shares Purchased. Certificates representing shares of the Common Stock will
be delivered to subscribers as soon as practicable after closing of the
Conversion.
Plan of Distribution and Marketing Agent
Officers of the Association are available at the Association's office to
provide offering materials to prospective investors, to answer their questions
(but only to the extent such information is derived from this Prospectus) and to
receive completed Stock Order Forms and certification forms from prospective
investors interested in subscribing for shares of the Common Stock. None of the
Association's directors, officers or employees will receive any commissions or
other compensation for their efforts in connection with sales of shares of the
Common Stock. ALTHOUGH INFORMATION REGARDING THE STOCK OFFERING IS AVAILABLE AT
THE ASSOCIATION'S OFFICE, AN INVESTMENT IN THE COMMON STOCK IS NOT A DEPOSIT,
AND THE COMMON STOCK IS NOT FEDERALLY INSURED.
The directors, officers and employees of the Association who will be involved
in selling stock are expected to be exempt from the requirement to register with
the SEC as broker-dealers within the meaning of Rule 3a4-1 under the Exchange
Act. Such persons will qualify under the safe harbor provisions of that rule on
the basis of paragraphs (a)(4)(ii) and/or (iii), i.e., management of the
Association expects that such persons either (x) will perform substantial duties
for the Company in its business, will not otherwise be broker-dealers and are
not expected to participate in another offering in the next twelve months or (y)
will limit their activities to preparing written communications, responding to
customer inquiries and/or performing ministerial/clerical functions.
The Association and the Company have engaged Trident Securities as financial
advisor to provide sales assistance in connection with the Subscription and
Community Offerings of the Common Stock. The services of Trident Securities
will include, but are not limited to, (i) training and educating the
Association's employees who will be performing certain ministerial functions in
the Subscription and Community Offerings regarding the mechanics and regulatory
requirements of the stock sales process and the solicitation of proxies from
members, (ii) providing employees to manage the Stock Information Center,
assisting Association customers and interested stock purchasers and keeping
records of orders for shares of Common Stock, and (iii) supervising the
Association's sales efforts, including preparation of marketing materials. For
all its services rendered in the Conversion, Trident Securities will receive a
commission equal to 2.35% of the aggregate dollar amount of Common Stock sold to
residents of Colorado, and 1.50% of the aggregate dollar amount of Common Stock
sold to non-residents of Colorado, excluding any shares of stock sold to the
Association's directors, executive officers, and the ESOP. Additionally,
commissions will be excluded on shares sold to "associates" (as defined in the
Plan) of the Association's directors and executive officers. In the event
Common Stock is sold by other NASD member firms under selected dealer's
agreements, the aggregate commissions to be received by Trident Securities and
selected dealers are not expected to exceed 4.5% of the amount of Common Stock
sold by such selected dealers. Trident Securities will also be reimbursed for
its reasonable out-of-pocket expenses in an amount not to exceed $10,000 and its
legal fees in an amount not to exceed $30,000. The Company and the Association
have agreed to indemnify Trident Securities for reasonable costs and expenses in
connection with certain claims or liabilities, including certain liabilities
under the Securities Act.
Stock Pricing and Number of Shares to be Issued
Ferguson, which is experienced in the evaluation and appraisal of savings
institutions involved in the conversion process, has been retained by the
Association to prepare an appraisal of the estimated pro forma market value of
the Common Stock to be sold pursuant to the Conversion. Prior to the
Conversion, the Association did not have any business relationship with
Ferguson. Ferguson will receive a fixed fee of $25,000 for its appraisal and
other services, and reimbursement for related expenses up to $5,000. The
Association has agreed to indemnify
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Ferguson under certain circumstances against any losses, damages, expenses or
liability arising out of the Association's engagement of Ferguson for the
appraisal.
Ferguson has determined as of December 13, 1997 that the estimated pro forma
market value of the stock to be issued by the Company in the Conversion was
$3,200,000. In determining the reasonableness and adequacy of the appraisal
submitted by Ferguson, the Boards of Directors of the Association and the
Company reviewed with Ferguson the methodology and the appropriateness of
assumptions used by Ferguson in preparing the appraisal. The Company, in
consultation with Trident Securities, has determined to offer the shares in the
Conversion at the Purchase Price of $10.00 per share. The price per share was
determined based on a number of factors, including the market price per share of
the stock of other financial institutions. Regulations administered by the OTS
require, however, that the appraiser establish a range of value for the stock of
approximately 15% on either side of the estimated value to allow for
fluctuations in the aggregate value of the stock due to changes in the market
and other factors from the time of commencement of the Subscription Offering
until completion of the Community Offering. Accordingly, Ferguson has
established a range of value of from $2,720,000 to $3,680,000 for the
Conversion. Ferguson will either confirm the continuing validity of its
appraisal or provide an updated appraisal immediately prior to the completion of
the Conversion.
Should it be determined at the close of the offering that the aggregate pro
forma market value of the Common Stock is higher or lower than $3,200,000, but
is nonetheless within the Estimated Valuation Range or within 15% of the maximum
of such range, the Company will make an appropriate adjustment by raising or
lowering by no more than 15% the total number of shares being offered (within a
range from 272,000 shares to 368,000 shares). Unless permitted by the Company
or otherwise required by the OTS, no resolicitation of subscribers and other
purchasers will be made because of any such change in the number of shares to be
issued unless the aggregate purchase price of the Common Stock sold in the
Conversion is below the minimum of the Estimated Valuation Range or is more than
$4,232,000 (i.e., 15% above the maximum of the Estimated Valuation Range). If
the aggregate purchase price falls outside the range of from $2,720,000 to
$4,232,000, subscribers and other purchasers will be resolicited and given the
opportunity to continue their orders, in which case they will need to
affirmatively reconfirm their subscriptions prior to the expiration of the
resolicitation, or their subscription funds will be promptly refunded with
interest at the Association's passbook rate. Subscribers will also be given the
opportunity to increase, decrease or rescind their orders. Any change in the
Estimated Valuation Range must be approved by the OTS. THE ESTABLISHMENT OF ANY
NEW PRICE RANGE MAY BE EFFECTED WITHOUT A RESOLICITATION OF VOTES FROM THE
ASSOCIATION'S MEMBERS TO APPROVE THE CONVERSION.
THE APPRAISAL IS NOT INTENDED, AND MUST NOT BE CONSTRUED, AS A RECOMMENDATION
OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING THE COMMON STOCK. IN PREPARING
THE VALUATION, FERGUSON HAS RELIED UPON AND ASSUMED THE ACCURACY AND
COMPLETENESS OF FINANCIAL AND STATISTICAL INFORMATION PROVIDED BY THE
ASSOCIATION AND THE COMPANY. FERGUSON DID NOT INDEPENDENTLY VERIFY THE
FINANCIAL STATEMENTS AND OTHER INFORMATION PROVIDED BY THE ASSOCIATION AND THE
COMPANY, NOR DID FERGUSON VALUE INDEPENDENTLY THE ASSETS AND LIABILITIES OF THE
ASSOCIATION AND THE COMPANY. THE VALUATION CONSIDERS THE ASSOCIATION AND THE
COMPANY ONLY AS A GOING CONCERN AND SHOULD NOT BE CONSIDERED AS AN INDICATION OF
THE LIQUIDATION VALUE OF THE ASSOCIATION AND THE COMPANY. MOREOVER, BECAUSE
SUCH VALUATION IS NECESSARILY BASED UPON ESTIMATES AND PROJECTIONS OF A NUMBER
OF MATTERS, ALL OF WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME, NO ASSURANCE
CAN BE GIVEN THAT PERSONS PURCHASING THE COMMON STOCK WILL THEREAFTER BE ABLE TO
SELL SUCH SHARES AT PRICES EQUAL TO OR ABOVE THE PRICE OR PRICES PAID FOR IT.
COPIES OF THE APPRAISAL REPORT OF FERGUSON SETTING FORTH THE METHOD AND
ASSUMPTIONS FOR SUCH APPRAISAL ARE ON FILE AND AVAILABLE FOR INSPECTION AT THE
OFFICES SET FORTH IN "ADDITIONAL INFORMATION" AND AT THE OFFICE OF THE
ASSOCIATION. FURTHER, ANY SUBSEQUENT UPDATED APPRAISAL ALSO WILL BE FILED WITH
THE SEC AND WILL BE AVAILABLE FOR INSPECTION.
Limitations on Purchase of Shares
Purchases of shares of Common Stock are subject to limitations as set forth in
the Plan. All shares are offered to persons subscribing in the Subscription
Offering, and shares are only offered to persons in the Community
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Offering and Syndicated Community Offering, if any, to the extent available
after filling subscriptions in the Subscription Offering.
Within the Subscription Offering, the maximum purchases by subscribers are
limited under the Plan. Eligible Account Holders may only subscribe up to an
amount equal to the greater (i) of the lesser of 5% of the shares issued in the
Conversion or $150,000, (ii) one-tenth of one percent of the total offering of
shares of Common Stock, or (iii) 15 times the product (rounded down to the next
whole number) obtained by multiplying the total number of shares of Common Stock
to be issued by a fraction of which the numerator is the amount of the
Qualifying Deposit of the Eligible Account Holder and the denominator is the
total amount of Qualifying Deposits of all Eligible Account Holders in the
Converted Association in each case on the Eligibility Record Date (i.e.,
December 31, 1995). Supplemental Eligible Account Holders may only subscribe up
to an amount equal to the greater of (i) the lesser of 5% of the shares issued
in the Conversion or $150,000, (ii) one-tenth of one percent of the total
offering of shares of Common Stock, or (iii) 15 times the product (rounded down
to the next whole number) obtained by multiplying the total number of shares of
Common Stock to be issued by a fraction of which the numerator is the amount of
the Qualifying Deposit of the Supplemental Eligible Account Holder and the
denominator is the total amount of Qualifying Deposits of all Supplemental
Eligible Account Holders in the Converted Association in each case on the
Supplemental Eligibility Record Date (i.e., March 31, 1997). The Plan further
provides that no person (together with associates and persons acting in concert
therewith) may purchase in the aggregate more than the lesser of 5% of the
shares issued in the Conversion or $150,000 of the aggregate value of shares of
Common Stock offered in the Conversion.
The Plan provides for certain additional limitations to be placed upon the
purchase of shares by eligible subscribers and others in the Conversion. Each
subscriber must subscribe for a minimum of 25 shares. The ESOP may purchase up
to an aggregate of 10% of the shares of the Common Stock to be issued in the
Conversion and is expected to purchase 8% of such shares. No person, including
associates (as defined below) of and persons acting in concert (as defined
below) with such person (other than the ESOP), may purchase in the Subscription
or Community Offerings more than the lesser of 5% of the shares issued in the
Conversion or $150,000, of Common Stock. Shares purchased by the ESOP and
attributable to a participant thereunder shall not be aggregated with shares
purchased by such participant or any other purchaser of Common Stock in the
Conversion. Officers and directors and their associates may not purchase, in
the aggregate, more than 35% of the shares to be issued in the Conversion. For
purposes of the Plan, the directors of the Company and the Association are not
deemed to be associates or a group acting in concert solely by reason of their
Board membership.
Subject to any required regulatory approval and the requirements of applicable
laws and regulations, but without further approval of the Association's members,
purchase limitations may be increased or decreased at the sole discretion of the
Company and the Association at any time. If such amount is increased,
subscribers for the maximum amount will be given the opportunity to increase
their subscriptions up to the then applicable limit, subject to the rights and
preferences of any person who has priority Subscription Rights. In the event
that the purchase limitation is decreased after commencement of the Subscription
and Community Offerings, the orders of any person who subscribed for the maximum
number of shares of Common Stock shall be decreased by the minimum amount
necessary so that such person shall be in compliance with the then maximum
number of shares permitted to be subscribed for by such person.
The term "acting in concert" is defined in the Plan to mean (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal, whether or not pursuant to an express agreement, or (ii)
a combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. The
Company and the Association may presume that certain persons are acting in
concert based upon, among other things, joint account relationships and the fact
that such persons have filed joint Schedules 13D with the SEC with respect to
other companies. The term "associate" of a person is defined in the Plan to
mean: (i) any corporation or organization (other than the Association, the
Company, or a majority-owned subsidiary of the Association or the Company) of
which such person is an officer or partner or is directly or indirectly the
beneficial owner of 10% or more of any equity securities; (ii) any trust or
other estate in which such person has a substantial beneficial interest
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or as to which such person serves as a trustee or in a similar fiduciary
capacity, provided, however, such term shall not include any employee stock
benefit plan of the Association in which such person has a substantial
beneficial interest or serves as a trustee or in a similar fiduciary capacity;
and (iii) any relative or spouse of such person, or any relative of such spouse,
who either has the same home as such person or who is a director of the
Association or the Company or any of their subsidiaries. Directors are not
treated as associates solely because of their Board membership.
Each person purchasing Common Stock in the Conversion shall be deemed to
confirm that such purchase does not conflict with the purchase limitations under
the Plan or otherwise imposed by law, rule or regulation. In the event that
such purchase limitations are violated by any person (including any associate or
group of persons affiliated or otherwise acting in concert with such person),
the Company shall have the right to purchase from such person at the aggregate
purchase price all shares acquired by such person in excess of such purchase
limitations or, if such excess shares have been sold by such person, to receive
the difference between the aggregate purchase price paid for such excess shares
and the price at which such excess shares were sold by such person. This right
of the Company to purchase such excess shares shall be assignable by the
Company. In addition, persons who violate the purchase limitations may be
subject to sanctions and penalties imposed by the OTS.
Stock purchased pursuant to the Conversion will be freely transferable, except
for shares purchased by directors and officers of the Association and the
Company. See "-- Limitations on Resales by Management."
In addition, under guidelines of the NASD, members of the NASD and their
associates are subject to certain restrictions on the transfer of securities
purchased in accordance with Subscription Rights and to certain reporting
requirements upon purchase of such securities.
Depending upon market conditions, the Boards of Directors of the Company and
the Association, with the approval of the OTS, may increase or decrease any of
the above purchase limitations. In the event of such an increase or decrease,
no further approval of members of the Association would be required. OTS
regulations authorize a plan of conversion to provide a minimum purchase
limitation of a percentage as low as 1% and a maximum purchase limitation of a
percentage not to exceed 10%, provided that orders for shares exceeding 5% of
the shares being offered in the Conversion shall not exceed in the aggregate 10%
of the shares being offered in the Conversion.
Regulatory Restrictions on Acquisition of the Common Stock
Current federal regulations prohibit any person from making an offer,
announcing an intent to make an offer, entering into any other arrangement to
purchase Common Stock or acquiring Common Stock or Subscription Rights in the
Company from another person prior to completion of the Conversion. Further, no
person may make an offer or announcement of an offer to purchase shares or
actually acquire shares in the Company for a period of three years from the date
of the completion of the Conversion, if, upon the completion of such offer or
acquisition, that person would become the beneficial owner of more than 10% of
the Company's outstanding stock, without the prior written approval of the OTS.
The OTS has defined the word "person" to include any individual, group acting in
concert, corporation, partnership, association, joint stock company, trust,
unincorporated organization or similar company, a syndicate or any group formed
for the purpose of acquiring, holding or disposing of securities of an insured
institution. However, offers made exclusively to the Company or underwriters or
members of a selling group acting on behalf of the Company for resale to the
general public are excepted. The regulations also provide civil penalties for
willful violation or assistance of any such violation of the regulation by any
person connected with the management of the Company following the Conversion.
Moreover, when any person, directly or indirectly, acquires beneficial ownership
of more than 10% of the Company's capital stock following the Conversion within
such three-year period without the prior approval of the OTS, the Company's
Common Stock beneficially owned by such person in excess of 10% shall not be
counted as shares entitled to vote and shall not be voted by any person or
counted as voting shares in connection with any matter submitted to the
stockholders for a vote. The Certificate of Incorporation of the Company
include a similar 10% beneficial ownership limitation. See "Certain Anti-
Takeover Provisions in the Certificate of Incorporation and Bylaws."
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In addition to the foregoing restrictions, any person or group of persons
acting in concert who propose to acquire 10% or more of the Company's
outstanding shares will be presumed under OTS regulations, to be acquiring
control of the Company and will be required to submit prior notice to the OTS
under the Change in Control Act.
Restrictions on Repurchase of Stock
Subject to the exceptions described herein, for a period of three years
following the Conversion, the Company may not repurchase any of its stock from
any person, except (i) repurchases on a pro rata basis pursuant to an offer,
approved by the OTS, made to all stockholders, and (ii) repurchases of
qualifying shares of a director. However, upon 10 days' written notification to
the OTS Regional Director for the Converted Association and the Chief Counsel of
the Business Transactions Division of the OTS, if the Regional Director and
Chief Counsel do not object, the Company may make open market repurchases of its
outstanding Common Stock, provided that: (i) no repurchases may occur in the
first year following the Conversion without OTS approval; (ii) in the second and
third years after the Conversion, repurchases must be part of an open-market
program that does not allow for the repurchase of more than 5% of the Company's
outstanding Common Stock during a 12-month (a waiver may be obtained from the
OTS which would allow for additional purchases); (iii) the repurchases would not
cause the Converted Association to become "undercapitalized" (as defined for
regulatory purposes); (iv) the repurchases would not materially adversely affect
the Converted Association's financial condition; and (v) there is a valid
business purpose for the repurchases. The Company may not repurchase any of its
stock if the effect thereof would cause the Converted Association's regulatory
capital to be reduced below the amount required for the liquidation account.
Regulatory dividend limitations may provide further restrictions on stock
repurchases.
Limitations on Resales by Management
Shares of the Common Stock purchased by directors or officers of the Company
and the Association in the Conversion will be subject to the restriction that
such shares may not be sold for a period of one year following completion of the
Conversion, except in the event of the death of the original purchaser or in any
exchange of such shares in connection with a merger or acquisition of the
Company approved by the OTS. Accordingly, shares of the Common Stock issued by
the Company to directors and officers shall bear a legend giving appropriate
notice of the restriction imposed upon it and, in addition, the Company will
give appropriate instructions to the transfer agent for the Common Stock with
respect to the applicable restriction for transfer of any restricted stock. Any
shares issued to directors and officers as a stock dividend, stock split or
otherwise with respect to restricted stock shall be subject to the same
restrictions. Shares acquired otherwise than in the Conversion, such as under
the Company's Option Plan, would not be subject to such restrictions. To the
extent directors and officers are deemed affiliates of the Company, all shares
of the Common Stock acquired by such directors and officers will be subject to
certain resale restrictions and may be resold pursuant to Rule 144 under the
Securities Act. See "Regulation -- Regulation of the Company Following the
Conversion -- Federal Securities Law."
Interpretation and Amendment of the Plan
To the extent permitted by law, all interpretations of the Plan by the
Association will be final. The Plan provides that the Association's Board of
Directors shall have the sole discretion to interpret and apply the provisions
of the Plan to particular facts and circumstances and to make all determinations
necessary or desirable to implement such provisions, including but not limited
to matters with respect to giving preference in the Community Offering to
natural persons and trusts of natural persons who are permanent residents of the
Local Community, and any and all interpretations, applications and
determinations made by the Board of Directors in good faith and on the basis of
such information and assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the Association and its members and
subscribers in the Subscription and Community Offerings, subject to the
authority of the OTS.
The Plan provides that, if deemed necessary or desirable by the Board of
Directors, the Plan may be substantively amended by a two-thirds vote of the
Board of Directors at any time prior to submission of the Plan and proxy
materials to the Association's members. After submission of the Plan and proxy
materials to the members,
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the Plan may be amended by a two-thirds vote of the Board of Directors at any
time prior to the Special Meeting and at any time following the Special Meeting
with the concurrence of the OTS. In its discretion, the Board of Directors may
generally modify or terminate the Plan upon the order of the regulatory
authorities without resoliciting proxies or otherwise obtaining approval of the
amended Plan by members at another Special Meeting. However, any modification of
the Plan that results in a material change in the terms of the Conversion would
require such a resolicitation of proxies and another meeting of members.
The Plan further provides that in the event that mandatory new regulations
pertaining to conversions are adopted by the OTS or any successor agency prior
to completion of the Conversion, the Plan will be amended to conform to such
regulations without a resolicitation of proxies or another Special Meeting. In
the event that such new conversion regulations contain optional provisions, the
Plan may be amended to utilize such optional provisions at the discretion of the
Board of Directors without a resolicitation of proxies or another Special
Meeting. By adoption of the Plan, the Association's members will be deemed to
have authorized amendment of the Plan under the circumstances described above.
Conditions and Termination
Completion of the Conversion requires the approval of the Plan by the
affirmative vote of not less than a majority of the total outstanding votes of
the members of the Association and the sale of all shares of the Common Stock
within 24 months following approval of the Plan by the members. If these
conditions are not satisfied, the Plan will be terminated, and the Association
will continue its business in the mutual form of organization. The Plan may be
terminated by the Board of Directors at any time prior to the Special Meeting
and, with the approval of the OTS, by the Board of Directors at any time
thereafter.
CERTAIN RESTRICTIONS ON ACQUISITION OF THE COMPANY AND THE ASSOCIATION
Conversion Regulations
OTS regulations prohibit a person from making an offer, announcing an intent
to make an offer or other arrangement to purchase stock, or acquiring stock or
subscription rights in the Association or the Company from another person prior
to completion of the Conversion. Further, no person may make such an offer or
announcement of an offer to purchase shares or actually acquire shares in the
Association or the Company for a period of three years from the date of the
completion of the Conversion if, upon the completion of such offer or
acquisition, that person would become the beneficial owner of more than 10% of
the stock of the Association or the Company without the prior written approval
of the Director of the OTS. For purposes of the regulations, "person" is
defined to include any individual, group acting in concert, corporation,
partnership, association, joint stock company, trust, unincorporated
organization or similar company, a syndicate or any other group formed for the
purpose of acquiring, holding or disposing of securities of the Association or
the Company. Offers made exclusively to the Association or the Company,
however, or underwriters or members of a selling group acting on the
Association's or Company's behalf for resale to the general public, are
excepted.
Change in Association Control Act and Savings and Loan Holding Company
Provisions of Home Owners' Loan Act
Federal laws and regulations contain a number of provisions which affect the
acquisition of insured institutions such as the Association, including a savings
and loan holding company such as the Company. The Change in Bank Control Act
provides that no person, acting directly or indirectly or through or in concert
with one or more persons, may acquire control of a savings association unless
the OTS has been given 60 days' prior written notice and the OTS does not issue
a notice disapproving the proposed acquisition. In addition, certain provisions
of the Home Owners Loan Act provide that no company may acquire control of a
thrift without the prior approval of the OTS. Any company that acquires such
control becomes a "savings and loan holding company" subject to registration,
examination and regulation by the OTS.
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Pursuant to applicable regulations, control of a savings association is
conclusively deemed to have been acquired by, among other things, the
acquisition of more than 25% of any class of voting stock of a savings
association or the ability to control the election of a majority of the
directors of an institution. Moreover, control is presumed to have been
acquired, subject to rebuttal, upon the acquisition of more than 10% of any
class of voting stock, or more than 25% of any class of stock, of a savings
association, where one or more enumerated "control factors" are also present in
the acquisition. The OTS may prohibit an acquisition of control if it finds,
among other things, that (i) the acquisition would result in a monopoly or
substantially lessen competition, (ii) the financial condition of the acquiring
person might jeopardize the financial stability of the savings association, or
(iii) the competence, experience, or integrity of the acquiring person indicates
that it would not be in the interest of the depositors or the public to permit
the acquisition of control by such person. The foregoing restrictions do not
apply to the acquisition of the Company's capital stock by one or more tax-
qualified employee stock benefit plans, provided that the plan or plans do not
have beneficial ownership in the aggregate of more than 25% of any class of
equity security.
Delaware General Corporation Law
The DGCL contains a statute designed to provide Delaware corporations with
additional protection against hostile takeovers. The takeover statute, which is
codified in Section 203 of the DGCL, among other things, prohibits the Company
from engaging in certain business combinations (including a merger) with a
person who is the beneficial owner of 15% or more of the Company's outstanding
voting stock (an Interested Stockholder) during the three-year period following
the date such person became an Interested Stockholder. This restriction does
not apply if (1) before such person became an Interested Stockholder, the Board
of Directors approved the transaction in which the Interested Stockholder
becomes an Interested Stockholder or approved the business combination; or (2)
upon consummation of the transaction which resulted in the stockholder's
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the Company outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding, those shares owned by (i) persons who are directors and also
officers and (ii) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (3) on or subsequent to
such date, the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least two-thirds of the outstanding
voting stock which is not owned by the Interested Stockholder. The Company may
exempt itself from the requirements of the statute by adopting an amendment to
its Certificate of Incorporation. At the present time, the Board of Directors
does not intend to propose any such amendment.
CERTAIN ANTI-TAKEOVER PROVISIONS
IN THE CERTIFICATE OF INCORPORATION AND BYLAWS
While the Boards of Directors of the Association and the Company are not aware
of any effort that might be made to obtain control of the Company after
Conversion, the Board of Directors, as discussed below, believes that it is
appropriate to include certain provisions as part of the Company's Certificate
of Incorporation to protect the interests of the Company and its stockholders
from hostile takeovers which the Board of Directors might conclude are not in
the best interests of the Association, the Company or the Company's
stockholders. These provisions may have the effect of discouraging a future
takeover attempt which is not approved by the Board of Directors but which
individual stockholders may deem to be in their best interests or in which
stockholders may receive a substantial premium for their shares over then
current market prices. As a result, stockholders who might desire to
participate in such a transaction may not have an opportunity to do so. Such
provisions will also render the removal of the current Board of Directors or
management of the Company more difficult.
The following discussion is a general summary of the material provisions of
the Certificate of Incorporation and Bylaws of the Company which may be deemed
to have such an "anti-takeover" effect. The description of these provisions is
necessarily general and reference should be made in each case to the Certificate
of Incorporation and
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Bylaws of the Company. For information regarding how to obtain a copy of these
documents without charge, see "Additional Information."
Board of Directors
Certain provisions of the Company's Certificate of Incorporation and Bylaws
will impede changes in control of the Board of Directors of the Company. The
Certificate of Incorporation provides that the Board of Directors is to be
divided into three classes, as nearly equal in number as possible, which shall
be elected for staggered three-year terms.
The Company's Certificate of Incorporation provides that a director may be
removed only for cause by the affirmative vote of the holders of at least 80% of
the outstanding shares entitled to vote and that the size of the Board of
Directors may be changed only by a vote of two-thirds of the directors then in
office. The Certificate of Incorporation further provides that any vacancy
occurring in the Board of Directors, including a vacancy created by an increase
in the number of directors, shall be filled for the remainder of the unexpired
term by a two-thirds vote of the directors then in office.
Stockholder Vote Required to Approve Business Combinations with Principal
Stockholders
The Company's Certificate of Incorporation requires the approval of the
holders of (i) at least 80% of the Company's outstanding shares of voting stock,
and (ii) at least a majority of the Company's outstanding shares of voting
stock, not including shares held by a "Related Person," to approve certain
"Business Combinations" as defined therein, and related transactions. Under
DGCL, absent this provision, Business Combinations, including mergers,
consolidations and sales of substantially all of the assets of the Company must,
subject to certain exceptions, be approved by the vote of the holders of a
majority of the outstanding shares of the Common Stock. For a discussion of an
exception to the majority approval requirement under Delaware law, see "Certain
Restrictions on Acquisition of the Company and the Association -- Delaware
General Corporation Law." The increased voting requirements in the Company's
Certificate of Incorporation apply in connection with business combinations
involving a "Related Person," except in cases where the proposed transaction has
been approved in advance by two-thirds of those members of the Company's Board
of Directors who are unaffiliated with the Related Person and who were directors
prior to the time when the Related Person became a Related Person (the
"Continuing Directors"). The term "Related Person" is defined to include any
individual, corporation, partnership or other entity which owns beneficially or
controls, directly or indirectly, 10% or more of the outstanding shares of
voting stock of the Company. A "Business Combination" is defined to include (i)
any merger or consolidation of the Company with or into any Related Person; (ii)
any sale, lease exchange, mortgage, transfer, or other disposition of all or a
substantial part of the assets of the Company or of a subsidiary to any Related
Person (the term "substantial part" is defined to include more than 25% of the
Company's total assets); (iii) any merger or consolidation of a Related Person
with or into the Company or a subsidiary of the Company; (iv) any sale, lease,
exchange, transfer or other disposition of all or any substantial part of the
assets of a Related Person to the Company or a subsidiary of the Company; (v)
the issuance of any securities of the Company or a subsidiary of the Company to
a Related Person; (vi) the acquisition by the Company of any securities of the
Related Person; (vii) any reclassification of the Common Stock, or any
recapitalization involving the Common Stock; and (viii) any agreement, contract
or other arrangement providing for any of the above transactions.
Limitations on Call of Meetings of Stockholders
The Company's Certificate of Incorporation provides that special meetings of
stockholders may only be called by the Company's Board of Directors or an
appropriate committee appointed by the Board of Directors. Stockholders are not
authorized to call a special meeting, and stockholder action may be taken only
at a special or annual meeting of stockholders and not by written consent.
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Absence of Cumulative Voting
The Company's Certificate of Incorporation provides that there shall not be
cumulative voting by stockholders for the election of the Company's directors.
The absence of cumulative voting rights effectively means that the holders of a
majority of the shares voted at a meeting of stockholders may, if they so
choose, elect all directors of the Company to be selected at that meeting, thus
precluding minority stockholder representation on the Company's Board of
Directors.
Restrictions on Acquisitions of Securities
The Certificate of Incorporation provides that for a period of five years from
the effective date of the Conversion, no person may acquire directly or
indirectly acquire the beneficial ownership of more than 10% of any class of
equity security of the Company, unless such offer or acquisition shall have been
approved in advance by a two-thirds vote of the Company's Continuing Directors.
This provision does not apply to any employee stock benefit plan of the Company.
In addition, during such five-year period, no shares beneficially owned in
violation of the foregoing percentage limitation, as determined by the Company's
Board of Directors, shall be entitled to vote in connection with any matter
submitted to stockholders for a vote. Additionally, the Certificate of
Incorporation provides for further restrictions on voting rights of shares owned
in excess of 10% of any class of equity security of the Company beyond five
years after the Conversion of the Association. Specifically, the Certificate of
Incorporation provides that if, at any time after five years from the
Association's conversion to stock form, any person acquires the beneficial
ownership of more than 10% of any class of equity security of the Company, then,
with respect to each vote in excess of 10%, such person shall be entitled to
cast only one-hundredth of one vote. An exception from the restriction is
provided if the acquisition of more than 10% of the securities received the
prior approval by a two-thirds vote of the Company's Continuing Directors.
Under the Company's Certificate of Incorporation, the restriction on voting
shares beneficially owned in violation of the foregoing limitations is imposed
automatically. In order to prevent the imposition of such restrictions, the
Board of Directors must take affirmative action approving in advance a
particular offer to acquire or acquisition. Unless the Board took such
affirmative action, the provision would operate to restrict the voting by
beneficial owners of more than 10% of the Company's Common Stock in a proxy
contest.
Board Consideration of Certain Nonmonetary Factors in the Event of an Offer by
Another Party
The Certificate of Incorporation of the Company permits the Board of
Directors, in evaluating a Business Combination or a tender or exchange offer,
to consider, in addition to the adequacy of the amount to be paid in connection
with any such transaction, certain specified factors and any other factors the
Board deems relevant, including (i) the social and economic effects of the
transaction on the Company and its subsidiaries, employees, depositors, loan and
other customers, creditors and other elements of the communities in which the
Company and its subsidiaries operate or are located; (ii) the business and
financial condition and earnings prospects of the acquiring party or parties;
and (iii) the competence, experience and integrity of the acquiring party or
parties and its or their management. By having the standards in the Certificate
of Incorporation of the Company, the Board of Directors may be in a stronger
position to oppose any proposed business combination, tender or exchange offer
if the Board concludes that the transaction would not be in the best interest of
the Company, even if the price offered is significantly greater than the then
market price of any equity security of the Company.
Authorization of Preferred Stock
The Company's Certificate of Incorporation authorizes the issuance of up to
1,000,000 shares of preferred stock, which conceivably would represent an
additional class of stock required to approve any proposed acquisition. The
Company is authorized to issue preferred stock from time to time in one or more
series subject to applicable provisions of law, and the Board of Directors is
authorized to fix the designations, powers, preferences and relative
participating, optional and other special rights of such shares, including
voting rights (which could be multiple or as a separate class) and conversion
rights. Issuance of the preferred stock could adversely affect the relative
voting rights of holders of the Common Stock. In the event of a proposed
merger, tender offer or other attempt to gain
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control of the Company that the Board of Directors does not approve, it might be
possible for the Board of Directors to authorize the issuance of a series of
preferred stock with rights and preferences that would impede the completion of
such a transaction. An effect of the possible issuance of preferred stock,
therefore, may be to deter a future takeover attempt. The Board of Directors has
no present plans or understandings for the issuance of any preferred stock and
does not intend to issue any preferred stock except on terms which the Board of
Directors deems to be in the best interests of the Company and its stockholders.
This preferred stock, none of which has been issued by the Company, together
with authorized but unissued shares of Common Stock (the Certificate of
Incorporation authorizes the issuance of up to 3,000,000 shares of Common
Stock), also could represent additional capital required to be purchased by the
acquiror.
Procedures for Stockholder Nominations
The Company's Certificate of Incorporation provides that any stockholder
desiring to make a nomination for the election of directors or a proposal for
new business at a meeting of stockholders must submit written notice to the
Secretary of the Company not less than 30 or more than 60 days in advance of the
meeting. "New business" within the meaning of this provision will be
interpreted by the Company to exclude shareholder proposals which have been
included in the Company's proxy solicitation materials pursuant to Rule 14a-8
under the Exchange Act.
Amendment of Bylaws
The Company's Certificate of Incorporation provides that the Company's Bylaws
may be amended either by a two-thirds vote of the Company's Board of Directors
or by the affirmative vote of the holders of not less than 80% of the
outstanding shares of the Company's stock entitled to vote generally in the
election of directors, after giving effect to any limits on voting rights.
Absent this provision, Delaware law provides that a corporation's bylaws may be
amended by the holders of a majority of a corporation's outstanding capital
stock. The Company's Bylaws contain numerous provisions concerning the
Company's governance, such as fixing the number of directors and determining the
number of directors constituting a quorum. By reducing the ability of a
potential corporate raider to make changes in the Company's Bylaws and to reduce
the authority of the Board of Directors or impede its ability to manage the
Company, this provision could have the effect of discouraging a tender offer or
other takeover attempt where the ability to make fundamental changes through
bylaw amendments is an important element of the takeover strategy of the
acquiror.
Amendment of Certificate of Incorporation
The Company's Certificate of Incorporation provides that specified provisions
contained in the Certificate of Incorporation may not be repealed or amended
except upon the affirmative vote of not less than 80% of the outstanding shares
of the Company's stock entitled to vote generally in the election of directors,
after giving effect to any limits on voting rights. This requirement exceeds
the majority vote of the outstanding stock that would otherwise be required by
Delaware law for the repeal or amendment of a certificate provision. The
specific provisions are those (i) governing the calling of special meetings, the
absence of cumulative voting rights and the requirement that stockholder action
be taken only at annual or special meetings, (ii) requiring written notice to
the Company of nominations for the election of directors and new business
proposals, (iii) governing the number of the Company's Board of Directors, the
filling of vacancies on the Board of Directors and classification of the Board
of Directors, (iv) providing the mechanism for removing directors, (v) limiting
the acquisition of more than 10% of the capital stock of the Company or the
Association (except, with the prior approval of the Continuing Directors of the
Company), (vi) governing the requirement for the approval of certain Business
Combinations involving a "Related Person," (vii) regarding the consideration of
certain nonmonetary factors in the event of an offer by another party, (viii)
providing for the indemnification of directors, officers, employees and agents
of the Company, (ix) pertaining to the elimination of the liability of the
directors to the Company and its stockholders for monetary damages, with certain
exceptions, for breach of fiduciary duty, and (x) governing the required
stockholder vote for amending the Certificate of Incorporation or Bylaws of the
Company. This provision is intended to prevent the holders of less than 80% of
the outstanding stock of the Company from circumventing any of the foregoing
provisions by amending the Certificate of Incorporation to delete or modify one
of such provisions. This provision would enable the holders of
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more than 20% of the Company's voting stock to prevent amendments to the
Company's Certificate of Incorporation or Bylaws, even if such amendments were
favored by the holders of a majority of the voting stock.
Benefit Plans
In addition to the provisions of the Company's Certificate of Incorporation
and Bylaws described above, certain benefit plans of the Company and the
Association adopted in connection with the Conversion contain provisions which
also may discourage hostile takeover attempts which the Boards of Directors of
the Company and the Association might conclude are not in the best interests of
the Company, the Association or the Company's stockholders. For a description
of the benefit plans and the provisions of such plans relating to changes in
control of the Company or the Association, see "Management of the Association --
Certain Benefit Plans and Agreements."
The Purpose of and Anti-Takeover Effect of the Company's Certificate of
Incorporation and Bylaws
The Boards of Directors of the Company and the Association believe that the
provisions described above reduce the Company's vulnerability to takeover
attempts and certain other transactions which have not been negotiated with and
approved by its Board of Directors. These provisions will also assist the
Company and the Association in the orderly deployment of the net proceeds of the
Conversion into productive assets during the initial period after the
Conversion. The Boards of Directors of the Company and the Association believe
these provisions are in the best interests of the Association and of the Company
and its stockholders. In the judgment of the Boards of Directors of the Company
and the Association, the Company's Board is in the best position to consider all
relevant factors and to negotiate for what is in the best interests of the
stockholders and the Company's other constituents. Accordingly, the Boards of
Directors of the Company and the Association believe that it is in the best
interests of the Company and its stockholders to encourage potential acquirors
to negotiate directly with the Company's Board of Directors and that these
provisions will encourage such negotiations and discourage nonnegotiated
takeover attempts. It is also the view of the Board of Directors that these
provisions should not discourage persons from proposing a merger or other
transaction at prices reflective of the true value of the Company and which is
in the best interests of all stockholders.
Attempts to acquire control of financial institutions and their holding
companies have recently become increasingly common. Takeover attempts which
have not been negotiated with and approved by the Board of Directors present to
stockholders the risk of a takeover on terms which may be less favorable than
might otherwise be available. A transaction which is negotiated and approved by
the Board of Directors, on the other hand, can be carefully planned and
undertaken at an opportune time in order to obtain maximum value for the Company
and stockholders, with due consideration given to matters such as the management
and business of the acquiring corporation and maximum strategic development of
the Company's assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause great expense. Although a tender offer or
other takeover attempt may be made at a price substantially above then current
market prices, such offers are sometimes made for less than all the outstanding
shares of a target company. As a result, stockholders may be presented with the
alternative of partially liquidating their investment at a time that may be
disadvantageous, or retaining their investment in an enterprise which is under
different management and whose objectives may not be similar to those of the
remaining stockholders.
Despite the belief of the Association and the Company as to the benefits to
stockholders of these provisions of the Company's Certificate of Incorporation
and Bylaws, these provisions may also have the effect of discouraging a future
takeover attempt which would not be approved by the Company's Board, but
pursuant to which the stockholders may receive a substantial premium for their
shares over then current market prices. As a result, stockholders who might
desire to participate in such a transaction may not have any opportunity to do
so. Such provisions will also render the removal of the Company's Board of
Directors and management more difficult and may tend to stabilize the Company's
stock price, thus limiting gains which might otherwise be reflected in price
increases due to a potential merger or acquisition. The Board of Directors,
however, has concluded that the potential benefits of these provisions outweigh
the possible disadvantages. Pursuant to applicable regulations, at any annual
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or special meeting of its stockholders after the Conversion, the Company may
adopt additional Certificate of Incorporation provisions regarding the
acquisition of its equity securities that would be permitted to a Delaware
corporation.
DESCRIPTION OF CAPITAL STOCK
General
The Company is authorized to issue 3,000,000 shares of Common Stock, par value
$0.01 per share, and 1,000,000 shares of serial preferred stock, par value $0.01
per share. The Company currently expects to issue between 272,000 and 368,000
shares, subject to adjustment, of the Common Stock and no shares of serial
preferred stock in the Conversion. The Company has reserved for future issuance
under the Option Plan an amount of authorized but unissued shares of Common
Stock equal to 10% of the shares to be issued in the Conversion. THE CAPITAL
STOCK OF THE COMPANY WILL REPRESENT NONWITHDRAWABLE CAPITAL, WILL NOT BE AN
ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY THE FDIC OR ANY OTHER
---
FEDERAL OR STATE GOVERNMENTAL AGENCY.
Common Stock
Voting Rights. Each share of the Common Stock will have the same relative
rights and will be identical in all respects with every other share of the
Common Stock. The holders of the Common Stock will possess exclusive voting
rights in the Company, except to the extent that shares of serial preferred
stock issued in the future may have voting rights, if any. Each holder of
shares of the Common Stock will be entitled to one vote for each share held of
record on all matters submitted to a vote of holders of shares of the Common
Stock. For information regarding a possible reduction in voting rights, see
"Certain Anti-Takeover Provisions in the Certificate of Incorporation and Bylaws
- -- Restrictions on Acquisitions of Securities."
Dividends. The Company may, from time to time, declare dividends to the
holders of the Common Stock, who will be entitled to share equally in any such
dividends. For information as to cash dividends, see "Dividend Policy",
"Regulation -- Dividend Restrictions", and "Taxation."
Liquidation. In the event of any liquidation, dissolution or winding up of
the Converted Association, the Company, as holder of all of the Association's
capital stock, would be entitled to receive all assets of the Converted
Association after payment of all debts and liabilities of the Converted
Association and after distribution of the balance in the liquidation account to
Eligible Account Holders and Supplemental Eligible Account Holders. In the
event of a liquidation, dissolution or winding up of the Company, each holder of
shares of the Common Stock would be entitled to receive, after payment of all
debts and liabilities of the Company, a pro rata portion of all assets of the
Company available for distribution to holders of the Common Stock. If any
serial preferred stock is issued, the holders thereof may have a priority in
liquidation or dissolution over the holders of the Common Stock.
Restrictions on Acquisition of the Common Stock. For information regarding
limitations on acquisition of shares of the Common Stock, see "Certain
Restrictions on Acquisition of the Company, the Converted Association and the
Association," "Certain Anti-Takeover Provisions in the Certificate of
Incorporation and Bylaws" and "The Conversion -- Regulatory Restrictions on
Acquisition of the Common Stock."
Other Characteristics. Holders of the Common Stock will not have preemptive
rights with respect to any additional shares of the Common Stock which may be
issued. The Common Stock is not subject to call for redemption, and the
outstanding shares of the Common Stock, when issued and upon receipt by the
Company of the full purchase price therefor, will be fully paid and
nonassessable.
Transfer Agent and Registrar. The transfer agent and registrar for the Common
Stock will be _________ Stock Transfer Company.
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Serial Preferred Stock
None of the 1,000,000 authorized shares of serial preferred stock of the
Company will be issued in the Conversion. After the Conversion is completed,
the Board of Directors of the Company will be authorized to issue serial
preferred stock and to fix and state voting powers, designations, preferences or
other special rights of such shares and the qualifications, limitations and
restrictions thereof. The serial preferred stock may rank prior to the Common
Stock as to dividend rights or liquidation preferences, or both, and may have
full or limited voting rights. The Board of Directors has no present intention
to issue any of the serial preferred stock. Should the Board of Directors of
the Company subsequently issue serial preferred stock, no holder of any such
stock shall have any preemptive right to subscribe for or purchase any stock or
any other securities of the Company other than such, if any, as the Board of
Directors, in its sole discretion, may determine and at such price or prices and
upon such other terms as the Board of Directors, in its sole discretion, may
fix.
REGISTRATION REQUIREMENTS
The Company will register its Common Stock with the SEC pursuant to the
Exchange Act upon the completion of the Conversion and will not deregister said
shares for a period of at least three years following the completion of the
Conversion. Upon such registration, the proxy and tender offer rules, insider
trading reporting and restrictions, annual and periodic reporting and other
requirements of the Exchange Act will be applicable. The Company intends to
have a September 30 fiscal year end.
LEGAL OPINIONS
The legality of the Common Stock will be passed upon for the Company by
Housley Kantarian & Bronstein, P.C., Washington, D.C., which has consented to
the references herein to its opinion. Certain legal matters will be passed upon
for Trident Securities by Malizia, Sloane, Spidi & Fisch, P.C., Washington, D.C.
TAX OPINIONS
The federal income tax consequences of the Conversion will be passed upon by
Housley Kantarian & Bronstein, P.C., Washington, D.C., which has consented to
the references herein to its opinion. The Colorado income tax consequences of
the Conversion will be opined upon by Grimsley, White & Company, which has
consented to the references herein to its opinion.
EXPERTS
The financial statements of Rocky Ford Federal Savings and Loan Association at
September 30, 1996 and 1995 and for the two years then ended have been included
herein and elsewhere in the registration statement and the Association's
application for conversion in reliance upon the report of Grimsley, White &
Company, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
Ferguson has consented to the publication herein of the summary of its letter
to the Association setting forth its opinion as to the estimated pro forma
aggregate market value of the Common Stock to be issued in the Conversion and
the value of Subscription Rights to purchase the Common Stock and to the use of
its name and statements with respect to it appearing herein.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement with respect to
the Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Such
information may be inspected at the public reference facilities maintained by
the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
103
<PAGE>
20549. Copies may be obtained at prescribed rates from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC
also maintains an internet address ("Web site") that contains reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the SEC. The address for this Web
site is "http://www.sec.gov."
The Association has filed with the OTS an Application for Conversion. This
document omits certain information contained in such application. The
Application for Conversion can be inspected, without charge, at the offices of
the OTS, 1700 G Street, N.W., Washington, D.C. 20552, and at the office of the
OTS Regional Director, Midwest Regional Office, at 122 West John Carpenter
Freeway, Irving, Texas 75039.
104
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-1
Statements of Financial Condition as of September 30, 1996 and 1995 F-2
Statements of Income for the Years Ended
September 30, 1996 and 1995 31
Statements of Equity for the Years Ended
September 30, 1996 and 1995 F-3
Statements of Cash Flows for the Years Ended
September 30, 1996 and 1995 F-4
Notes to Financial Statements F-5
</TABLE>
Schedules - All schedules are omitted because the required information is not
applicable or is presented in the financial statements or accompanying notes.
All financial statements of Rocky Ford Financial, Inc. have been omitted
because Rocky Ford Financial, Inc. has not yet issued any stock, has no assets
and no liabilities and has not conducted any business other than of an
organizational nature.
105
<PAGE>
[LETTERHEAD OF GRIMSLEY, WHITE & COMPANY APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Rocky Ford Federal Savings and
Loan Association
Rocky Ford, Colorado
We have audited the accompanying statements of financial condition of Rocky Ford
Federal Savings and Loan Association as of September 30, 1996 and 1995, and the
related statements of income, equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Association's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rocky Ford Federal Savings and
Loan Association as of September 30, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note 2 to the financial statements, effective October 1, 1994,
the Association changed its method of accounting for investment and
mortgage-backed securities.
/s/ Grimsley, White & Company
GRIMSLEY, WHITE & COMPANY
November 15, 1996 Except for Note 15 as to which
the date is January 14, 1997
F-1
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
STATEMENTS OF FINANCIAL CONDITION
SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
------------------- ------------------
<S> <C> <C>
Cash and cash equivalents
Interest - bearing $ 2,000,000 $ 1,100,000
Non - interest bearing 221,416 160,363
Certificates of deposit 1,897,000 2,583,000
Securities available for sale 584,700 444,788
Securities held to maturity 3,116,767 4,073,168
Loans receivable - net 12,286,909 10,984,236
Accrued interest receivable 125,018 158,868
Real estate held for investment - net - 17,430
Premises and equipment 98,672 87,546
Prepaids 57,611 43,327
------------------- ------------------
TOTAL ASSETS $ 20,388,093 $ 19,652,726
=================== ==================
LIABILITIES AND EQUITY
Deposits $ 17,144,638 $ 16,702,125
Advances from borrowers for taxes and insurance 41,778 49,290
Accounts payable and accrued expenses 273,217 191,241
Current income tax payable - 6,182
Deferred income taxes 150,200 128,400
Deferred income - 2,191
------------------- ------------------
TOTAL LIABILITIES 17,609,833 17,079,429
--------------------------------------
Retained earnings - substantially restricted 2,607,578 2,479,036
Net unrealized gain on securities available for sale, net of tax of $100,300
in 1996 and $55,400 in 1995 170,682 94,261
------------------- ------------------
TOTAL EQUITY 2,778,260 2,573,297
--------------------------------------
TOTAL LIABILITIES AND EQUITY $ 20,388,093 $ 19,652,726
=================== ==================
</TABLE>
See Notes To Financial Statements
F-2
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
STATEMENTS OF EQUITY
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN
ON
SECURITIES
RETAINED AVAILABLE-
EARNINGS FOR-SALE
-------------- -------------
<S> <C> <C>
BALANCES OCTOBER 1, 1994 $ 2,192,048 $ -
Recognition of net unrealized gain on securities available-for-sale, net of
taxes of $50,800, due to adoption of FASB 115 - 86,500
Net income for the year 286,988 -
Change in net unrealized gain on securities available-for-sale, net of
taxes of $4,600 - 7,761
-------------- -------------
BALANCES SEPTEMBER 30, 1995 2,479,036 94,261
Net income for the year 128,542 -
Change in net unrealized gain on securities available-for-sale,
net of taxes of $44,900 - 76,421
-------------- -------------
BALANCES SEPTEMBER 30, 1996 $ 2,607,578 $ 170,682
============== =============
</TABLE>
See Notes To Financial Statements
F-3
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 128,542 $ 286,988
-------------- -------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of:
Deferred loan origination fees (16,803) (13,026)
Discounts on mortgaged-back securities and investments (16,965) (28,112)
Stock dividend (18,600) -
Provision for loan losses and losses on real estate - (68,407)
(Gain) loss on foreclosed real estate (1,966) (10,214)
Depreciation 21,341 14,983
Change in assets and liabilities
Accrued interest receivable 33,850 (9,237)
Prepaids (14,284) (17,973)
Accounts payable and accrued expenses 81,976 27,712
Current income taxes (6,182) 5,781
Deferred income (2,191) (735)
Deferred income taxes (23,091) (2,500)
-------------- -------------
TOTAL ADJUSTMENTS 37,085 (101,728)
-------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 165,627 185,260
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in certificates of deposit 686,000 197,000
Loan originations and principal payments on loans and mortgage-backed
related securities held to maturity (1,083,836) (318,910)
Proceeds from maturities of investment securities held to maturity 2,800,000 900,000
Purchase of securities available for sale (584,269) -
Purchase of mortgage-backed and related securities (1,488,125) -
Capital purchases (32,468) (29,668)
Proceeds from sale of foreclosed real estate and land held for investment 63,123 38,685
-------------- -------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 360,425 787,107
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits 442,513 (435,017)
Net change in mortgage escrow funds (7,512) (15)
-------------- -------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 435,001 (435,032)
-------------- -------------
NET INCREASE IN CASH 961,053 537,335
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,260,363 723,028
-------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 2,221,416 $ 1,260,363
============== =============
</TABLE>
The Association paid cash in the amount of $148,188 and $137,619 for interest
and $103,319 and $132,391 for income taxes for the years ended September 30,
1996 and 1995.
See Notes To Financial Statements
F-4
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Rocky Ford Federal Savings and Loan Association (the Association) is
a federally chartered mutual association which conducts its operations
in Southeastern Colorado. The Association provides a variety of
financial services to the area it serves. Its primary deposit products
are certificates of deposit and its primary lending products are real
estate mortgages.
The following items comprise the significant accounting policies which
the Association follows in preparing and presenting its financial
statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash Equivalents
Cash equivalents consist of overnight deposits and funds due from banks.
For purposes of the statements of cash flows, the Association considers
all highly liquid debt instruments with original maturities, when
purchased, of three months or less to be cash equivalents.
Certificates of Deposit
The Association maintains certificates of deposit with financial
institutions across the United States. It is the policy of the
Association to limit deposits to insurable accounts.
Securities Held-to-Maturity
Mortgage-backed securities and related debt investments for which the
Association has the positive intent and ability to hold to maturity are
reported at cost, adjusted for amortization of premiums and accretion of
discounts which are recognized in interest income using the interest
method over the period to maturity.
Securities Available-for-Sale
Securities available-for-sale consist of equity securities, not
classified as trading securities, which are carried at fair value.
Unrealized holding gains and losses, net of tax, on securities
available-for-sale are reported as a net amount in a separate component
of equity until realized.
Gains and losses on the sale of securities available-for-sale are
determined using the specific-identification method.
Declines in the fair value of individual held-to-maturity and available-
for-sale securities below their cost, that are other than temporary,
would result in write-downs of the individual securities to their fair
value. Should the Association incur write-downs, they will be included
in earnings as realized losses.
F-5
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Securities Available-for-Sale (Continued)
Premiums and discounts are recognized in interest income using the
interest method over the period to maturity.
Federal Home Loan Bank (FHLB) stock is an equity interest in the FHLB of
Topeka. The Association, as a member of the FHLB, is required to
maintain an investment in the capital stock of the FHLB. The stock is
classified as available-for-sale, but is carried at cost, as its cost is
assumed to equal its market value. FHLB stock can only be sold at par
value to the FHLB or to another member institution.
Loans Receivable
Loans receivable are stated at unpaid principal balances, less the
allowance for loan losses, and net of deferred loan-origination fees and
discounts.
Loan origination and commitment fees, as well as certain direct
origination costs, are deferred and amortized as a yield adjustment over
the lives of the related loans using the interest method. Amortization
of deferred loan fees is discontinued when a loan is placed on
nonaccrual status.
Loans are placed on nonaccrual status when the principal and interest is
delinquent for 90 days or more. Uncollectible interest on these loans is
charged off, or an allowance is established, based on management's
periodic evaluation, by a charge to interest income equal to all
interest previously accrued. Income is subsequently recognized only to
the extent that cash payments are received.
Allowance for Loan Losses
The allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb potential losses inherent
in the loan portfolio. The amount of the allowance is based on
management's evaluation of the collectibility of the loan portfolio,
including the nature of the portfolio, credit concentrations, specific
impaired loans, and economic conditions. The allowance is increased by a
provision for loan losses, which is charged to expense, and reduced by
charge-offs, net of recoveries. Such provisions are based on
management's estimate of net realizable value or fair value of the
collateral, as applicable. These estimates are susceptible to economic
changes that could result in a material adjustment to results of
operations in the near term. Recovery of the carrying value of such
loans is dependent, to a great extent, on the economic, operational, and
other conditions that may be beyond the Association's control.
Real Estate Held for Investment and Foreclosed Real Estate
Direct investments in real estate properties held for investment are
carried at lower of cost, including cost of improvements and amenities
subsequent to acquisition, or net realizable value.
F-6
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreclosed real estate held for sale is carried at the lower of fair
value minus estimated costs to sell or cost (the fair value of the
foreclosed asset at the time of foreclosure). Costs of holding
foreclosed property are charged to expense in the current period, except
for significant property improvements, which are capitalized to the
extent that carrying value does not exceed estimated fair market value.
Income Taxes
The Association recognizes income taxes under SFAS No. 109 Accounting
for Income Taxes. Under the provisions of SFAS No. 109, deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and the tax basis of assets and liabilities and the
tax rates which will be in effect when these differences are expected to
reverse. If appropriate, deferred tax assets are reduced by a valuation
allowance which reflects the extent to which such assets will be
realized.
Premises and Equipment
Land is carried at cost. Building, furniture, fixtures, and equipment
are carried at cost, less accumulated depreciation. Building, furniture,
fixtures, and equipment are depreciated using the straight-line method
over the estimated useful lives of the assets.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Association in
estimating fair values of financial instruments as disclosed herein:
Cash and short-term instruments. The carrying amounts of cash and
short-term instruments approximate fair values.
Available-for-sale and held-to-maturity securities. Fair values for
securities, excluding restricted equity securities, are based on quoted
market prices. The carrying values of restricted equity securities
approximate fair values.
Loans receivable. Fair values for mortgage loans is estimated using
discounted cash flow analysis, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using discounted
cash flow analysis or underlying collateral values, where applicable.
Deposit liabilities. The carrying amounts of passbook savings and
money-market accounts approximate their fair values at the reporting
date. Fair values for fixed-rate CDs are estimated using a discounted
cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.
Reclassifications
Certain amounts in 1995 have been reclassified to conform with 1996
presentation.
F-7
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -2 INVESTMENT SECURITIES
The Association adopted Statement of Financial Accounting Standards No.
115 "Accounting for Certain Investments in Debt and Equity Securities",
effective October 1, 1994. The Association's investments in marketable
equity securities have been held for an indefinite period and have
historically been reported at the lower of cost or market. Application
of FASB No. 115 resulted in the recognition of unrealized holding gains
of $94,261, net of the related tax effect, which was reported in the
equity section of the balance sheet.
Securities are classified in three categories and accounted for as
follows: debt securities that the Association has the positive intent
and ability to hold to maturity are classified as held-to-maturity and
are measured at amortized cost; debt and equity securities bought and
held principally for the purpose of selling in the near term are
classified as trading securities and are measured at fair value, with
unrealized gains and losses included in earnings; debt and equity
securities not classified as either held-to-maturity or trading
securities are deemed available-for-sale and are measured at fair-value,
with unrealized gains and losses, net of applicable taxes, reported in a
separate component of equity.
Held-to-Maturity Securities
The amortized cost and estimated fair value of held-to-maturity
securities at September 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
1996 Cost Gains Losses Value
------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Mortgage-backed securities
GNMA certificates $ 2,616,767 $ 67,099 $(23,161) $ 2,660,705
U.S. Government Agencies 500,000 0 (11,406) 488,594
----------- -------- --------- -----------
$ 3,116,767 $ 67,099 $(34,567) $ 3,149,299
=========== ======== ========= ===========
1995
------
Mortgage-backed securities
GNMA certificates $ 1,373,500 $ 89,900 $ 0 $ 1,463,400
U.S. Government Agencies 2,699,668 0 (23,252) 2,676,416
----------- -------- --------- -----------
$ 4,073,168 $ 89,900 $(23,252) $ 4,139,816
=========== ======== ========= ===========
</TABLE>
F-8
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -2 INVESTMENT SECURITIES (Continued)
Available-for-Sale Securities
The amortized cost and estimated fair value of available-for-sale
securities at September 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
1996 Cost Gains Losses Value
------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Equity securities
FHLB stock $ 302,400 $ 0 $ 0 $ 302,400
FHLMC stock 11,327 270,973 0 282,300
---------- -------- -------- ----------
$ 313,727 $270,973 $ 0 $ 584,700
========== ======== ======== ==========
1995
------
Equity securities
FHLB stock $ 283,800 $ 0 $ 0 $ 283,800
FHLMC stock 11,327 149,661 0 160,988
---------- -------- -------- ----------
$ 295,127 $149,661 $ 0 $ 444,788
========== ======== ======== ==========
</TABLE>
The amortized cost and fair value of debt securities at September 30,
1996, by contractual maturity, are shown below. The Associations debt
securities held-to-maturity are mortgage-backed securities whose
expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized
Held-to-Maturity Debt Securities Cost
-------------------------------- ----------
<S> <C>
Due in one year or less $ 30,645
Due after one year through five years 651,791
Due from five to ten years 277,674
Due after ten years 2,156,657
----------
Total Held-to-Maturity Securities $3,116,767
==========
</TABLE>
GNMA Certificates with a carrying amount of $231,259 and $254,263 at
September 30, 1996 and 1995, respectively, were pledged to secure public
deposits.
F-9
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -3 LOANS RECEIVABLE
Loans receivable at September 30 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
First mortgage loans
(principally conventional):
Principal balances:
Secured by one-to-four-family
residences $12,056,769 $10,743,215
Secured by other properties 173,626 122,914
----------- -----------
12,230,395 10,866,129
Less:
Net deferred loan origination fees (61,242) (72,526)
----------- -----------
Total first mortgage loans 12,169,153 10,793,603
----------- -----------
Second mortgage and share loans
Principal balances:
Second mortgage 75,487 171,298
Share 102,269 79,335
----------- -----------
Total second mortgages and share loans 177,756 250,633
----------- -----------
Less:
Allowance for loan losses (60,000) (60,000)
----------- -----------
$12,286,909 $10,984,236
=========== ===========
</TABLE>
Activity in the allowance for loan losses is summarized as follows for
the years ended September 30:
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Balance at beginning of year $ 60,000 $ 128,407
Provision (recovery) charged to income 0 (68,407)
Charge-offs and recoveries, net 0 0
----------- ------------
Balance at end of year $ 60,000 $ 60,000
=========== ============
</TABLE>
Nonaccrual loans for which interest has been reserved totaled $0 at
September 30, 1996 and 1995, respectively. Interest income in the amount
of $0 has been reserved at September 30, 1996 and 1995.
As of September 30, 1996 the Association had outstanding firm
commitments to originate loans of approximately $909,300.
F-10
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -4 ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at September 30 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Certificates of deposit $ 5,325 $ 14,715
Investment securities 11,875 49,141
Mortgaged-backed securities 18,144 10,442
Loans receivable 89,674 84,570
--------- ---------
$ 125,018 $ 158,868
========= =========
</TABLE>
NOTE -5 REAL ESTATE HELD FOR INVESTMENTS
The Association holds land which could be used for development purposes.
The following is a summary of real estate held for investment.
<TABLE>
<CAPTION>
1995
----------
<S> <C>
Land $ 21,265
Provision for losses (3,835)
----------
$ 17,430
==========
</TABLE>
Activity in the allowance for losses for real estate foreclosed and held
for investment for the years ended September 30 is as follows:
<TABLE>
<S> <C>
Balance at September 30, 1994 $ 18,800
Charge-offs, net of recoveries (14,965)
--------
Balance at September 30, 1995 3,835
Recoveries (3,835)
--------
Balance at September 30, 1996 $ 0
========
</TABLE>
NOTE -6 PREMISES AND EQUIPMENT
Premises and equipment at September 30 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Land $ 10,000 $ 10,000
Buildings 119,666 107,686
Furniture and fixtures 100,934 119,571
Automobile 34,963 26,194
-------- --------
265,563 263,451
Less accumulated depreciation (166,891) (175,905)
-------- --------
$ 98,672 $ 87,546
======== ========
</TABLE>
F-11
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -6 PREMISES AND EQUIPMENT (Continued)
Depreciation expense charged to operations amounted to $21,341 and
$14,983 for the years ended September 30, 1996 and 1995.
NOTE -7 DEPOSITS
Deposits at September 30 are summarized as follows:
<TABLE>
<CAPTION>
RATE AT 1996 1995
SEPTEMBER 30, AMOUNT PERCENT AMOUNT PERCENT
---------------- ------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Money market 4.15% $ 3,270,990 19.08 $ 2,557,273 15.31
Passbook savings 3.30% 1,077,717 6.28 1,078,678 6.46
------------- ----------- -------------- -----------
4,348,707 25.36 3,635,951 21.77
------------- ----------- -------------- -----------
Certificates of
deposit 3% - 4% 423,765 2.47 966,984 5.79
4% - 5% 4,565,453 26.63 3,467,694 20.76
5% - 6% 7,745,816 45.18 7,887,894 47.23
6% - 7% 0 0.00 685,384 4.10
7% - 8% 60,897 .36 58,218 .35
------------- ----------- -------------- -----------
12,795,931 74.64 13,066,174 78.23
------------- ----------- -------------- -----------
$ 17,144,638 100.00 $ 16,702,125 100.00
============= =========== ============== ===========
</TABLE>
The aggregate amount of jumbo certificates of deposit with a minimum
denomination of $100,000 was approximately $1,512,000 and $800,850 at
September 30, 1996 and 1995.
At September 30, 1996, scheduled maturities of certificates of
deposits are as follows:
<TABLE>
<CAPTION>
Rate 1997 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C>
3% - 4% $ 413,261 $ 10,504 $ 0
4% - 5% 4,565,452 0 0
5% - 6% 4,751,111 2,194,662 800,044
6% - 7% 0 0 0
7% - 8% 25,000 0 35,897
---------- ---------- ----------
$9,754,824 $2,205,166 $ 835,941
========== ========== ==========
</TABLE>
Interest expense on deposits for years ended September 30 is
summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Money market $ 112,054 $ 111,033
Passbook savings 31,557 35,737
Certificates of deposit 676,820 587,059
---------- ----------
$ 820,431 $ 733,829
========== ==========
</TABLE>
F-12
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -8 INCOME TAXES
Income tax expense for the years ended September 30 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Current $ 81,475 $ 120,235
Deferred (23,100) (2,500)
------------ ------------
$ 58,375 $ 117,735
============ ============
</TABLE>
Retained earnings at September 30, 1996 include earnings of
approximately $452,000, representing bad debt deductions for which no
provision for federal income taxes has been made. If, in the future,
this portion of retained earnings is used for any purpose other than
to absorb bad debt losses, federal income taxes will be imposed at the
then applicable rates.
The provisions for federal income taxes for the years ended September
30, 1996 and 1995 differ from that computed at the statutory corporate
tax rate of 34 percent as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Tax at statutory rate $ 63,552 $ 137,606
Change Resulting From:
Bad debt reduction (recovery) based on percentage
of income - net of applicable preference tax 0 (23,258)
Other (5,177) 3,387
------------ ------------
$ 58,375 $ 117,735
============ ============
</TABLE>
Temporary differences between the financial statement carrying amounts
and tax basis of assets and liabilities that gave rise to significant
portions of the deferred tax liability at September 30 relates to the
following:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Accrued interest on loans $ 33,200 $ 31,300
Deferred compensation (30,400) (32,100)
Deferred loan fees (22,700) (26,800)
FHLB stock dividend 39,700 32,800
Bad debt deduction 69,300 67,800
Unrealized gain on securities available-for-sale 100,300 55,400
SAIF special assessment (39,200) 0
------------ ------------
$ 150,200 $ 128,400
============ ============
</TABLE>
F-13
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE -8 INCOME TAXES (Continued)
For 1996 and 1995, deferred tax expense results from timing
differences in the recognition of income and expense for tax and
financial purposes. The sources and tax effects of these temporary and
timing differences are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Accrued interest on loans $ 1,900 $ 2,100
Deferred Directors fees 1,700 (3,800)
Deferred loan fees recognized 4,100 (4,500)
FHLB stock dividend 6,900 0
Bad debt deduction 1,500 3,700
SAIF special assessment (39,200) 0
---------- ----------
$ (23,100) $ (2,500)
========== ==========
</TABLE>
NOTE -9 FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT
(FIRREA) OF 1989
FIRREA was signed into law on August 9, 1989; regulations for savings
institutions' minimum-capital requirements went into effect on
December 7, 1989.
The regulations require institutions to have minimum regulatory
tangible capital equal to 1.5 percent of total assets, 3 percent core
capital ratio, and a 8.00 percent risk-based capital.
At September 30, 1996, the institution had the following capital
ratios calculated in accordance with FIRREA'S capital standards:
Core capital to adjusted total assets 12.90%
Tangible capital to adjusted total assets 12.90%
Total capital to risk-weighted assets 34.17%
The Association's management believes that, under the current
regulations, the Association will continue to meet its minimum capital
requirements in the coming year. However, events beyond the control of
the Association, such as increased interest rates or a downturn in the
economy in the Association's operating area, could adversely affect
future minimum capital requirements.
F-14
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE-10 OTHER NON-INTEREST EXPENSE
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Advertising $ 12,215 $ 11,603
Communication, postage and office supplies 19,960 22,871
Insurance 5,874 7,423
Professional services 14,374 14,006
Travel and entertainment 25,216 11,946
Dues and subscriptions 4,930 2,607
Other 4,453 4,406
---------- ----------
$ 87,022 $ 74,862
========== ==========
</TABLE>
NOTE-11 SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
Most of the Association's business activity is with customers located
within the state, principally southeastern Colorado. The Association
does not have a high concentration of deposits or loans with one
individual or entity.
NOTE-12 RELATED PARTY TRANSACTIONS
Loans to related parties include loans made to directors, executive
officers, and their associates as defined. The loans are made on
substantially the same terms as other loan customers.
The aggregate dollar amount of loans was $167,298 and $83,610 at
September 30, 1996 and 1995, respectively. During 1996, new loans of
$102,200 were made and repayments totaled $18,512. Purchases from
directors for the years ended September 30, 1996 and 1995 amounted to
$30,343 and $9,547, respectively.
As of September 30, 1996 approximately $850,000 of directors and
employees accounts were included in deposits.
NOTE-13 FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of the Association's financial instruments
as of September 30, 1996 are as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
------------ ------------
<S> <C> <C>
Financial Assets:
Cash and cash equivalents $ 2,221,416 $ 2,221,416
Certificates of deposit 1,897,000 1,897,000
Securities available-for-sale 584,700 584,700
Securities held-to-maturity 3,116,767 3,149,299
Loans receivable - net 12,286,909 12,591,000
Financial liabilities:
Deposits 17,144,638 17,115,000
</TABLE>
F-15
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE-14 IMPACT OF NEW ACCOUNTING STANDARDS
Accounting for ESOP. The Accounting Standards Division of the American
Institute of Certified Public Accountants approved Statement of
Position ("SOP") 93-6, "Employers' Accounting for Employee Stock
Ownership Plans," which is effective for fiscal years beginning after
December 15, 1993. SOP 93-6 changed, among other things, the measure
of compensation recorded by employers from the cost of ESOP shares to
the fair value of ESOP shares. To the extent that the fair value of
the Common Stock held by the ESOP that are committed to be released
directly to compensate employees, differs from the cost of such
shares, compensation expenses and a related charge or credit to
additional paid-in capital will be reported in the Association's
financial statements. The adoption of the ESOP by the Association and
the application of SOP 93-6 is likely to result in fluctuations in
compensation expense as a result of changes in the fair value of the
common stock. However, any such compensation expense fluctuations will
result in an offsetting adjustment to paid-in capital, and therefore,
total capital will not be affected.
Accounting by Creditors for Impairment of a Loan and Accounting by
Creditors for Impairment of a Loan - Income Recognition and
Disclosures. The Association adopted on October 1, 1995 Statements of
Financial Accounting Standards Nos. 118 and 114. SFAS No. 114 requires
that certain impaired loans be measured based on the present value of
expected future cash flows discounted at each loan's original
effective interest rate. As a practical expedient, impairment may be
measured based on the loan's observable market price or the fair value
of the collateral if the loan is collateral dependent. When the
measure of the impaired loan is less than the recorded investment in
the loan, the impairment is recorded through a valuation allowance.
The Association had previously measured the allowance for loan losses
using methods similar top those prescribed in SFAS No. 114. As a
result of adopting these statements, no additional provision to the
allowance for loan losses was required as of October 1, 1995. Based on
the Association's loan portfolio composition, which primarily consists
of one-to-four family residential mortgages, which are exempt from
SFAS No. 114 when evaluated collectively for impairment as is done by
the Association, the Association had no loans designated as impaired
under the provisions of SFAS No. 114 at October 1, 1995.
Disclosure of Derivative Financial Instruments. In October, 1994, the
Financial Accounting Standards Board ("FASB") issued SFAS No. 119
"Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments." This statement addresses the disclosure of
derivative financial instruments including the face amount, nature and
terms. For derivatives held for trading, disclosure of average and
period end fair values and disaggregated gains and losses is required.
For derivatives held for purposes other than trading, disclosure of
objectives, strategies, policies on reporting and income recognition
method is required. This statement is effective for financial
statements for fiscal years ending after December 15, 1995. Currently
the Association does not own any derivative financial instruments and
therefore SFAS No. 119 should not have any impact on the financial
statements.
F-16
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE-14 IMPACT OF NEW ACCOUNTING STANDARDS (Continued)
Impairment of Long-Lived Assets. In March 1995, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of." This statement establishes accounting standards for the
impairment of long-lived assets and certain identifiable intangibles,
and goodwill related to those assets to be held and used and for long-
lived assets and certain identifiable intangibles to be disposed of.
This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In
performing the review for recoverability, the entity should estimate
the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying
amount of the asset, an impairment loss is recognized. Otherwise, an
impairment loss is not recognized. Measurement of an impairment loss
for long-lived assets and identifiable intangibles that an entity
expects to hold and use should be based on the fair value of the
assets. The impact on the financial statements for implementation of
the statement is not expected to be material.
Mortgage Servings Rights. In May 1995, the Financial Accounting
Standards Board issued SFAS No. 122, "Accounting for Mortgage
Servicing Rights." This Statement amends SFAS No. 65, Accounting for
Certain Mortgage Banking Activities" to require that a mortgage
banking enterprise recognize as separate assets rights to service
mortgage loans for others, however those servicing rights are
acquired. The total cost of the mortgage loans to be sold should be
allocated between the mortgage servicing rights and the loans based on
their relative fair values if it is practicable to estimate those fair
values. If not, the entire cost should be allocated to the mortgage
loans. This statement applies prospectively in fiscal years beginning
after December 15, 1995. The impact on the financial statements for
implementation of the Statement is not expected to be material based
on the Association's current operating activities.
Accounting for Stock-Based Compensation. In October, 1995, the
Financial Accounting Standards Board issued SFAS No. 123, "Accounting
for Stock-Based Compensation to Employees." This Statement encourages
entities to adopt the fair value based method of accounting for
employee stock options or other stock compensation plans. However, it
allows an entity to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees." Under the
fair value based method, compensation cost is measured at the grant
date based on the value of the award and is recognized over the
service period, which is usually the vesting period. Under the
intrinsic value based method, compensation cost is the excess of the
quoted market price of the stock at the grant date over the amount an
employee must pay to acquire the stock. Most fixed stock option
plans--the most common type of stock compensation plan have
no--intrinsic value at grant date and under Opinion No. 25 no
compensation cost is recognized for them. Compensation cost is
recognized for other types of stock based compensation plans under
Opinion No. 25, including plans
F-17
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE-14 IMPACT OF NEW ACCOUNTING STANDARDS (Continued)
with variable, usually performance-based features. This Statement
requires that an employer's financial statements include certain
disclosures about stock-based employee compensation arrangements
regardless of the method used to account for them. This Statement is
effective for transactions entered into in fiscal years that begin
after December 15, 1995. The Association will adopt the Statement on
the date the Association converts from a federal mutual to a federal
stock savings and loan association. The Association has not determined
which method it will use to account for the options at this time and
has not estimated the effect of adoption on the Association's
financial condition or results of operations.
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. In June, 1996, the Financial
Accounting Standards Board issued SFAS No. 125 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities", which provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of financial components
approach that focuses on control. Under that approach, after a
transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement is
effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and
is to be applied prospectively. Earlier or retroactive application is
not permitted. The Association will adopt the provisions of the
Standard on January 1, 1997. Based on the Association's current
operating activities, management does not believe that the adoption of
this statement will have a material impact on the Association's
financial condition or results of operations.
NOTE-15 PLAN OF CONVERSION
On January 14, 1997, the Board of Directors of Rocky Ford Federal
Savings and Loan Association adopted a Plan of Conversion whereby the
Association would convert from a mutual savings institution to a stock
savings and loan pursuant to the Rules and Regulations of the OTS. The
Plan includes, as part of the conversion, the concurrent formation of
a holding company. The Plan provides that non-transferable
subscription rights to purchase Holding Company Conversion Stock will
be offered first to Eligible Account Holders of record as of the
Eligibility Record Date, then to the Association's Tax-Qualified
Employee Plan, then to Supplemental Eligible Account Holders of record
as of the Supplemental Eligibility Record Date, then to other members.
Concurrently with, at any time during, or promptly after the
Subscription Offering, and on a lowest priority basis, and opportunity
to subscribe may also be offered to the general public in a Direct
Community Offering. The price of the Holding Company Conversion Stock
will be based upon an independent appraisal of the Association and
will reflect its estimated pro forma market value, as converted. It is
the desire of the Board of Directors of the Association to attract new
capital to the Association in order to increase its capital, support
future savings growth and increase the amount of funds available for
residential and other mortgage lending. The Converted Association is
also expected to benefit from its management and other personnel
having a stock ownership in its business, since stock ownership is
viewed as an effective performance incentive and a means of
attracting, retaining and compensating management and other personnel.
F-18
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
NOTES TO FINANCIAL STATEMENTS
NOTE-15 PLAN OF CONVERSION (Continued)
No change will be made in the Board of Directors or management as a
result of the Conversion.
The costs of issuing the common stock will be deferred and deducted
from the sale proceeds. If the offering is unsuccessful for any
reason, the deferred costs will be charged to operations. At September
30, 1996, the Association had incurred no such costs.
For the purpose of granting eligible members of the Association a
priority in the event of future liquidation, the Association will, at
the time of conversion, establish a liquidation account equal to its
regulatory capital as of the date of the latest balance sheet used in
the final conversion offering circular. In the event (and only in such
event) of future liquidation of the converted Association, an eligible
savings account holder who continues to maintain a savings account
shall be entitled to receive a distribution form the liquidation
account, in the proportionate amount of the then-current adjusted
balance of the savings deposits then held, before any distributions
may be made with respect to capital stock.
Present regulations provide that the Association may not declare or
pay a cash dividend on or repurchase any of its capital stock if the
result thereof would be to reduce the regulatory capital of the
Association below the amount required for the liquidation account or
the regulatory capital requirement. Further, any dividend declared or
paid on or repurchase of, the Association's capital stock shall be in
compliance with the rules and regulations of the Office of Thrift
Supervision, or other applicable regulations.
F-19
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such information shall not be relied upon as having been authorized by the
Company, the Association or Trident Securities, Inc. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to any person in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so, or to any person to whom it
is unlawful. Neither the delivery of this Prospectus nor any sale hereunder
shall under any circumstances create any implication that there has been no
change in the affairs of the Company or the Association since any of the dates
as of which information is furnished herein or since the date hereof.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
PROSPECTUS SUMMARY..................................................... 5
SELECTED CONSOLIDATED FINANCIAL INFORMATION
AND OTHER DATA...................................................... 13
RISK FACTORS........................................................... 16
ROCKY FORD FINANCIAL, INC.............................................. 20
ROCKY FORD FEDERAL SAVINGS AND
LOAN ASSOCIATION..................................................... 20
USE OF PROCEEDS........................................................ 21
DIVIDEND POLICY........................................................ 22
MARKET FOR THE COMMON STOCK............................................ 23
CAPITALIZATION......................................................... 24
HISTORICAL AND PRO FORMA REGULATORY
CAPITAL COMPLIANCE................................................... 26
PRO FORMA DATA......................................................... 27
PROPOSED MANAGEMENT PURCHASES.......................................... 30
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................... 32
BUSINESS OF THE COMPANY................................................ 43
BUSINESS OF THE ASSOCIATION............................................ 44
TAXATION............................................................... 69
MANAGEMENT OF THE COMPANY.............................................. 70
MANAGEMENT OF THE ASSOCIATION.......................................... 71
THE CONVERSION......................................................... 80
CERTAIN RESTRICTIONS ON ACQUISITION OF THE COMPANY
AND THE ASSOCIATION.................................................. 96
CERTAIN ANTI-TAKEOVER PROVISIONS
IN THE CERTIFICATE OF INCORPORATION AND BYLAWS......................... 97
DESCRIPTION OF CAPITAL STOCK........................................... 102
REGISTRATION REQUIREMENTS.............................................. 103
LEGAL OPINIONS......................................................... 103
TAX OPINION............................................................ 103
EXPERTS................................................................ 103
ADDITIONAL INFORMATION................................................. 103
INDEX TO FINANCIAL STATEMENTS.......................................... 105
</TABLE>
Until _________, 1997 (90 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
Rocky Ford Financial, Inc.
(Holding Company for
Rocky Ford Federal
Savings and Loan Association)
Up to _______ Shares
COMMON STOCK
---------------------
PROSPECTUS
---------------------
TRIDENT SECURITIES, INC.
___________, 1997
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Directors, officers and employees of the Company and/or the Association may be
entitled to benefit from the indemnification provisions contained in the
Delaware General Corporation Law (the "DGCL"), the Company's Certificate of
Incorporation and federal regulations applicable to the Association. The
general effect of these provisions is summarized below:
Delaware General Corporation Law
Section 145 of the DGCL permits a Delaware corporation to indemnify any person
who was or is a party or is threatened to be made a party to any proceeding of
any type, (other than an action by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, may not, of
itself, create a presumption that these standards have not been met.
A Delaware corporation may also indemnify any person who was or is a party or
is threatened to be made a party to any proceeding by or in the right of the
corporation by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. However, no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought
determines upon application that such person is fairly and reasonably entitled
to be indemnified.
To the extent that a director, officer, employee or agent of a corporation has
been successful on the merits or otherwise in defense of any proceeding
described above indemnification against expenses (including attorneys' fees)
actually and reasonably incurred by him is mandatory.
Any determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in subsections (a) and (b) must be made by a majority of
the board of directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or by the
stockholders.
Expenses (including attorneys' fees) incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
or proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section is not exclusive.
II-1
<PAGE>
In addition, a corporation shall have power to purchase and maintain insurance
against any liability of individuals whom the corporation is required to
indemnify.
Article XVII of the Certificate of Incorporation
A. Persons. The Corporation shall indemnify, to the extent provided in
-------
paragraphs B, D or F:
(1) any person who is or was a director, officer, employee, or agent
of the Corporation; and
(2) any person who serves or served at the Corporation's request as a
director, officer, employee, agent, partner or trustee of another corporation,
partnership, joint venture, trust or other enterprise.
B. Extent -- Derivative Suits. In case of a threatened, pending or
--------------------------
completed action or suit by or in the right of the Corporation against a person
named in paragraph A by reason of his holding a position named in paragraph A,
the Corporation shall indemnify him if he satisfies the standard in paragraph C,
for expenses (including attorneys' fees but excluding amounts paid in
settlement) actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit.
C. Standard -- Derivative Suits. In case of a threatened, pending or
----------------------------
completed action or suit by or in the right of the Corporation, a person named
in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is the subjectof the
suit or action, and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, including, but not limited
to, the taking of any and all actions in connection with the Corporation's
response to any tender offer or any offer or proposal of another party to
engage in a Business Combination (as defined in Article XV) not approved by
the board of directors. However, he shall not be indemnified in respect of any
claim, issue or matter as to which he has been adjudged liable to the
Corporation unless (and only to the extent that) the court in which the suit
was brought shall determine, upon application, that despite the adjudication
but in view of all the circumstances, he is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
D. Extent -- Nonderivative Suits. In case of a threatened, pending or
-----------------------------
completed suit, action or proceeding (whether civil, criminal, administrative or
investigative), other than a suit by or in the right of the Corporation,
together hereafter referred to as a nonderivative suit, against a person named
in paragraph A by reason of his holding a position named in paragraph A, the
Corporation shall indemnify him if he satisfies the standard in paragraph E, for
amounts actually and reasonably incurred by him in connection with the defense
or settlement of the nonderivative suit, including, but not limited to (i)
expenses (including attorneys' fees), (ii) amounts paid in settlement, (iii)
judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative suit, a
-------------------------------
person named in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is the subject
of the nonderivative suit and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the Corporation, including, but
not limited to, the taking of any and all actions in connection with the
Corporation's response to any tender offer or any offer or proposal of
another party to engage in a Business Combination (as defined in Article
XV) not approved by the board of directors and, with respect to any
criminal action or proceeding,
II-2
<PAGE>
he had no reasonable cause to believe his conduct was unlawful. The
termination of a nonderivative suit by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not,
---- ----------
in itself, create a presumption that the person failed to satisfy the
standard of this subparagraph E(2).
F. Determination That Standard Has Been Met. A determination that the
----------------------------------------
standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in subparagraph C(2) (second sentence), the determination may
be made by:
(1) the board of directors by a majority vote of a quorum consisting of
directors of the Corporation who were not parties to the action, suit or
proceeding; or
(2) independent legal counsel (appointed by a majority of the disinterested
directors of the Corporation, whether or not a quorum) in a written opinion;
or
(3) the stockholders of the Corporation.
G. Proration. Anyone making a determination under paragraph F may
---------
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advance Payment. The Corporation shall pay in advance any expenses
---------------
(including attorneys' fees) which may become subject to indemnification under
paragraphs A through G if:
(1) the board of directors authorizes the specific payment; and
(2) the person receiving the payment undertakes in writing to repay the
same if it is ultimately determined that he is not entitled to indemnification
by the Corporation under paragraphs A through G.
I. Nonexclusive. The indemnification and advance payment of expenses
------------
provided by paragraphs A through H shall not be exclusive of any other rights to
which a person may be entitled by law, bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
J. Continuation. The indemnification provided by this Article XVII shall
------------
be deemed to be a contract between the Corporation and the persons entitled to
indemnification thereunder, and any repeal or modification of this Article XVII
shall not affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought based in whole or in part upon any such state
of facts. The indemnification and advance payment provided by paragraphs A
through H shall continue as to a person who has ceased to hold a position named
in paragraph A and shall inure to his heirs, executors and administrators.
K. Insurance. The Corporation may purchase and maintain insurance on
---------
behalf of any person who holds or who has held any position named in paragraph
A, against any liability incurred by him in any such position, or arising out of
his status as such, whether or not the Corporation would have power to indemnify
him against such liability under paragraphs A through H.
L. Intention and Savings Clause. It is the intention of this Article
----------------------------
XVII to provide for indemnification to the fullest extent permitted by the
General Corporation Law of the State of Delaware, and this Article XVII shall be
interpreted accordingly. If this Article XVII or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee, and
agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article XVII that shall
not have been invalidated and to the full extent permitted by applicable law.
If the General Corporation Law of the State of Delaware is amended, or other
Delaware law is
II-3
<PAGE>
enacted, to permit further or additional indemnification of the persons defined
in this Article XVII A, then the indemnification of such persons shall be to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended, or such other Delaware law.
Federal Regulations Providing for Indemnification of Directors and Officers of
- ------------------------------------------------------------------------------
Rocky Ford Federal Savings and Loan Association
- -----------------------------------------------
Federal regulations require that Rocky Ford Federal Savings and Loan
Association (the "Association") indemnify any person against whom an action is
brought by reason of that person's role as a director or officer of the
Association for (i) any judgments resulting from the action; (ii) reasonable
costs and expenses (including attorney's fees) incurred in connection with the
defense or settlement of such action; and (iii) reasonable costs and expenses
(including attorney's fees) incurred in connection with enforcing the
individual's indemnification rights against the Association, assuming a final
judgment is obtained in his favor.
The mandatory indemnification provided for by federal regulations is
limited to (i) actions where a final judgment on the merits is in favor of the
officer or director and (ii) in the case of a settlement, final judgment against
the director or officer or final judgment not on the merits, except as to where
the director or officer is found negligent or to have committed misconduct in
the performance of his or her duties, where a majority of the Board of Directors
of the Association determines that the director or officer was acting in good
faith within what he was reasonably entitled to believe was the scope of his or
her employment or authority for a purpose that was in the best interests of the
Association or its members or stockholders.
In addition, the Association has a directors' and officers' liability
policy providing for insurance against certain liabilities incurred by directors
and officers of the Association while serving in their capacities as such.
Item 25. Other Expenses of Issuance and Distribution *
<TABLE>
<CAPTION>
<S> <C>
Underwriting Fees and Expenses................. $ 92,500
Legal Fees and Expenses........................ 95,000
Printing, Postage and Mailing.................. 40,000
Accounting Fees and Expenses................... 45,000
Appraisal and Business Plan Fees and Expenses.. 30,000
Blue Sky Filing Fees and Expenses
(including legal counsel).................... 15,000
Federal Filing Fees (OTS and SEC).............. 12,000
Conversion Agent Fees.......................... 7,000
Stock Transfer Agent fees and certificates..... 5,000
Other Expenses................................. 8,500
-----
Total...................................... $ 350,000
= =======
</TABLE>
----------
* Estimated.
Item 26. Recent Sales of Unregistered Securities.
Not applicable.
Item 27. Exhibits:
The exhibits schedules filed as a part of this registration statement
are as follows:
1.1 Engagement Letter with Trident Securities, Inc.
* 1.2 Form of Agency Agreement with Trident Securities, Inc.
2 Plan of Conversion (Exhibit A to Proxy Statement filed as Exhibit 99.2)
II-4
<PAGE>
3.1 Certificate of Incorporation of Rocky Ford Financial, Inc.
3.2 Bylaws of Rocky Ford Financial, Inc.
4 Form of Common Stock Certificate of Rocky Ford Financial, Inc.
5 Opinion of Housley Kantarian & Bronstein, P.C. regarding legality of
securities being registered
* 8.1 Form of Federal Tax Opinion of Housley Kantarian & Bronstein, P.C.
* 8.2 Form of State Tax Opinion
8.3 Opinion of Ferguson & Co., LLP as to the value of subscription rights
for tax purposes
10.1 Proposed Employment Agreement between Rocky Ford Federal Savings and
Loan Association and Keith E. Waggoner
10.2 Proposed Employment Agreement between Rocky Ford Financial, Inc. and
Keith E. Waggoner
10.3 Proposed Rocky Ford Financial, Inc. 1997 Stock Option and Incentive Plan
10.4 Proposed Rocky Ford Financial, Inc. Management Recognition Plan
10.5 Rocky Ford Federal Savings and Loan Association Retirement Plan for
Directors and Senior Officer
10.6 Proposed Rocky Ford Federal Savings and Loan Association Incentive
Compensation Plan
23.1 Consent of Grimsley, White & Company
23.2 Consent of Housley Kantarian & Bronstein, P.C. (in opinion filed as
Exhibit 5)
23.3 Consent of Ferguson & Co., LLP
24 Power of Attorney (reference is made to the signature page)
27 Financial Data Schedule
99.1 Proxy statement and form of proxy for solicitation of members of Rocky
Ford Federal Savings and Loan Association
* 99.2 Proposed Stock Order Form and Form of Certification
99.3 Miscellaneous Marketing Materials
99.4 Appraisal Report
- --------------------
* To be filed by amendment.
II-5
<PAGE>
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Rocky
Ford, State of Colorado, on January 24, 1997.
ROCKY FORD FINANCIAL, INC.
By: /s/ Keith E. Waggoner
-------------------------------------------
Keith E. Waggoner
President and Chief Executive Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of Rocky Ford Financial, Inc., hereby severally
constitute and appoint Keith E. Waggoner, who may act, with full power of
substitution, our true and lawful attorney and agent, to do any and all things
in our names in the capacities indicated below which said Keith E. Waggoner, who
may act, may deem necessary or advisable to enable Rocky Ford Financial, Inc. to
comply with the Securities Act of 1933, as amended, and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
the registration of Rocky Ford Financial, Inc. common stock, including
specifically, but not limited to, power and authority to sign for us in our
names in the capacities indicated below, the registration statement and any and
all amendments (including post-effective amendments) thereto; and we hereby
ratify and confirm all that said Keith E. Waggoner shall do or cause to be done
by virtue thereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Keith E. Waggoner President and Chief January 24, 1997
- ------------------------
Keith E. Waggoner Executive Officer
(Principal Executive, Financial
and Accounting Officer)
/s/ Donald F. Gause Chairman of the Board January 24, 1997
- ------------------------
Donald F. Gause of Directors
/s/ Norman Bailey Director January 24, 1997
- ------------------------
Norman Bailey
/s/ William E. Burrell Director January 24, 1997
- ------------------------
William E. Burrell
/s/ Francis E. Clute Director January 24, 1997
- ------------------------
Francis E. Clute
/s/ Brian H. Hancock Director January 24, 1997
- ------------------------
Brian H. Hancock
/s/ R. Dean Jones Director January 24, 1997
- ------------------------
R. Dean Jones
/s/ Wayne W. Whittaker Director January 24, 1997
- ------------------------
Wayne W. Whittaker
</TABLE>
<PAGE>
[LETTERHEAD OF TRIDENT SECURITIES, INC.]
November 1, 1996
Board of Directors
Rocky Ford Federal Savings
and Loan Association of Colorado
801 Swink Avenue
Rocky Ford, Colorado 81067
RE: Conversion Stock Marketing Services
Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, Inc. ("Trident") and Rocky Ford Federal Savings and Loan Association
of Colorado, Rocky Ford, Colorado (the "Association") concerning our investment
banking services in connection with the conversion of the Association from a
mutual to a capital stock form of organization.
Trident is prepared to assist the Association in connection with the offering of
its shares of common stock during the subscription offering and community
offering as such terms are defined in the Association's Plan of Conversion. The
specific terms of the services contemplated hereunder shall be set forth in a
definitive sales agency agreement (the "Agreement") between Trident and the
Association to be executed on the date the offering circular/prospectus is
declared effective by the appropriate regulatory authorities. The price of the
shares during the subscription offering and community offering will be the price
established by the Association's Board of Directors, based upon an independent
appraisal as approved by the appropriate regulatory authorities, provided such
price is mutually acceptable to Trident and the Association.
In connection with the subscription offering and community offering, Trident
will act as financial advisor and exercise its best efforts to assist the
Association in the sale of its common stock during the subscription offering and
community offering. Additionally, Trident may enter into agreements with other
National Association of Securities Dealers, Inc., ("NASD") member firms to act
as selected dealers, assisting in the sale of the common stock. Trident and the
Association will determine the selected dealers to assist the Association during
the community offering. At the appropriate time, Trident in conjunction with
its counsel, will conduct an examination of the relevant documents and records
of the Association as Trident deems necessary and appropriate. The Association
will make all documents, records and other information deemed necessary by
Trident or its counsel available to them upon request.
For its services hereunder, Trident will receive the following compensation and
reimbursement from the Association:
1. A commission equal to two point thirty five percent (2.35%) of the
aggregate dollar amount of capital stock sold to residents in the
state of Colorado and one and one half percent (1.50%) of the
aggregate dollar amount of capital stock sold
<PAGE>
TRIDENT SECURITIES, INC.
Board of Directors
November 1, 1996
Page 2
to residents outside the state of Colorado in the subscription and
community offerings. No commissions shall be payable on shares
purchased by officers, directors, employees or their associates or
employee plans. Further, all commissions shall be based on the amount
of stock sold; however, fees shall be capped at the midpoint of the
final appraised value. In addition, in the event that the offering is
closed above the midpoint appraised value as stated on the final
Prospectus cover, the above described fee schedule shall be applied on
a pro rata basis as if the offering had closed at the midpoint of the
valuation range.
2. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed upon
jointly by Trident and the Association to reflect market requirements
at the time of the stock allocation in a Syndicated Community
Offering.
3. The foregoing fees and commissions are to be payable to Trident at
closing as defined in the Agreement to be entered into between the
Association and Trident.
4. Trident shall be reimbursed for allocable expenses incurred by them,
including legal fees, whether or not the Agreement is consummated.
Trident's out-of-pocket expenses will not exceed $11,000 and its legal
fees will not exceed $26,500. The Association will forward to Trident
a check in the amount of $11,000 as an advance payment to defray the
allocable expenses of Trident.
It further is understood that the Association will pay all other expenses of the
conversion including but not limited to its attorneys' fees, NASD filing fees,
and filing and registration fees and fees of either Trident's attorneys or the
attorneys relating to any required state securities law filings, telephone
charges, air freight, rental equipment, supplies, transfer agent charges, fees
relating to auditing and accounting and costs of printing all documents
necessary in connection with the foregoing.
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the conversion, the
Association warrants that: (a) the Association has not privately placed any
securities within the last 18 months; (b) there have been no material dealings
within the last 12 months between the Association and any NASD member or any
person related to or associated with any such member; (c) none of the officers
or directors of the Association has any affiliation with the NASD; (d) except as
contemplated by this engagement letter with Trident, the Association has no
financial or management consulting contracts outstanding with any other person;
(e) the Association has not granted Trident a right of first refusal with
respect to the underwriting of any future offering of the Association stock; and
(f) there has been no intermediary between Trident and the Association in
connection with the public offering of the Association's shares, and no person
is being compensated in any manner for providing such service.
The Association agrees to indemnify and hold harmless Trident and each person,
if any, who controls the firm against all losses, claims, damages or
liabilities, joint or several and all legal or other expenses reasonably
incurred by them in connection with the investigation or defense
<PAGE>
TRIDENT SECURITIES, INC.
Board of Directors
November 1, 1996
Page 3
thereof (collectively, "Losses"), to which they may become subject under the
securities laws or under the common law, that arise out of or are based upon the
conversion or the engagement hereunder of Trident. If the foregoing
indemnification is unavailable for any reason, the Association agrees to
contribute to such Losses in the proportion that its financial interest in the
conversion bears to that of the indemnified parties. If the Agreement is
entered into with respect to the common stock to be issued in the conversion,
the Agreement will provide for indemnification, which will be in addition to any
rights that Trident or any other indemnified party may have at common law or
otherwise. The indemnification provision of this paragraph will be superseded
by the indemnification provisions of the Agreement entered into by the
Association and Trident.
This letter is merely a statement of intent and is not a binding legal agreement
except as to paragraph (4) above with regard to the obligation to reimburse
Trident for allocable expenses to be incurred prior to the execution of the
Agreement and the indemnity described in the preceding paragraph. While Trident
and the Association agree in principle to the contents hereof and propose to
proceed promptly, and in good faith, to work out the arrangements with respect
to the proposed offering, any legal obligations between Trident and the
Association shall be only as set forth in a duly executed Agreement. Such
Agreement shall be in form and content satisfactory to Trident and the
Association, as well as their counsel, and Trident's obligations thereunder
shall be subject to, among other things, there being in Trident's opinion no
material adverse change in the condition or obligations of the Association or no
market conditions which might render the sale of the shares by the Association
hereby contemplated inadvisable.
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident one copy of this letter along with the advance payment of
$11,000. This proposal is open for your acceptance for a period of thirty (30)
days from the date hereof.
Yours very truly,
TRIDENT SECURITIES, INC.
By: /s/ R. Lee Burrows, Jr.
---------------------------
R. Lee Burrows, Jr.
Managing Director
Agreed and accepted to this 18 day
---
of November, 1996
--------
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION OF COLORADO
By: /s/ Donald F. Gause
-------------------------
Donald F. Gause
President
RLB/cs
10-31-2
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
ROCKY FORD FINANCIAL, INC.
ARTICLE I
Name
The name of the corporation is Rocky Ford Financial, Inc. (herein the
"Corporation").
ARTICLE II
Registered Office
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Corporation Trust Center, in the City of Wilmington,
County of New Castle. The name of the Corporation's registered agent at such
address is The Corporation Trust Company.
ARTICLE III
Powers
The purpose for which the Corporation is organized is to act as a savings
institution holding company and to transact all other lawful business for which
corporations may be incorporated pursuant to the laws of the State of Delaware.
The Corporation shall have all the powers of a corporation organized under the
General Corporation Law of the State of Delaware.
ARTICLE IV
Term
The Corporation is to have perpetual existence.
ARTICLE V
Incorporators
The names and mailing addresses of the incorporators are as follows:
<TABLE>
<CAPTION>
Name Mailing Address
- ---- ---------------
<S> <C>
Donald F. Gause 817 South 6th Street
Rocky Ford, Colorado 81067
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
Name Mailing Address
- ---- ---------------
<S> <C>
Keith E. Waggoner 23531 Road 21
La Junta, Colorado 81050
Norman L. Bailey 15 Chaparral Circle
La Junta, Colorado 81050
William E. Burrell 20003 Highway 30
Rocky Ford, Colorado 81067
Francis E. Clute 100 Cottonwood Lane
Rocky Ford, Colorado 81067
Brian H. Hancock 28140 Manor
Rocky Ford, Colorado 81067
R. Dean Jones 997 Elizabeth Drive
Rocky Ford, Colorado 81067
Wayne W. Whittaker 800 South 6th Street
Rocky Ford, Colorado 81067
</TABLE>
ARTICLE VI
Initial Directors
The number of directors constituting the initial board of directors of the
Corporation is seven, and the names and addresses of the persons who are to
serve as directors until their successors are elected and qualified, together
with the classes of directorships to which such persons have been assigned, are:
<TABLE>
<CAPTION>
Name Address Class
- ---- ------- -----
<S> <C> <C>
Norman L. Bailey 15 Chaparral Circle I
La Junta, Colorado 81050
R. Dean Jones 997 Elizabeth Drive I
Rocky Ford, Colorado 81067
William E. Burrell 20003 Highway 30 II
Rocky Ford, Colorado 81067
Francis E. Clute 100 Cottonwood Lane II
Rocky Ford, Colorado 81067
Wayne W. Whittaker 800 South 6th Street II
Rocky Ford, Colorado 81067
Donald F. Gause 817 South 6th Street III
Rocky Ford, Colorado 81067
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
Name Address Class
- ---- ------- -----
<S> <C> <C>
Keith E. Waggoner 23531 Road 21 III
La Junta, Colorado 81050
Brian H. Hancock 28140 Manor III
Rocky Ford, Colorado 81067
</TABLE>
ARTICLE VII
Capital Stock
The aggregate number of shares of all classes of capital stock which the
Corporation has authority to issue is 4,000,000 of which 3,000,000 are to be
shares of common stock, $0.01 par value per share, and of which 1,000,000 are to
be shares of serial preferred stock, $0.01 par value per share. The shares may
be issued by the Corporation from time to time as approved by the board of
directors of the Corporation without the approval of the stockholders except as
otherwise provided in this Article VII or the rules of a national securities
exchange if applicable. The consideration for the issuance of the shares shall
be paid to or received by the Corporation in full before their issuance and
shall not be less than the par value per share. The consideration for the
issuance of the shares shall be cash, services rendered, personal property
(tangible or intangible), real property, leases of real property or any
combination of the foregoing. In the absence of actual fraud in the
transaction, the judgment of the board of directors as to the value of such
consideration shall be conclusive. Upon payment of such consideration such
shares shall be deemed to be fully paid and nonassessable. In the case of a
stock dividend, the part of the surplus of the Corporation which is transferred
to stated capital upon the issuance of shares as a stock dividend shall be
deemed to be the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. Common Stock. Except as provided in this Certificate, the holders
------------
of the common stock shall exclusively possess all voting power. Each holder of
shares of common stock shall be entitled to one vote for each share held by such
holder, except as otherwise expressly set forth in this Certificate.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and sinking fund or retirement fund or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock, and on any class or
series of stock entitled to participate therewith as to dividends, out of any
assets legally available for the payment of dividends, but only when and as
declared by the board of directors of the Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having preference
over the common stock in any such event, the full preferential amounts to which
they are respectively entitled, the holders of the common stock and of any class
or series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets shall be entitled, after payment or provision for payment
of all debts and liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in kind.
Each share of common stock shall have the same relative powers, preferences
and rights as, and shall be identical in all respects with, all the other shares
of common stock of the Corporation, except as otherwise expressly set forth in
this Certificate.
B-3
<PAGE>
B. Serial Preferred Stock. Except as provided in this Certificate,
----------------------
the board of directors of the Corporation is authorized, by resolution or
resolutions from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each such series, and the qualifications, limitations or restrictions
thereof, including, but not limited to determination of any of the following:
(1) the distinctive serial designation and the number of shares
constituting such series;
(2) the dividend rates or the amount of dividends to be paid on the shares
of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to
dividends;
(3) the voting powers, full or limited, if any, of the shares of such
series;
(4) whether the shares of such series shall be redeemable and, if so, the
price or prices at which, and the terms and conditions upon which such
shares may be redeemed;
(5) the amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation;
(6) whether the shares of such series shall be entitled to the benefits of
a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and, if so entitled, the amount of such
fund and the manner of its application, including the price or prices
at which such shares may be redeemed or purchased through the
application of such funds;
(7) whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the
Corporation and, if so convertible or exchangeable, the conversion
price or prices, or the rate or rates of exchange, and the adjustments
thereof, if any, at which such conversion or exchange may be made, and
any other terms and conditions of such conversion or exchange;
(8) the subscription or purchase price and form of consideration for which
the shares of such series shall be issued; and
(9) whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial
preferred stock and whether such shares may be reissued as shares of
the same or any other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series,
except as otherwise expressly set forth in this Certificate.
ARTICLE VIII
Preemptive Rights
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive right
to purchase or subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of
B-4
<PAGE>
indebtedness, debentures or other securities convertible into or exchangeable
for stock of any class or series or carrying any right to purchase stock of any
class or series; but any such unissued stock, bonds, certificates or
indebtedness, debentures or other securities convertible into or exchangeable
for stock or carrying any right to purchase stock may be issued pursuant to
resolution of the board of directors of the Corporation to such persons, firms,
corporations or associations, whether or not holders thereof, and upon such
terms as may be deemed advisable by the board of directors in the exercise of
its sole discretion.
ARTICLE IX
Repurchase of Shares
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences of indebtedness, or other securities of
the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by law.
ARTICLE X
Meetings of Stockholders; Cumulative Voting
A. Notwithstanding any other provision of this Certificate or the
bylaws of the Corporation, no action required to be taken or which may be taken
at any annual or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in writing, without
a meeting, to the taking of any action is specifically denied.
B. Special meetings of the stockholders of the Corporation for any
purpose or purposes may be called at any time by the board of directors of the
Corporation, or by a committee of the board of directors which has been duly
designated by the board of directors and whose powers and authorities, as
provided in a resolution of the board of directors or in the bylaws of the
Corporation, include the power and authority to call such meetings, but such
special meetings may not be called by any other person or persons.
C. There shall be no cumulative voting by stockholders of any class or
series in the election of directors of the Corporation.
D. Meetings of stockholders may be held at such place as the bylaws
may provide.
ARTICLE XI
Notice for Nominations and Proposals
A. Nominations for the election of directors and proposals for any new
business to be taken up at any annual or special meeting of stockholders may be
made by the board of directors of the Corporation or by any stockholder of the
Corporation entitled to vote generally in the election of directors. In order
for a stockholder of the Corporation to make any such nominations and/or
proposals, he or she shall give notice thereof in writing, delivered or mailed
by first class United States mail, postage prepaid, to the Secretary of the
Corporation not less than thirty days nor more than sixty days prior to the date
of any such meeting; provided, however, that if less than forty days' notice of
the meeting is given to stockholders, such written notice shall be delivered or
mailed, as prescribed, to the Secretary of the Corporation not later than the
close of business on the tenth day following the day on which notice of the
meeting was mailed to stockholders. Each such notice given by a stockholder
with respect to nominations for the election of directors shall set forth
(i) the name, age, business address and, if known, residence
B-5
<PAGE>
address of each nominee proposed in such notice, (ii) the principal occupation
or employment of each such nominee, and (iii) the number of shares of stock of
the Corporation which are beneficially owned by each such nominee. In addition,
the stockholder making such nomination shall promptly provide any other
information reasonably requested by the Corporation.
B. Each such notice given by a stockholder to the Secretary with
respect to business proposals to be brought before a meeting shall set forth in
writing as to each matter: (i) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business at
the meeting; (ii) the name and address, as they appear on the Corporation's
books, of the stockholder proposing such business; (iii) the class and number
of shares of the Corporation which are beneficially owned by the stockholder;
and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in this Certificate to the contrary, no new business
shall be conducted at the meeting except in accordance with the procedures set
forth in this Article.
C. The Chairman of the annual or special meeting of stockholders may,
if the facts warrant, determine and declare to such meeting that a nomination or
proposal was not made in accordance with the foregoing procedure, and, if he
should so determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for action at the next
succeeding special or annual meeting of the stockholders taking place thirty
days or more thereafter. This provision shall not require the holding of any
adjourned or special meeting of stockholders for the purpose of considering such
defective nomination or proposal.
ARTICLE XII
Directors
A. Number; Vacancies. The number of directors of the Corporation
-----------------
shall be such number, not less than five nor more than fifteen (exclusive of
directors, if any, to be elected by holders of preferred stock of the
Corporation, voting separately as a class), as shall be set forth from time to
time in the bylaws, provided that no action shall be taken to decrease or
increase the number of directors unless at least two-thirds of the directors
then in office shall concur in said action. Vacancies in the board of directors
of the Corporation, however caused, and newly created directorships shall be
filled by a vote of two-thirds of the directors then in office, whether or not a
quorum, and any director so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of the class to which the
director has been chosen expires and when the director's successor is elected
and qualified.
B. Classified Board. The board of directors of the Corporation shall
----------------
be divided into three classes of directors which shall be designated Class I,
Class II and Class III. The members of each class shall be elected for a term
of three years and until their successors are elected and qualified. Such
classes shall be as nearly equal in number as the then total number of directors
constituting the entire board of directors shall permit, with the terms of
office of all members of one class expiring each year. Subject to the
provisions of this Article XII, should the number of directors not be equally
divisible by three, the excess director or directors shall be assigned to
Classes III or II as follows: (i) if there shall be an excess of one
directorship over a number equally divisible by three, such extra directorship
shall be classified in Class III; and (ii) if there be an excess of two
directorships over a number equally divisible by three, one shall be classified
in Class III and the other in Class II. At the first annual meeting of
stockholders, directors of Class II shall be elected to hold office for a term
expiring at the third succeeding annual meeting thereafter. At the second
annual meeting of stockholders, directors of Class III shall be elected to hold
office for a term expiring at the third succeeding annual meeting thereafter.
At the third annual meeting of stockholders, directors of Class I shall be
elected to hold office for a term expiring at the third succeeding annual
meeting thereafter. Thereafter, at each succeeding annual meeting, directors of
each class shall be elected for three year terms. Notwithstanding the
foregoing, the director whose term shall expire at any annual meeting shall
continue to serve until such time as his successor shall have been duly elected
and shall have qualified unless his position on the board of directors shall
have been abolished by action taken to reduce the size of the board of directors
prior to said meeting.
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Should the number of directors of the Corporation be reduced, the
directorship(s) eliminated shall be allocated among classes as appropriate so
that the number of directors in each class is as specified in the immediately
preceding paragraph. The board of directors shall designate, by the name of the
incumbent(s), the position(s) to be abolished. Notwithstanding the foregoing,
no decrease in the number of directors shall have the effect of shortening the
term of any incumbent director. Should the number of directors of the
Corporation be increased, the additional directorships shall be allocated among
classes as appropriate so that the number of directors in each class is as
specified in the immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class, to elect one or
more directors of the Corporation, the board of directors shall consist of said
directors so elected in addition to the number of directors fixed as provided in
this Article XII. Notwithstanding the foregoing, and except as otherwise may be
required by law or by the terms and provisions of the preferred stock of the
Corporation, whenever the holders of any one or more series of preferred stock
of the Corporation shall have the right, voting separately as a class, to elect
one or more directors of the Corporation, the terms of the director or directors
elected by such holders shall expire at the next succeeding annual meeting of
stockholders.
ARTICLE XIII
Removal of Directors
Notwithstanding any other provision of this Certificate or the bylaws of
the Corporation, any director or the entire board of directors of the
Corporation may be removed, at any time, but only for cause and only by the
affirmative vote of the holders of at least 80% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose. Notwithstanding the foregoing, whenever
the holders of any one or more series of preferred stock of the Corporation
shall have the right, voting separately as a class, to elect one or more
directors of the Corporation, the preceding provisions of this Article XIII
shall not apply with respect to the director or directors elected by such
holders of preferred stock.
ARTICLE XIV
Acquisition of Capital Stock
A. Five-Year Prohibition. For a period of five years from the
---------------------
effective date of the completion of the conversion of Rocky Ford Federal Savings
and Loan Association, Rocky Ford, Colorado, from mutual to stock form (which
entity shall become a wholly owned subsidiary of the Corporation upon such
conversion), no person shall directly or indirectly offer to acquire or acquire
the beneficial ownership of more than 10% of any class of equity security of the
Corporation, unless such offer or acquisition shall have been approved in
advance by a two-thirds vote of the Continuing Directors, as defined in Article
XV. In addition, for a period of five years from the completion of the
conversion of Rocky Ford Savings and Loan Association from mutual to stock form
(which entity shall become a wholly owned subsidiary of the Corporation upon
such conversion), and notwithstanding any provision to the contrary in this
Certificate or in the bylaws of the Corporation, where any person directly or
indirectly acquires beneficial ownership of more than 10% of any class of equity
security of the Corporation in violation of this Article XIV, the securities
beneficially owned in excess of 10% shall not be counted as shares entitled to
vote, shall not be voted by any person or counted as voting shares in connection
with any matter submitted to the stockholders for a vote, and shall not be
counted as outstanding for purposes of determining a quorum or the affirmative
vote necessary to approve any matter submitted to the stockholders for a vote.
B. Prohibition After Five Years. If, at any time after five years
----------------------------
from the effective date of the completion of the conversion of Rocky Ford
Savings and Loan Association from mutual to stock form (which entity shall
become a wholly-owned subsidiary of the Corporation upon such conversion), any
person shall acquire the
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beneficial ownership of more than 10% of any class of equity security of the
Corporation without the prior approval by a two-thirds vote of the Continuing
Directors, as defined in Article XV hereof, then the record holders of voting
stock of the Corporation beneficially owned by such acquiring person shall have
only the voting rights set forth in this paragraph B on any matter requiring
their vote or consent. With respect to each vote in excess of 10% of the voting
power of the outstanding shares of voting stock of the Corporation which such
record holders would otherwise be entitled to cast without giving effect to this
paragraph B, such record holders in the aggregate shall be entitled to cast only
one-hundredth (1/100) of a vote, and the aggregate voting power of such record
holders, so limited for all shares of voting stock of the Corporation
beneficially owned by such acquiring person, shall be allocated proportionately
among such record holders. For each such record holder, this allocation shall be
accomplished by multiplying the aggregate voting power, prior to imposing the
limitations of this paragraph B, of the outstanding shares of voting stock of
the Corporation beneficially owned by such record holder by a fraction whose
numerator is the number of votes equal to 10% of the shares of voting stock of
the Corporation and whose denominator is the total number of votes represented
by the shares of voting stock of the Corporation that are beneficially owned by
such acquiring person; any share held by such record holder in excess of the
allocated amount as determined in accordance with the previous clause shall be
entitled to cast one-hundredth of a vote. A person who is a record owner of
shares of voting stock of the Corporation that are beneficially owned
simultaneously by more than one person shall have, with respect to such shares,
the right to cast the least number of votes that such person would be entitled
to cast under this paragraph B by virtue of such shares being so beneficially
owned by any of such acquiring persons.
C. Definitions. The term "person" means an individual, a group acting
-----------
in concert, a corporation, a partnership, an association, a joint stock company,
a trust, an unincorporated organization or similar company, a syndicate or any
other group acting in concert formed for the purpose of acquiring, holding,
voting or disposing of securities of the Corporation. The term "acquire"
includes every type of acquisition, whether effected by purchase, exchange,
operation of law or otherwise. The term group "acting in concert" includes
(a) knowing participation in a joint activity or conscious parallel action
towards a common goal whether or not pursuant to an express agreement, and (b) a
combination or pooling of voting or other interest in the Corporation's
outstanding shares for a common purpose, pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. The term "beneficial ownership" shall have the meaning defined in
Rule 13d-3 of the General Rules and Regulations under the Securities and
Exchange Act of 1934, as in effect on the date of filing of this Certificate.
D. Exclusion for Employee Benefit Plans, Directors, Officers,
----------------------------------------------------------
Employees and Certain Proxies. The restrictions contained in this Article XIV
- -----------------------------
shall not apply to (i) any underwriter or member of an underwriting or selling
group involving a public sale or resale of securities of the Corporation or a
subsidiary thereof; provided, however, that upon completion of the sale or
resale of such securities, no such underwriter or member of such selling group
is a beneficial owner of more than 10% of any class of equity security of the
Corporation, (ii) any proxy granted to one or more Continuing Directors, as
defined in Article XV, by a stockholder of the Corporation or (iii) any employee
benefit plans of the Corporation. In addition, the Continuing Directors, as
defined in Article XV, the officers and employees of the Corporation and its
subsidiaries, the directors of subsidiaries of the Corporation, the employee
benefit plans of the Corporation and its subsidiaries, entities organized or
established by the Corporation or any subsidiary thereof pursuant to the terms
of such plans and trustees and fiduciaries with respect to such plans acting in
such capacity shall not be deemed to be a group with respect to their beneficial
ownership of voting stock of the Corporation solely by virtue of their being
directors, officers or employees of the Corporation or a subsidiary thereof or
by virtue of the Continuing Directors, as defined in Article XV, the officers
and employees of the Corporation and its subsidiaries and the directors of
subsidiaries of the Corporation being fiduciaries or beneficiaries of an
employee benefit plan of the Corporation or a subsidiary of the Corporation.
Notwithstanding the foregoing, no director, officer or employee of the
Corporation or any of its subsidiaries or group of any of them shall be exempt
from the provisions of this Article XIV should any such person or group become a
beneficial owner of more than 10% of any class of equity security of the
Corporation.
E. Determinations. A majority of the Continuing Directors, as defined
--------------
in Article XV, shall have the power to construe and apply the provisions of this
Article XIV and to make all determinations necessary or desirable
B-8
<PAGE>
to implement such provisions, including but not limited to matters with respect
to (a) the number of shares beneficially owned by any person, (b) whether a
person has an agreement, arrangement or understanding with another as to the
matters referred to in the definition of beneficial ownership, (c) the
application of any other definition or operative provision of this Article XIV
to the given facts or (d) any other matter relating to the applicability or
effect of this Article XIV. Any constructions, applications, or determinations
made by the Continuing Directors pursuant to this Article XIV in good faith and
on the basis of such information and assistance as was then reasonably available
for such purpose shall be conclusive and binding upon the Corporation and its
stockholders.
ARTICLE XV
Approval of Certain Business Combinations
The stockholder vote required to approve Business Combinations (as
hereinafter defined) shall be as set forth in this section.
A. (1) Except as otherwise expressly provided in this Article XV, the
affirmative vote of the holders of (i) at least 80% of the outstanding
shares entitled to vote thereon (and, if any class or series of shares is
entitled to vote thereon separately, the affirmative vote of the holders of
at least 80% of the outstanding shares of each such class or series), and
(ii) at least a majority of the outstanding shares entitled to vote
thereon, not including shares deemed beneficially owned by a Related Person
(as hereinafter defined), shall be required in order to authorize any of
the following:
(a) any merger or consolidation of the Corporation with or into a
Related Person (as hereinafter defined);
(b) any sale, lease, exchange, transfer or other disposition,
including without limitation, a mortgage, or any other capital device,
of all or any Substantial Part (as hereinafter defined) of the assets
of the Corporation (including without limitation any voting securities
of a subsidiary) or of a subsidiary, to a Related Person;
(c) any merger or consolidation of a Related Person with or into
the Corporation or a subsidiary of the Corporation;
(d) any sale, lease, exchange, transfer or other disposition of
all or any Substantial Part of the assets of a Related Person to the
Corporation or a subsidiary of the Corporation;
(e) the issuance of any securities of the Corporation or a
subsidiary of the Corporation to a Related Person;
(f) the acquisition by the Corporation or a subsidiary of the
Corporation of any securities of a Related Person;
(g) any reclassification of the common stock of the Corporation,
or any recapitalization involving the common stock of the Corporation;
and
(h) any agreement, contract or other arrangement providing for
any of the transactions described in this Article.
(2) Such affirmative vote shall be required notwithstanding any other
provision of this Certificate, any provision of law, or any agreement with
any regulatory agency or national securities exchange which might otherwise
permit a lesser vote or no vote.
B-9
<PAGE>
(3) The term "Business Combination" as used in this Article XV shall
mean any transaction which is referred to in any one or more of
subparagraphs A(1)(a) through (h) above.
B. The provisions of paragraph A shall not be applicable to any
particular Business Combination, and such Business Combination shall require
only such affirmative vote as is required by any other provision of this
certificate, any provision of law, or any agreement with any regulatory agency
or national securities exchange, if the Business Combination shall have been
approved by a two-thirds vote of the Continuing Directors (as hereinafter
defined); provided, however, that such approval shall only be effective if
obtained at a meeting at which a Continuing Director Quorum (as hereinafter
defined) is present.
C. For the purposes of this Article XV the following definitions
apply:
(1) The term "Related Person" shall mean and include (a) any
individual, corporation, partnership or other person or entity which
together with its "affiliates" (as that term is defined in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of
1934), "beneficially owns" (as that term is defined in Rule 13d-3 of the
General Rules and Regulations under the Securities Act of 1934) in the
aggregate 10% or more of the outstanding shares of the common stock of the
Corporation; and (b) any "affiliate" (as that term is defined in Rule 12b-2
under the Securities Exchange Act of 1934) of any such individual,
corporation, partnership or other person or entity. Without limitation,
any shares of the common stock of the Corporation which any Related Person
has the right to acquire pursuant to any agreement, or upon exercise or
conversion rights, warrants or options, or otherwise, shall be deemed
"beneficially owned" by such Related Person.
(2) The term "Substantial Part" shall mean more than 25 percent of the
total assets of the Corporation, as of the end of its most recent fiscal
year ending prior to the time the determination is made.
(3) The term "Continuing Director" shall mean any member of the board
of directors of the Corporation who is unaffiliated with the Related Person
and was a member of the board prior to the time that the Related Person
became a Related Person, and any successor of a Continuing Director who is
unaffiliated with the Related Person and is recommended to succeed a
Continuing Director by a majority of Continuing Directors then on the
board.
(4) The term "Continuing Director Quorum" shall mean two-thirds of the
Continuing Directors capable of exercising the powers conferred on them.
ARTICLE XVI
Evaluation of Business Combinations
In connection with the exercise of its judgment in determining what is in
the best interests of the Corporation and of the shareholders, when evaluating a
Business Combination (as defined in Article XV) or a tender or exchange offer,
the board of directors of the Corporation may, in addition to considering the
adequacy of the amount to be paid in connection with any such transaction,
consider all of the following factors and any other factors which it deems
relevant; (i) the social and economic effects of the transaction on the
Corporation and its subsidiaries, employees, depositors, loan and other
customers, creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located; (ii) the business and
financial condition and earnings prospects of the acquiring person or entity,
including, but not limited to, debt service and other existing financial
obligations, financial obligations to be incurred in connection with the
acquisition and other likely financial obligations of the acquiring person or
entity and the possible effect of such conditions upon the Corporation and its
subsidiaries and the other elements of the communities in which the Corporation
and its subsidiaries operate or are located; and (iii) the competence,
experience, and integrity of the acquiring person or entity and its or their
management.
B-10
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ARTICLE XVII
Indemnification
A. Persons. The Corporation shall indemnify, to the extent provided
-------
in paragraphs B, D or F:
(1) any person who is or was a director, officer, employee, or agent
of the Corporation; and
(2) any person who serves or served at the Corporation's request as a
director, officer, employee, agent, partner or trustee of another
corporation, partnership, joint venture, trust or other enterprise.
B. Extent -- Derivative Suits. In case of a threatened, pending or
--------------------------
completed action or suit by or in the right of the Corporation against a person
named in paragraph A by reason of his holding a position named in paragraph A,
the Corporation shall indemnify him if he satisfies the standard in paragraph C,
for expenses (including attorneys' fees but excluding amounts paid in
settlement) actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit.
C. Standard -- Derivative Suits. In case of a threatened, pending or
----------------------------
completed action or suit by or in the right of the Corporation, a person named
in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is the subject
of the suit or action, and in a manner he reasonably believed to be in, or
not opposed to, the best interests of the Corporation, including, but not
limited to, the taking of any and all actions in connection with the
Corporation's response to any tender offer or any offer or proposal of
another party to engage in a Business Combination (as defined in Article
XV) not approved by the board of directors. However, he shall not be
indemnified in respect of any claim, issue or matter as to which he has
been adjudged liable to the Corporation unless (and only to the extent
that) the court in which the suit was brought shall determine, upon
application, that despite the adjudication but in view of all the
circumstances, he is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper.
D. Extent -- Nonderivative Suits. In case of a threatened, pending or
-----------------------------
completed suit, action or proceeding (whether civil, criminal, administrative or
investigative), other than a suit by or in the right of the Corporation,
together hereafter referred to as a nonderivative suit, against a person named
in paragraph A by reason of his holding a position named in paragraph A, the
Corporation shall indemnify him if he satisfies the standard in paragraph E, for
amounts actually and reasonably incurred by him in connection with the defense
or settlement of the nonderivative suit, including, but not limited to (i)
expenses (including attorneys' fees), (ii) amounts paid in settlement, (iii)
judgments, and (iv) fines.
E. Standard -- Nonderivative Suits. In case of a nonderivative suit,
-------------------------------
a person named in paragraph A shall be indemnified only if:
(1) he is successful on the merits or otherwise; or
(2) he acted in good faith in the transaction which is the subject
of the nonderivative suit and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the Corporation, including, but
not limited to, the taking of any and all actions in connection with the
Corporation's response to any tender offer or any offer or proposal of
another party to engage in a Business Combination (as defined in Article
XV) not approved by the board of directors and, with respect to any
criminal action or proceeding, he had no reasonable cause to believe his
conduct was unlawful. The termination of a nonderivative suit
B-11
<PAGE>
by judgment, order, settlement, conviction, or upon a plea of nolo
----
contendere or its equivalent shall not, in itself, create a presumption
----------
that the person failed to satisfy the standard of this subparagraph E(2).
F. Determination That Standard Has Been Met. A determination that the
----------------------------------------
standard of paragraph C or E has been satisfied may be made by a court, or,
except as stated in subparagraph C(2) (second sentence), the determination may
be made by:
(1) the board of directors by a majority vote of a quorum consisting
of directors of the Corporation who were not parties to the action, suit or
proceeding; or
(2) independent legal counsel (appointed by a majority of the
disinterested directors of the Corporation, whether or not a quorum) in a
written opinion; or
(3) the stockholders of the Corporation.
G. Proration. Anyone making a determination under paragraph F may
---------
determine that a person has met the standard as to some matters but not as to
others, and may reasonably prorate amounts to be indemnified.
H. Advance Payment. The Corporation shall pay in advance any expenses
---------------
(including attorneys' fees) which may become subject to indemnification under
paragraphs A through G if:
(1) the board of directors authorizes the specific payment; and
(2) the person receiving the payment undertakes in writing to repay
the same if it is ultimately determined that he is not entitled to
indemnification by the Corporation under paragraphs A through G.
I. Nonexclusive. The indemnification and advance payment of expenses
------------
provided by paragraphs A through H shall not be exclusive of any other rights to
which a person may be entitled by law, bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
J. Continuation. The indemnification provided by this Article XVII
------------
shall be deemed to be a contract between the Corporation and the persons
entitled to indemnification thereunder, and any repeal or modification of this
Article XVII shall not affect any rights or obligations then existing with
respect to any state of facts then or theretofore existing or any action, suit
or proceeding theretofore or thereafter brought based in whole or in part upon
any such state of facts. The indemnification and advance payment provided by
paragraphs A through H shall continue as to a person who has ceased to hold a
position named in paragraph A and shall inure to his heirs, executors and
administrators.
K. Insurance. The Corporation may purchase and maintain insurance on
---------
behalf of any person who holds or who has held any position named in paragraph
A, against any liability incurred by him in any such position, or arising out of
his status as such, whether or not the Corporation would have power to indemnify
him against such liability under paragraphs A through H.
L. Intention and Savings Clause. It is the intention of this Article
----------------------------
XVII to provide for indemnification to the fullest extent permitted by the
General Corporation Law of the State of Delaware, and this Article XVII shall be
interpreted accordingly. If this Article XVII or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee, and
agent of the Corporation as to costs, charges, and expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement with respect
to any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, including an action by or in the right of the Corporation to the
full extent permitted by any applicable portion of this Article XVII that shall
not have been invalidated and to the full extent permitted by applicable law.
If the General Corporation Law of the State of Delaware is amended, or other
Delaware law is enacted, to permit further or additional indemnification of the
persons defined in this Article XVII A, then the
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<PAGE>
indemnification of such persons shall be to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as so amended, or such other
Delaware law.
ARTICLE XVIII
Limitations on Directors' Liability
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except: (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions that are not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived any
improper personal benefit. If the General Corporation Law of the State of
Delaware or other Delaware law is amended or enacted after the date of filing of
this Certificate to further eliminate or limit the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended, or such other Delaware law. Any
repeal or modification of the foregoing paragraph by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
ARTICLE XIX
Amendment of Bylaws
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to adopt,
repeal, alter, amend and rescind the bylaws of the Corporation by a vote of two-
thirds of the board of directors. Notwithstanding any other provision of this
Certificate or the bylaws of the Corporation (and notwithstanding the fact that
some lesser percentage may be specified by law), the bylaws shall not be
adopted, repealed, altered, amended or rescinded by the stockholders of the
Corporation except by the vote of the holders of not less than 80% of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose (provided
that notice of such proposed adoption, repeal, alteration, amendment or
rescission is included in the notice of such meeting), or, as set forth above,
by the board of directors.
ARTICLE XX
Amendment of Certificate of Incorporation
The Corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Certificate in the manner now or hereafter
prescribed by law, and all rights conferred on stockholders herein are granted
subject to this reservation. Notwithstanding the foregoing, the provisions set
forth in Articles X, XI, XII, XIII, XIV, XV, XVI, XVII, XVIII, XIX and this
Article XX may not be repealed, altered, amended or rescinded in any respect
unless the same is approved by the affirmative vote of the holders of not less
than 80% of the outstanding shares of capital stock of the Corporation entitled
to vote generally in the election of directors (considered for this purpose as a
single class) cast at a meeting of the stockholders called for that purpose
(provided that notice of such proposed repeal, alteration, amendment or
rescission is included in the notice of such meeting); except that such repeal,
alteration, amendment or rescission may be made by the affirmative vote of the
holders of a majority of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors (considered
for this purpose as a single class) if the same is first approved by a majority
of the Continuing Directors, as defined in Article XV of this Certificate.
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<PAGE>
WE, THE UNDERSIGNED, being the incorporators hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this Certificate, hereby declaring and certifying
that this is our act and deed and the facts herein stated are true, and
accordingly have hereunto set our hands this 14th day of January, 1997.
/s/ Donald F. Gause
-------------------------
Donald F. Gause
Incorporator
/s/ Keith E. Waggoner
-------------------------
Keith E. Waggoner
Incorporator
/s/ Norman L. Bailey
-------------------------
Norman L. Bailey
Incorporator
/s/ William E. Burrell
-------------------------
William E. Burrell
Incorporator
/s/ Francis E. Clute
-------------------------
Francis E. Clute
Incorporator
/s/ Brian H. Hancock
-------------------------
Brian H. Hancock
Incorporator
/s/ R. Dean Jones
-------------------------
R. Dean Jones
Incorporator
/s/ Wayne W. Whittaker
-------------------------
Wayne W. Whittaker
Incorporator
Attest:
-------------------------
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EXHIBIT 3.2
BYLAWS
OF
ROCKY FORD FINANCIAL, INC.
ARTICLE I
Principal Executive Office
The principal executive office of Rocky Ford Financial, Inc. (the
"Corporation") shall be at 801 Swink Avenue, Rocky Ford, Colorado 81067. The
Corporation may also have offices at such other places within or without the
State of Colorado as the board of directors shall from time to time determine.
ARTICLE II
Stockholders
SECTION 1. Place of Meetings. All annual and special meetings of
-----------------
stockholders shall be held at the principal executive office of the Corporation
or at such other place within or without the State of Colorado as the board of
directors may determine and as designated in the notice of such meeting.
SECTION 2. Annual Meeting. A meeting of the stockholders of the
--------------
Corporation for the election of directors and for the transaction of any other
business of the Corporation shall be held annually at such date and time as the
board of directors may determine.
SECTION 3. Special Meetings. Special meetings of the stockholders for
----------------
any purpose or purposes may be called at any time by the board of directors or
by a committee of the board of directors in accordance with the provisions of
the Corporation's Certificate of Incorporation.
SECTION 4. Conduct of Meetings. Annual and special meetings shall be
-------------------
conducted in accordance with these Bylaws or as otherwise prescribed by the
board of directors. The chairman or the chief executive officer of the
Corporation shall preside at such meetings.
SECTION 5. Notice of Meeting. Written notice stating the place, day
-----------------
and hour of the meeting and the purpose or purposes for which the meeting is
called shall be mailed by the secretary or the officer performing his duties,
not less than ten days nor more than sixty days before the meeting to each
stockholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books or records of the Corporation as of the record date prescribed in Section
6, with postage thereon prepaid. If a stockholder is present at a meeting, or
in writing waives notice thereof before or after the meeting, notice of the
meeting to such stockholder shall be unnecessary. When any stockholders'
meeting, either annual or special, is adjourned for thirty days or more, notice
of the adjourned meeting shall be given as in the case of an original meeting.
It shall not be necessary to give any notice of the time and place of any
meeting adjourned for less than thirty days or of the business to be transacted
at such adjourned meeting, other than an announcement at the meeting at which
such adjournment is taken.
C-1
<PAGE>
SECTION 6. Fixing of Record Date. For the purpose of determining
---------------------
stockholders entitled to notice of or to vote at any meeting of stockholders, or
any adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the board of directors shall fix in advance a date as the record
date for any such determination of stockholders. Such date in any case shall be
not more than sixty days, and in case of a meeting of stockholders not less than
ten days, prior to the date on which the particular action requiring such
determination of stockholders, is to be taken. When a determination of
stockholders entitled to vote at any meeting of stockholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
SECTION 7. Voting Lists. The officer or agent having charge of the
------------
stock transfer books for shares of the Corporation shall make, at least ten days
before each meeting of stockholders, a complete record of the stockholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number of shares held by each. The record, for a period of ten days
before such meeting, shall be kept on file at the principal office of the
Corporation, whether within or outside the State of Colorado, and shall be
subject to inspection by any stockholder for any purpose germane to the meeting
at any time during usual business hours. Such record shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any stockholder for any purpose germane to the meeting during the
whole time of the meeting. The original stock transfer books shall be prima
facie evidence as to who are the stockholders entitled to examine such record or
transfer books or to vote at any meeting of stockholders.
SECTION 8. Quorum. One-third of the outstanding shares of the
------
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than one-third of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
SECTION 9. Proxies. At all meetings of stockholders, a stockholder may
-------
vote by proxy executed in writing by the stockholder or by his duly authorized
attorney in fact. Proxies solicited on behalf of the management shall be voted
as directed by the stockholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid
after eleven months from the date of its execution unless otherwise provided in
the proxy.
SECTION 10. Voting. Except as is otherwise specified in the Certificate
------
of Incorporation, at each election for directors every stockholder entitled to
vote at such election shall be entitled to one vote for each share of stock
held. Unless otherwise provided by the Certificate of Incorporation, by
statute, or by these Bylaws, a majority of those votes cast by stockholders at a
lawful meeting shall be sufficient to pass on a transaction or matter, except in
the election of directors, which election shall be determined by a plurality of
the votes of the shares present in person or by proxy at the meeting and
entitled to vote on the election of directors.
SECTION 11. Voting of Shares in the Name of Two or More Persons. When
---------------------------------------------------
ownership of stock stands in the name of two or more persons, in the absence of
written directions to the Corporation to the contrary, at any meeting of the
stockholders of the Corporation any one or more of such stockholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose name shares of stock stand, the vote or votes to
which these persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
SECTION 12. Voting of Shares by Certain Holders. Shares standing in the
-----------------------------------
name of another corporation may be voted by any officer, agent or proxy as the
Bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian or conservator may be voted by him, either in
person or by proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee may be voted by him, either in person or by
proxy,
C-2
<PAGE>
but no trustee shall be entitled to vote shares held by him without a transfer
of such shares into his name. Shares standing in the name of a receiver may be
voted by such receiver, and shares held by or under the control of a receiver
may be voted by such receiver without the transfer thereof into his name if
authority to do so is contained in an appropriate order of the court or other
public authority by which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Corporation, nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
SECTION 13. Inspectors of Election. In advance of any meeting of
----------------------
stockholders, the chairman of the board or the board of directors may appoint
any persons, other than nominees for office, as inspectors of election to act at
such meeting or any adjournment thereof. The number of inspectors shall be
either one or three. If the board of directors so appoints either one or three
inspectors, that appointment shall not be altered at the meeting. If inspectors
of election are not so appointed, the chairman of the board may make such
appointment at the meeting. In case any person appointed as inspector fails to
appear or fails or refuses to act, the vacancy may be filled by appointment in
advance of the meeting or at the meeting by the chairman of the board or the
president.
Unless otherwise prescribed by applicable law, the duties of such
inspectors shall include: determining the number of shares of stock and the
voting power of each share, the shares of stock represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining the result; and such acts as may
be proper to conduct the election or vote with fairness to all stockholders.
SECTION 14. Nominating Committee. The board of directors or a committee
--------------------
appointed by the board of directors shall act as a nominating committee for
selecting the nominees for election as directors. Except in the case of a
nominee substituted as a result of the death or other incapacity of a management
nominee, the nominating committee shall deliver written nominations to the
secretary at least twenty days prior to the date of the annual meeting.
Provided such committee makes such nominations, no nominations for directors
except those made by the nominating committee shall be voted upon at the annual
meeting unless other nominations by stockholders are made in writing and
delivered to the secretary of the Corporation in accordance with the provisions
of the Corporation's Certificate of Incorporation.
SECTION 15. New Business. Any new business to be taken up at the annual
------------
meeting shall be stated in writing and filed with the secretary of the
Corporation in accordance with the provisions of the Corporation's Certificate
of Incorporation. This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers, directors
and committees, but in connection with such reports no new business shall be
acted upon at such annual meeting unless stated and filed as provided in the
Corporation's Certificate of Incorporation.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
--------------
shall be under the direction of its board of directors. The chairman shall
preside at all meetings of the board of directors.
SECTION 2. Number, Term and Election. The board of directors shall
-------------------------
consist of eight members and shall be divided into three classes as nearly equal
in number as possible. The members of each class shall be elected
C-3
<PAGE>
for a term of three years and until their successors are elected or qualified.
The board of directors shall be classified in accordance with the provisions of
the Corporation's Certificate of Incorporation.
SECTION 3. Regular Meetings. A regular meeting of the board of
----------------
directors shall be held at such time and place as shall be determined by
resolution of the board of directors without other notice than such resolution.
SECTION 4. Special Meetings. Special meetings of the board of
----------------
directors may be called by or at the request of the chairman, the chief
executive officer or one-third of the directors. The person calling the special
meetings of the board of directors may fix any place as the place for holding
any special meeting of the board of directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participation
shall constitute presence in person.
SECTION 5. Notice. Written notice of any special meeting shall be
------
given to each director at least two days previous thereto delivered personally
or by telegram or at least seven days previous thereto delivered by mail at the
address at which the director is most likely to be reached. Such notice shall
be deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid if mailed or when delivered to the telegraph
company if sent by telegram. Any director may waive notice of any meeting by a
writing filed with the secretary. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the board of
directors need be specified in the notice or waiver of notice of such meeting.
SECTION 6. Quorum. A majority of the number of directors fixed by
------
Section 2 shall constitute a quorum for the transaction of business at any
meeting of the board of directors, but if less than such majority is present at
a meeting, a majority of the directors present may adjourn the meeting from time
to time. Notice of any adjourned meeting shall be given in the same manner as
prescribed by Section 5 of this Article III.
SECTION 7. Manner of Acting. The act of the majority of the directors
----------------
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by these Bylaws, the
Certificate of Incorporation, or the General Corporation Law of the State of
Delaware.
SECTION 8. Action Without a Meeting. Any action required or permitted
------------------------
to be taken by the board of directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
SECTION 9. Resignation. Any director may resign at any time by sending
-----------
a written notice of such resignation to the home office of the Corporation
addressed to the chairman. Unless otherwise specified therein such resignation
shall take effect upon receipt thereof by the chairman.
SECTION 10. Vacancies. Any vacancy occurring in the board of directors
---------
shall be filled in accordance with the provisions of the Corporation's
Certificate of Incorporation. Any directorship to be filled by reason of an
increase in the number of directors may be filled by the affirmative vote of
two-thirds of the directors then in office or by election at an annual meeting
or at a special meeting of the stockholders held for that purpose. The term of
such director shall be in accordance with the provisions of the Corporation's
Certificate of Incorporation.
SECTION 11. Removal of Directors. Any director or the entire board of
--------------------
directors may be removed only in accordance with the provisions of the
Corporation's Certificate of Incorporation.
SECTION 12. Compensation. Directors, as such, and advisory or emeritus
------------
directors may receive compensation for service on the board of directors.
Members of either standing or special committees may be allowed such
compensation as the board of directors may determine.
C-4
<PAGE>
SECTION 13. Advisory and Emeritus Directors. The board of directors may
-------------------------------
by resolution appoint as advisory directors individuals whom the board believes
possess knowledge, experience and other qualifications which may prove valuable
to the Corporation, and may appoint as emeritus directors individuals who have
retired from the board after extended and faithful service. Advisory and
emeritus directors may sit with the board of directors at regular and special
meetings and discuss any question under consideration; provided, however, that
advisory and emeritus directors shall cast no vote. The board of directors
shall have the power to remove any advisory or emeritus director with or without
cause at any time.
ARTICLE IV
Committees of the Board of Directors
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, as they may determine to be necessary
or appropriate for the conduct of the business of the Corporation, and may
prescribe the duties, constitution and procedures thereof. Each committee shall
consist of one or more directors of the Corporation appointed by a majority of
the whole board. The board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee.
The board shall have power at any time to change the members of, to fill
vacancies in, and to discharge any committee of the board. Any member of any
such committee may resign at any time by giving notice to the Corporation;
provided, however, that notice to the board, the chairman of the board, the
chief executive officer, the chairman of such committee, or the secretary shall
be deemed to constitute notice to the Corporation. Such resignation shall take
effect upon receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, acceptance of such resignation shall not be
necessary to make it effective. Any member of any such committee may be removed
at any time, either with or without cause, by the affirmative vote of a majority
of the authorized number of directors at any meeting of the board called for
that purpose.
ARTICLE V
Officers
SECTION 1. Positions. The officers of the Corporation shall be a
---------
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be elected by the board of directors. The board of directors may
designate one or more vice presidents as executive vice president or senior vice
president. The board of directors may also elect or authorize the appointment
of such other officers as the business of the Corporation may require. The
officers shall have such authority and perform such duties as the board of
directors may from time to time authorize or determine. In the absence of
action by the board of directors, the officers shall have such powers and duties
as generally pertain to their respective offices.
SECTION 2. Election and Term of Office. The officers of the
---------------------------
Corporation shall be elected annually by the board of directors at the first
meeting of the board of directors held after each annual meeting of the
stockholders. If the election of officers is not held at such meeting, such
election shall be held as soon thereafter as possible. Each officer shall hold
office until his successor shall have been duly elected and qualified or until
his death or until he shall resign or shall have been removed in the manner
hereinafter provided. Election or appointment of an officer, employee or agent
shall not of itself create contract rights. The board of directors may
authorize the Corporation to enter into an employment contract with any officer
in accordance with state law; but no such contract shall impair the right of the
board of directors to remove any officer at any time in accordance with Section
3 of this Article V.
C-5
<PAGE>
SECTION 3. Removal. Any officer may be removed by vote of two-thirds
-------
of the board of directors whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal, other than for cause,
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. Remuneration. The remuneration of the officers shall be
------------
fixed from time to time by the board of directors, and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
ARTICLE VI
Contracts, Loans, Checks and Deposits
SECTION 1. Contracts. To the extent permitted by applicable law, and
---------
except as otherwise prescribed by the Corporation's Certificate of Incorporation
or these Bylaws with respect to Certificates for shares, the board of directors
or the executive committee may authorize any officer, employee, or agent of the
Corporation to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation. Such authority may be general or
confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
-----
Corporation and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or confined
to specific instances.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for
-------------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by one or more officers, employees or
agents of the Corporation in such manner, including in facsimile form, as shall
from time to time be determined by resolution of the board of directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the Corporation
in any of its duly authorized depositories as the board of directors may select.
ARTICLE VII
Certificates for Shares and Their Transfer
SECTION 1. Certificates for Shares. The shares of the Corporation
-----------------------
shall be represented by Certificates signed by the chairman of the board of
directors or the president or a vice president and by the treasurer or an
assistant treasurer or the secretary or an assistant secretary of the
Corporation, and may be sealed with the seal of the Corporation or a facsimile
thereof. Any or all of the signatures upon a Certificate may be facsimiles if
the Certificate is countersigned by a transfer agent, or registered by a
registrar, other than the Corporation itself or an employee of the Corporation.
If any officer who has signed or whose facsimile signature has been placed upon
such Certificate shall have ceased to be such officer before the Certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of its issue.
SECTION 2. Form of Share Certificates. All Certificates representing
--------------------------
shares issued by the Corporation shall set forth upon the face or back that the
Corporation will furnish to any stockholder upon request and without charge a
full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof, and the qualifications, limitations or restrictions of such preferences
and/or rights, so far as the same have been fixed and determined, and the
authority of the board of directors to fix and determine the relative rights and
preferences of subsequent series.
C-6
<PAGE>
Each Certificate representing shares shall state upon the face thereof:
that the Corporation is organized under the laws of the State of Delaware; the
name of the person to whom issued; the number and class of shares, the
designation of the series, if any, which such Certificate represents; and the
par value of each share represented by such Certificate, or a statement that the
shares are without par value. Other matters in regard to the form of the
Certificates shall be determined by the board of directors.
SECTION 3. Payment for Shares. No Certificate shall be issued for any
------------------
share until such share is fully paid.
SECTION 4. Form of Payment for Shares. The consideration for the
--------------------------
issuance of shares shall be paid in accordance with the provisions of the
Corporation's Certificate of Incorporation.
SECTION 5. Transfer of Shares. Transfer of shares of capital stock of
------------------
the Corporation shall be made only on its stock transfer books. Authority for
such transfer shall be given only the holder of record thereof or by his legal
representative, who shall furnish proper evidence of such authority, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Corporation. Such transfer shall be made only on surrender for cancellation
of the Certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Corporation shall be deemed by the Corporation
to be the owner thereof for all purposes.
SECTION 6. Lost Certificates. The board of directors may direct a new
-----------------
Certificate to be issued in place of any Certificate theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the Certificate of stock to be
lost, stolen, or destroyed. When authorizing such issue of a new Certificate,
the board of directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen, or destroyed
Certificate, or his legal representative, to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the Certificate alleged to have been lost, stolen,
or destroyed.
ARTICLE VIII
Fiscal Year; Annual Audit
The fiscal year of the Corporation shall end on the last day of September
of each year. The Corporation shall be subject to an annual audit as of the end
of its fiscal year by independent public accountants appointed by and
responsible to the board of directors.
ARTICLE IX
Dividends
Dividends upon the stock of the Corporation, subject to the provisions of
the Certificate of Incorporation, if any, may be declared by the board of
directors at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property or in the Corporation's own stock.
ARTICLE X
Corporation Seal
The corporate seal of the Corporation shall be in such form as the board of
directors shall prescribe.
C-7
<PAGE>
ARTICLE XI
Amendments
In accordance with the Corporation's Certificate of Incorporation, these
Bylaws may be repealed, altered, amended or rescinded by the stockholders of the
Corporation only by vote of not less than 80% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose (provided that notice of such proposed
repeal, alteration, amendment or rescission is included in the notice of such
meeting). In addition, the board of directors may repeal, alter, amend or
rescind these Bylaws by vote of two-thirds of the board of directors at a legal
meeting held in accordance with the provisions of these Bylaws.
C-8
<PAGE>
Exhibit 4
COMMON STOCK
NUMBER ___ ___ SHARES
ROCKY FORD FINANCIAL, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This certifies that
is the owner of CUSIP ___________
fully paid and nonassessable shares of common stock, par value $0.01 per share,
of
Rocky Ford Financial, Inc. (the "Corporation"), a Delaware corporation. The
shares represented by this certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof, or by his duly
authorized attorney or legal representative, upon the surrender of this
certificate properly endorsed. This certificate is not valid until
countersigned and registered by the Corporation's transfer agent and registrar.
THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be executed
by the facsimile signatures of its duly authorized officers and has caused a
facsimile of its corporate seal to be hereunto affixed.
Dated:
- -------------------------------- ------------------------------
Francis E. Clute Keith E. Waggoner
Secretary President
Countersigned and Registered:
By:
-----------------------------------------------------
Transfer Agent and Registrar
-----------------------------------------------------
Authorized Signature
[CORPORATE SEAL]
- --------------------------------------------------------------------------------
RESTRICTIONS ON TRANSFER
The Certificate of Incorporation includes a provision which prohibits any person
from directly or indirectly acquiring or offering to acquire the beneficial
ownership of more than 10% of any class of equity security of the Corporation.
Such provision eliminates the voting rights of securities acquired in violation
of the provision. Such provision will expire five years from the date of
completion of the conversion of Rocky Ford Federal Savings and Loan Association,
Rocky Ford, Colorado (the "Association") from mutual to stock form. The
Certificate of Incorporation also imposes certain restrictions on the voting
rights of beneficial owners of more than 10% of any class of equity security of
the Corporation after five years from the date of completion of the conversion
of the Association from mutual to stock form. The Corporation will furnish
without charge to each stockholder who so requests additional information with
respect to such restrictions. Such request may be made in writing to the
Secretary of the Corporation.
- --------------------------------------------------------------------------------
<PAGE>
The shares represented by this certificate are issued subject to all
the provisions of the Certificate of Incorporation and Bylaws of the Corporation
as from time to time amended (copies of which are on file at the principal
executive office of the Corporation), to all of which the holder by acceptance
hereof assents.
The Corporation will furnish without charge to each stockholder who so
requests a full statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights. Such requests shall be made in writing to the Secretary of the
Corporation.
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF TRANSFER MIN ACT - ..........Custodian.......... under Uniform Transfers to
(Cust) (Minor)
Minors Act.......................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, __________________________________ HEREBY SELL(S),
ASSIGN(S) AND TRANSFER(S) UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------
/ /
- -----------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the common stock evidenced by this certificate, and do hereby irrevocably
constitute and appoint __________________________________, Attorney, to transfer
the said shares on the books of the Corporation, with full power of
substitution.
Dated _____________________
-------------------------------------
Signature
-------------------------------------
Signature
In presence of: _______________________________________________
SEE REVERSE SIDE FOR RESTRICTIONS ON TRANSFER
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
Exhibit 5
[LETTERHEAD OF HOUSLEY KANTARIAN & BRONSTEIN, PC]
January 27, 1997
Board of Directors
Rocky Ford Financial, Inc.
801 Swink Avenue
Rocky Ford, Colorado 81067-0032
RE: Registration Statement on Form SB-2
Ladies and Gentlemen:
You have requested our opinion as special counsel to First Lancaster
Bancshares, Inc. (the "Corporation") in connection with the Registration
Statement on Form SB-2 to be filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Registration Statement").
The Registration Statement relates to shares of common stock of the Corporation
(the "Common Stock") to be issued in connection with the simultaneous conversion
of Rocky Ford Federal Savings and Loan Association from mutual to stock form and
reorganization into the holding company form of ownership as a wholly owned
subsidiary of the Corporation (the "Conversion").
In rendering this opinion, we understand that the Common Stock will be
offered and sold in the manner described in the Prospectus which is a part of
the Registration Statement. We have examined such records and documents and
made such examination as we have deemed relevant in connection with this
opinion.
Based upon the foregoing, it is our opinion that the shares of Common Stock
will, when issued and sold as contemplated by the Registration Statement, be
legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus under the
heading "Legal Opinions."
Very truly yours,
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
By: /s/ Howard S. Parris
-------------------------------
Howard S. Parris
<PAGE>
Exhibit 8.3
[FERGUSON & CO., LLP LETTERHEAD]
December 31, 1996
Board of Directors
Rocky Ford Federal Savings and Loan Association
of Colorado
801 Swink Avenue
Rocky Ford, Colorado 81067
Plan of Conversion, Subscription Rights
---------------------------------------
Dear Directors:
Terms used in this letter not otherwise defined herein have the same
meanings for such terms in the Plan of Conversion adopted by the Board of
Directors of Rocky Ford Federal Savings and Loan Association of Colorado, Rocky
Ford, Colorado ("Rocky Ford Federal" or the "Association"), under which the
Association will convert from a mutual savings and loan association to a stock
savings and loan association and issue all of the Association's stock to Rocky
Ford Financial, Inc. (the "Holding Company"). Simultaneously, the Holding
Company will issue shares of common stock.
We understand that in accordance with the Plan of Conversion, Subscription
Rights to purchase shares of Common Stock in the Holding Company are to be
issued to (1) Eligible Account Holders, (2) The Association's tax qualified
employee plans, (3) Supplemental Eligible Account Holders, and (4) Other
Members. Based solely upon our observation that the Subscription Rights will be
available to such parties without cost, will be legally non-transferable and of
short duration, and will afford such parties the right only to purchase shares
of Common Stock at the same price to be paid by members of the general public in
the Community Offering, but without undertaking any independent investigation of
state or federal laws or the position of the Internal Revenue Service with
respect to such issue, we are of the belief that:
(1) the Subscription Rights will have no ascertainable market value; and
(2) the price at which the Subscription Rights are exercisable will not
be more or less than the pro forma market value of the shares upon issuance.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates and other external forces (e.g.,
natural disasters or significant global events) occur from time to time and may
materially affect the value of thrift stocks as a whole or the Holding Company's
value. Accordingly, no assurance can be given that persons
<PAGE>
who subscribe to shares of Common Stock in the Conversion will thereafter be
able to sell such shares at the same price paid in the Subscription Offering.
Sincerely,
/s/ Robin L. Fussell
Robin L. Fussell
Principal
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT entered into this ________ day of _________________, 1997,
by and between Rocky Ford Federal Savings & Loan Association (the "Association")
and Keith E. Waggoner (the "Employee"), effective on the date (the "Effective
Date") this agreement is executed.
WHEREAS, the Employee has heretofore been employed by the Association as
its Executive Vice President and is experienced in all phases of the business of
the Association; and
WHEREAS, the Board of Directors of the Association believes it is in the
best interests of the Association to enter into this Agreement with the Employee
in order to assure continuity of management of the Association and to reinforce
and encourage the continued attention and dedication of the Employee to his
assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Association and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
-------------
When used anywhere in this Agreement, the following terms shall have the
meaning set forth herein.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Association, as the terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) When the Association is in the "mutual" form of organization, a
"Change in Control" shall be deemed to have occurred if:
(i) as a result of, or in connection with, any exchange offer,
merger or other business combination, sale of assets or contested election,
any combination of the foregoing transactions, or any similar transaction,
the persons who were non-employee directors of the Association before such
transaction cease to constitute a majority of the Board of Directors of the
Association or any successor to the Association;
(ii) the Association transfers substantially all of its assets to
another corporation which is not an Affiliate of the Association;
(iii) the Association sells substantially all of the assets of an
Affiliate which accounted for 50% or more of the controlled group's assets
immediately prior to such sale;
<PAGE>
(iv) any "person" including a "group", exclusive of the Board of
Directors of the Association or any committee thereof, is or becomes the
"beneficial owner", directly or indirectly, of proxies of the Association
representing twenty-five percent (25%) or more of the combined voting power
of the Association's members; or
(v) the Association is merged or consolidated with another
corporation and, as a result of the merger or consolidation, less than
seventy percent (70%) of the outstanding proxies relating to the surviving
or resulting corporation are given, in the aggregate, by the former members
of the Association.
(c) If the Association is in the "stock" form of organization, a "Change
in Control" shall be deemed to have occurred if:
(i) as a result of, or in connection with, any initial public
offering, tender offer or exchange offer, merger or other business
combination, sale of assets or contested election, any combination of the
foregoing transactions, or any similar transaction, the persons who were
non-employee directors of the Association before such transaction cease to
constitute a majority of the Board of Directors of the Association or any
successor to the Association;
(ii) the Association transfers substantially all of its assets to
another corporation which is not an Affiliate of the Association;
(iii) the Association sells substantially all of the assets of an
Affiliate which accounted for 50% or more of the controlled group's assets
immediately prior to such sale;
(iv) any "person" including a "group" is or becomes the "beneficial
owner", directly or indirectly, of securities of the Association
representing twenty-five percent (25%) or more of the combined voting power
of the Association's outstanding securities (with the terms in quotation
marks having the meaning set forth under the federal securities laws); or
(v) the Association is merged or consolidated with another
corporation and, as a result of the merger or consolidation, less than
seventy percent (70%) of the outstanding voting securities of the surviving
or resulting corporation is owned in the aggregate by the former
stockholders of the Association.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
---
occur solely by reason of a transaction in which the Association converts to the
stock form of organization, or creates an independent holding company in
connection therewith.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and as interpreted through applicable rulings and regulations in
effect from time to time.
-2-
<PAGE>
(e) "Code (S)280G Maximum" shall mean product of 2.99 and his "base
amount" as defined in Code (S)280G(b)(3).
(f) "Good Reason" shall mean any of the following events, which has not
been consented to in advance by the Employee in writing: (i) the requirement
that the Employee move his personal residence, or perform his principal
executive functions, more than thirty (30) miles from his primary office as of
the later of the Effective Date and the most recent voluntary relocation by the
Employee; (ii) a material reduction in the Employee's base compensation under
this Agreement as the same may be increased from time to time; (iii) the failure
by the Association to continue to provide the Employee with compensation and
benefits provided under this Agreement as the same may be increased from time to
time, or with benefits substantially similar to those provided to him under any
of the employee benefit plans in which the Employee now or hereafter becomes a
participant, or the taking of any action by the Association which would directly
or indirectly reduce any of such benefits or deprive the Employee of any
material fringe benefit enjoyed by him under this Agreement; (iv) the assignment
to the Employee of duties and responsibilities materially different from those
normally associated with his position; (v) a failure to reelect the Employee to
the Board of Directors of the Association, if the Employee has served on such
Board at any time during the term of the Agreement; (vi) a material diminution
or reduction in the Employee's responsibilities or authority (including
reporting responsibilities) in connection with his employment with the
Association; or (vii) a material reduction in the secretarial or other
administrative support of the Employee. In addition, "Good Reason" shall mean
an impairment of the Employee's health to an extent that it makes continued
performance of his duties hereunder hazardous to his physical or mental health.
(g) "Just Cause" shall mean, in the good faith determination of the
Association's Board of Directors, the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provision of this
Agreement. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. No act, or failure to
act, on the Employee's part shall be considered "willful" unless he has acted,
or failed to act, with an absence of good faith and without a reasonable belief
that his action or failure to act was in the best interest of the Association.
(h) "Protected Period" shall mean the period that begins on the date one
year before the Change in Control and ends on the closing date of the Change in
Control.
(i) "Trust" shall mean a grantor trust that is designed in accordance
with Revenue Procedure 92-64 and has a trustee independent of the Association.
2. Employment. The Employee is employed as the Executive Vice President
----------
of the Association, provided that he shall become the President of the
Association upon the completion of its mutual to stock conversion. The Employee
shall render such administrative
-3-
<PAGE>
and management services for the Association as are currently rendered and as are
customarily performed by persons situated in a similar executive capacity. The
Employee shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Association. The Employee's other duties
shall be such as the Board of Directors (the "Board") of the Association may
from time to time reasonably direct, including normal duties as an officer of
the Association.
3. Base Compensation. The Association agrees to pay the Employee during
-----------------
the term of this Agreement a salary at the rate of $______ per annum, payable in
cash not less frequently than monthly. The Board shall review, not less often
than annually, the rate of the Employee's salary, and in its sole discretion may
decide to increase his salary. Notwithstanding the foregoing, following a
Change in Control, the Board of Directors of the Association shall continue to
annually review the rate of the Employee's salary, and shall increase said rate
of salary by a percentage which is not less than the average annual percentage
increase in salary that the Employee received over the three calendar years
immediately preceding the year in which the Change in Control occurs.
4. Discretionary Bonuses. The Employee shall participate in an
---------------------
equitable manner with all other senior management employees of the Association
in discretionary bonuses that the Board may award from time to time to the
Association's senior management employees. No other compensation provided for
in this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses. Notwithstanding the foregoing,
following a Change in Control, the Employee shall receive discretionary bonuses
that are made no less frequently than, and in annual amounts not less than, the
average annual discretionary bonuses paid to the Employee during each of the
three calendar years immediately preceding the year in which such Change in
Control occurs.
5. (a) Participation in Retirement, Medical and Other Plans. During
----------------------------------------------------
the term of this Agreement, the Employee shall be eligible to participate in the
following benefit plans: group hospitalization, disability, health, dental,
sick leave, life insurance, travel and/or accident insurance, auto
allowance/auto lease, retirement, pension, and/or other present or future
qualified plans provided by the Association, generally which benefits, taken as
a whole, must be at least as favorable as those in effect on the Effective Date.
(b) Employee Benefits; Expenses. The Employee shall be eligible to
---------------------------
participate in any fringe benefits which are or may become available to the
Association's senior management employees, including for example: any stock
option or incentive compensation plans, and any other benefits which are
commensurate with the responsibilities and functions to be performed by the
Employee under this Agreement. The Employee shall be reimbursed for all
reasonable out-of-pocket business expenses which he shall incur in connection
with his services under this Agreement upon substantiation of such expenses in
accordance with the policies of the Association.
-4-
<PAGE>
6. Term. The Association hereby employs the Employee, and the Employee
----
hereby accepts such employment under this Agreement, for the period commencing
on the Effective Date and ending thirty-six months thereafter (or such earlier
date as is determined in accordance with Section 9). Additionally, on each
annual anniversary date from the Effective Date, the Employee's term of
employment shall be extended for an additional one-year period beyond the then
effective expiration date provided the Board determines in a duly adopted
resolution that the performance of the Employee has met the Board's requirements
and standards, and that this Agreement shall be extended. Only those members of
the Board of Directors who have no personal interest in this Employment
Agreement shall discuss and vote on the approval and subsequent review of this
Agreement.
7. Loyalty; Noncompetition.
-----------------------
(a) During the period of his employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all his full business time, attention, skill, and efforts
to the faithful performance of his duties hereunder; provided, however, from
time to time, Employee may serve on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Association or any of its subsidiaries
or affiliates, or unfavorably affect the performance of Employee's duties
pursuant to this Agreement, or will not violate any applicable statute or
regulation. "Full business time" is hereby defined as that amount of time
usually devoted to like companies by similarly situated executive officers.
During the term of his employment under this Agreement, the Employee shall not
engage in any business or activity contrary to the business affairs or interests
of the Association, or be gainfully employed in any other position or job other
than as provided above.
(b) Permissible Investments. Nothing contained in this Section
-----------------------
shall be deemed to prevent or limit the Employee's right to invest in the
capital stock or other securities of any business dissimilar from that of the
Association, or, solely as a passive or minority investor, in any business.
8. Standards. The Employee shall perform his duties under this
---------
Agreement in accordance with such reasonable standards as the Board may
establish from time to time. The Association will provide Employee with the
working facilities and staff customary for similar executives and necessary for
him to perform his duties.
9. Vacation and Sick Leave. At such reasonable times as the Board shall
-----------------------
in its discretion permit, the Employee shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time, provided that:
(a) The Employee shall be entitled to an annual vacation in
accordance with the policies that the Board periodically establishes for senior
management employees of the Association.
-5-
<PAGE>
(b) The Employee shall not receive any additional compensation from
the Association on account of his failure to take a vacation or sick leave, and
the Employee shall not accumulate unused vacation or sick leave from one fiscal
year to the next, except in either case to the extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Employee shall
be entitled without loss of pay, to absent himself voluntarily from the
performance of his employment with the Association for such additional periods
of time and for such valid and legitimate reasons as the Board may in its
discretion determine. Further, the Board may grant to the Employee a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick
leave benefit as established by the Board.
10. Termination and Termination Pay. Subject to Section 12 hereof, the
-------------------------------
Employee's employment hereunder may be terminated under the following
circumstances:
(a) Death. The Employee's employment under this Agreement shall
-----
terminate upon his death during the term of this Agreement, in which event the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which his death occurred.
(b) Disability. (1) The Association may terminate the Employee's
----------
employment after having established the Employee's Disability. For purposes of
this Agreement, "Disability" means a physical or mental infirmity which impairs
the Employee's ability to substantially perform his duties under this Agreement
and which results in the Employee becoming eligible for long-term disability
benefits under the Association's long-term disability plan (or, if the
Association has no such plan in effect, which impairs the Employee's ability to
substantially perform his duties under this Agreement for a period of one
hundred eighty (180) consecutive days). The Employee shall be entitled to the
compensation and benefits provided for under this Agreement for (i) any period
during the term of this Agreement and prior to the establishment of the
Employee's Disability during which the Employee is unable to work due to the
physical or mental infirmity, or (ii) any period of Disability which is prior to
the Employee's termination of employment pursuant to this Section 10(b);
provided that any benefits paid pursuant to the Association's long term
disability plan will continue as provided in such plan.
(2) During any period that the Employee shall receive disability benefits
and to the extent that the Employee shall be physically and mentally able to do
so, he shall furnish such information, assistance and documents so as to assist
in the continued ongoing business of the Association and, if able, shall make
himself available to the Association to undertake reasonable assignments
consistent with his prior position and his physical and mental health. The
-6-
<PAGE>
Association shall pay all reasonable expenses incident to the performance of any
assignment given to the Employee during the disability period.
(c) Just Cause. The Board may, by written notice to the Employee,
----------
immediately terminate his employment at any time, for Just Cause. The Employee
shall have no right to receive compensation or other benefits for any period
after termination for Just Cause.
(d) Without Just Cause; Constructive Discharge. (1) The Board may,
------------------------------------------
by written notice to the Employee, immediately terminate his employment at any
time for a reason other than Just Cause, in which event the Employee shall be
entitled to receive the following compensation and benefits (unless such
termination occurs during the Protected Period in which event the benefits and
compensation provided for in Section 12 shall apply):
(i) the salary provided pursuant to Section 3 hereof, up to the expiration
date of this Agreement including any renewal term (the "Expiration Date"),
plus said salary for an additional 12-month period;
(ii) a put option meeting the requirements set forth in subsection 3
hereof, provided that the Employee shall not be entitled to such put option
if on the date the Employee terminates employment, either the Employee does
not own any common stock of the Association or an affiliated company, or
such common stock is "readily tradeable" within the meaning of Cod (S)
401(a)(28)(C); and
(iii) at the Employee's election either (A) cash in an amount equal to the
cost to the Employee of obtaining all health, life, disability and other
benefits which the Employee would have been eligible to participate in
through the Expiration Date based upon the benefit levels substantially
equal to those that the Association provided for the Employee at the date
of termination of employment or (B) continued participation under such
Association benefit plans through the Expiration Date, but only to the
extent the Employee continues to qualify for participation therein. All
amounts payable to the Employee shall be paid, at the option of the
Employee, either (I) in periodic payments through the Expiration Date, or
(II) in one lump sum within ten (10) days of such termination.
(2) The Employee shall be entitled to receive the compensation and
benefits payable under subsection 10(d)(1) hereof in the event that the Employee
voluntarily terminates employment within 90 days of an event that constitutes
Good Reason, (unless such voluntary termination occurs during the Protected
Period, in which event the benefits and compensation provided for in Section 12
shall apply).
(3) A put option deliverable to the Employee pursuant to this Section
10(d) shall, at a minimum, obligate the Association and any successor to
purchase any shares of its common stock are the common stock of any affiliated
company that the Employee owns on the date of terminating employment. The terms
of such purchase shall be set forth in a written instrument
-7-
<PAGE>
prepared and executed by the Association, and shall require that (i) the
purchase price be no less than the appraised value of such stock, determined in
accordance with Code (S) 401(a)(28)(C), by an appraiser mutually agreed upon by
the Employee and the Association, as of the last day of the fiscal year in which
the Employee's employment terminates, and (ii) the Association make such payment
as soon as practicable after the Association receives said appraisal.
(e) Termination or Suspension Under Federal Law. (1) If the
-------------------------------------------
Employee is removed and/or permanently prohibited from participating in the
conduct of the Association's affairs by an order issued under Sections 8(e)(4)
or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(4)
and (g)(1)), all obligations of the Association under this Agreement shall
terminate, as of the effective date of the order, but vested rights of the
parties shall not be affected.
(1) If the Association is in default (as defined in Section 3(x)(1)
of FDIA), all obligations under this Agreement shall terminate as of the date of
default; however, this Paragraph shall not affect the vested rights of the
parties.
(2) All obligations under this Agreement shall terminate, except to
the extent that continuation of this Agreement is necessary for the continued
operation of the Association: (i) by the Director of the Office of Thrift
Supervision ("Director of OTS"), or his or her designee, at the time that the
Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Association under the authority contained in Section 13(c) of FDIA; or (ii)
by the Director of the OTS, or his or her designee, at the time that the
Director of the OTS, or his or her designee approves a supervisory merger to
resolve problems related to operation of the Association or when the Association
is determined by the Director of the OTS to be in an unsafe or unsound
condition. Such action shall not affect any vested rights of the parties.
(3) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA
(12 U.S.C. 1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the
Employee from participating in the conduct of the Association's affairs, the
Association's obligations under this Agreement shall be suspended as of the date
of such service, unless stayed by appropriate proceedings. If the charges in the
notice are dismissed, the Association may in its discretion (i) pay the Employee
all or part of the compensation withheld while its contract obligations were
suspended, and (ii) reinstate (in whole or in part) any of its obligations which
were suspended.
(4) Any payments made to the Employee pursuant to this Agreement,
or otherwise, are subject to and conditioned upon their compliance with 12
U.S.C. Section 1828(k) and any regulations promulgated thereunder and shall not
exceed applicable limits under Office of Thrift Supervision Regulatory Bulletin
27a.
(f) Voluntary Termination by Employee. Subject to Section 12
---------------------------------
hereof, the Employee may voluntarily terminate employment with the Association
during the term of this Agreement, upon at least ninety (90) days' prior written
notice to the Board of Directors, in
-8-
<PAGE>
which case the Employee shall receive only his compensation, vested rights and
employee benefits up to the date of his termination (unless such termination
occurs pursuant to Section 10(d)(2) hereof or within the Protected Period in
Section 12(a) hereof in which event the benefits and compensation provided for
in Sections 10(d) or 12, as applicable, shall apply).
11. No Mitigation. The Employee shall not be required to mitigate the
-------------
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.
12. Change in Control.
-----------------
(a) Trigger Events. The Employee shall be entitled to collect the
severance benefits set forth in Subsection (b) hereof in lieu of any benefits
under Section 10 hereof in the event that (i) a Change in Control occurs, or
(ii) the Association or its successor(s) in interest terminate the Employee's
employment without his written consent and for any reason other than Just Cause
during the Protected Period.
(b) Amount of Severance Benefit. If the Employee becomes entitled
to collect severance benefits pursuant to Section 12(a) hereof, the Association
shall:
(i) pay the Employee a severance benefit equal to the
difference between the Code (S)280G Maximum and the sum of any other
"parachute payments" as defined under Code (S)280G(b)(2) that the
Employee receives on account of the Change in Control, and
(ii) pay for long-term disability and provide such medical
benefits as are available to the Employee under the provisions of
COBRA, for eighteen (18) months (or such longer period, up to 24
months, if COBRA is amended).
Said sum shall be paid in one lump sum within ten (10) days of the
later of the date of the Change in Control and the Employee's last day of
employment with the Association, provided that the Employee may elect at any
time on or before becoming entitled to collect benefits hereunder, to have such
benefits be paid in substantially equal installments over a period of up to 10
years. In the event that the Employee and the Association jointly agree that
the Employee has collected an amount exceeding the Code (S)280G Maximum, the
parties may agree in writing that such excess shall be treated as a loan
ab initio which the Employee shall repay to the Association, on terms and
- ---------
conditions mutually agreeable to the parties, together with interest at the
applicable federal rate provided for in Section 7872(f)(2)(B) of the Code.
(c) Funding of Grantor Trust upon Change in Control. Not later
than ten business days after a Change in Control, the Association shall (i)
deposit in a Trust an amount equal to the Code (S)280G Maximum, unless the
Employee has previously provided a written release of any claims under this
Agreement, and (ii) provide the trustee of the Trust with a
-9-
<PAGE>
written direction to hold said amount and any investment return thereon in a
segregated account for the benefit of the Employee, and to follow the procedures
set forth in the next paragraph as to the payment of such amounts from the
Trust. Upon the later of the Trust's final payment of all amounts due under the
following paragraph or the date twelve months after the Change in Control, the
trustee of the Trust shall pay to the Association the entire balance remaining
in the segregated account maintained for the benefit of the Employee. The
Employee shall thereafter have no further interest in the Trust.
During the 12-consecutive month period after a Change in Control, the
Employee may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Employee an amount designated in the notice as being
payable pursuant to this Agreement. Within three business days after receiving
said notice, the trustee of the Trust shall send a copy of the notice to the
Association via overnight and registered mail return receipt requested. On the
tenth (10th) business day after mailing said notice to the Association, the
trustee of the Trust shall pay the Employee the amount designated therein in
immediately available funds, unless prior thereto the Association provides the
trustee with a written notice directing the trustee to withhold such payment.
In the latter event, the trustee shall submit the dispute to non-appealable
binding arbitration for a determination of the amount payable to the Employee
pursuant to this Agreement, and the costs of such arbitration shall be paid by
the Association. The trustee shall choose the arbitrator to settle the dispute,
and such arbitrator shall be bound by the rules of the American Arbitration
Association in making his determination. The parties and the trustee shall be
bound by the results of the arbitration and, within 3 days of the determination
by the arbitrator, the trustee shall pay from the Trust the amounts required to
be paid to the Employee and/or the Association, and in no event shall the
trustee be liable to either party for making the payments as determined by the
arbitrator.
13. Indemnification. The Association agrees that its Bylaws shall
---------------
continue to provide for indemnification of directors, officers, employees and
agents of the Association, including the Employee during the full term of this
Agreement, and to at all times provide adequate insurance for such purposes.
14. Reimbursement of Employee for Enforcement Proceedings. In the event
-----------------------------------------------------
that any dispute arises between the Employee and the Association as to the terms
or interpretation of this Agreement, whether instituted by formal legal
proceedings or otherwise, including any action that the Employee takes to defend
against any action taken by the Association, the Employee shall be reimbursed
for all costs and expenses, including reasonable attorneys' fees, arising from
such dispute, proceedings or actions, provided that the Employee obtains either
a written settlement or a final judgement by a court of competent jurisdiction
substantially in his favor. Such reimbursement shall be paid within ten (10)
days of Employee's furnishing to the Association written evidence, which may be
in the form, among other things, of a cancelled check or receipt, of any costs
or expenses incurred by the Employee.
-10-
<PAGE>
15. Federal Income Tax Withholding. The Association may withhold all
------------------------------
federal and state income or other taxes from any benefit payable under this
Agreement as shall be required pursuant to any law or government regulation or
ruling.
16. Successors and Assigns.
----------------------
(a) Association. This Agreement shall not be assignable by the
-----------
Association, provided that this Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Association which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets of the Association.
(b) Employee. Since the Association is contracting for the unique
--------
and personal skills of the Employee, the Employee shall be precluded from
assigning or delegating his rights or duties hereunder without first obtaining
the written consent of the Association; provided, however, that nothing in this
paragraph shall preclude (i) the Employee from designating a beneficiary to
receive any benefit payable hereunder upon his death, or (ii) the executors,
administrators, or other legal representatives of the Employee or his estate
from assigning any rights hereunder to the person or persons entitled thereunto.
(c) Attachment. Except as required by law, no right to receive
----------
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
17. Amendments. No amendments or additions to this Agreement shall be
----------
binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
18. Applicable Law. Except to the extent preempted by federal law, the
--------------
laws of the State of Colorado shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
19. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
20. Entire Agreement. This Agreement, together with any understanding or
----------------
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto and shall supersede any prior
agreement between the parties.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: ROCKY FORD FEDERAL SAVINGS &
LOAN ASSOCIATION
By:
- -------------------------- ---------------------------------------------
Secretary Its
--------------------
WITNESS:
- -------------------------- ------------------------------------------------
Keith E. Waggoner
-12-
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is entered into this ______ day of __________, 1997, by and
between Rocky Ford Financial, Inc. (the "Company") and Keith E. Waggoner (the
"Employee"), effective on the closing date (the "Effective Date") of the
conversion of Rocky Ford Federal Savings & Loan Association (the "Association")
from mutual to stock form.
WHEREAS, the Employee has heretofore been employed by the Association as
its Executive Vice President, and is experienced in all phases of the business
of the Association, and has become the President and Chief Executive Officer of
the Company; and
WHEREAS, the Board of Directors (the "Board") of the Company believes it is
in the best interests of the Company to enter into this Agreement with the
Employee in order to assure continuity of management of the Association and the
Company, and to reinforce and encourage the continued attention and dedication
of the Employee to his assigned duties; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship between the Company and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Defined Terms
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When used anywhere in this Agreement, the following terms shall have the
meaning set forth herein.
(a) "Change in Control" shall occur if: (i) as a result of, or in
connection with, any initial public offering, tender offer or exchange offer,
merger or other business combination, sale of assets or contested election, any
combination of the foregoing transactions, or any similar transaction, the
persons who were non-employee directors of the Company before such transaction
cease to constitute a majority of the Board of Directors of the Company or any
successor to the Company; (ii) the Company transfers substantially all of its
assets to another corporation which is not an Affiliate of the Company; (iii)
the Company sells substantially all of the assets of an Affiliate which
accounted for 50% or more of the controlled group's assets immediately prior to
such sale; (iv) any "person" including a "group" is or becomes the "beneficial
owner", directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the Company's
outstanding securities (with the terms in quotation marks having the meaning set
forth under the federal securities laws); or (v) the Company is merged or
consolidated with another corporation and, as a result of the merger or
consolidation, less than seventy percent (70%) of the outstanding voting
securities of the surviving or resulting corporation are owned in the aggregate
by the former stockholders of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.
(c) "Code (S)280G Maximum" shall mean product of 2.99 and the
Employee's "base amount" as defined in Code (S)280G(b)(3).
(d) "Good Reason" shall mean any of the following events, which has
not been consented to in advance by the Employee in writing: (i) the requirement
that the Employee move his personal residence, or perform his principal
executive functions, more than 30 miles from his primary office as of the later
of the Effective Date and the most recent voluntary relocation by the Employee;
(ii) a material reduction in the Employee's base
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compensation as in effect under this Agreement as the same may be increased from
time to time; (iii) the failure by the Association or the Company to continue to
provide the Employee with compensation and benefits provided under this
Agreement as the same may be increased from time to time, or with benefits
substantially similar to those provided to him under any of the employee benefit
plans in which the Employee now or hereafter becomes a participant, or the
taking of any action by the Association or the Company which would directly or
indirectly reduce any of such benefits or deprive the Employee of any material
fringe benefit enjoyed by him under this Agreement; (iv) the assignment to the
Employee of duties and responsibilities materially different from those normally
associated with his position; (v) a failure to reelect the Employee to the Board
of Directors of the Association or the Company, if the Employee has served on
such Board at any time during the term of the Agreement; (vi) a material
diminution or reduction in the Employee's responsibilities or authority
(including reporting responsibilities) in connection with his employment with
the Association or the Company; or (vii) a material reduction in the secretarial
or other administrative support of the Employee.
(e) "Just Cause" shall mean, in the good faith determination of the
Association's Board of Directors, the Employee's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final cease-and-desist order, or material breach of any provision of this
Agreement. The Employee shall have no right to receive compensation or other
benefits for any period after termination for Just Cause. No act, or failure to
act, on the Employee's part shall be considered "willful" unless he has acted,
or failed to act, with an absence of good faith and without a reasonable belief
that his action or failure to act was in the best interest of the Association
and the Company.
(f) "Protected Period" shall mean the period that begins on the date
six months before a Change in Control and ends on the later of the second annual
anniversary of the Change in Control or the expiration date of this Agreement.
(g) "Trust" shall mean a grantor trust that is designed in accordance
with Revenue Procedure 92-64 and has a trustee independent of the Association
and the Company.
2. Employment. The Employee is employed as the President and Chief
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Executive Officer of the Company. The Employee shall render such administrative
and management services for the Company as are currently rendered and as are
customarily performed by persons situated in a similar executive capacity. The
Employee shall also promote, by entertainment or otherwise, as and to the extent
permitted by law, the business of the Company. The Employee's other duties
shall be such as the Board may from time to time reasonably direct, including
normal duties as an officer of the Company.
3. Consideration from Company: Joint and Several Liability. In lieu of
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paying the Employee a base salary during the term of this Agreement, the Company
hereby agrees that to the extent permitted by law, it shall be jointly and
severally liable with the Association for the payment of all amounts due under
the employment agreement of even date herewith between the Association and the
Employee. Nevertheless, the Board may in its discretion at any time during the
term of this Agreement agree to pay the Employee a base salary for the remaining
term of this Agreement. If the Board agrees to pay such salary, the Board shall
thereafter review, not less often than annually, the rate of the Employee's
salary, and in its sole discretion may decide to increase his salary.
4. Discretionary Bonuses. The Employee shall participate in an
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equitable manner with all other senior management employees of the Company in
discretionary bonuses that the Board may award from time to time to the
Company's senior management employees. No other compensation provided for in
this Agreement shall be deemed a substitute for the Employee's right to
participate in such discretionary bonuses.
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5. Participation in Retirement, Medical and Other Plans
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(a) During the term of this Agreement, the Employee shall be eligible
to participate in the following benefit plans: group hospitalization,
disability, health, dental, sick leave, life insurance, travel and/or accident
insurance, auto allowance/auto lease, retirement, pension, and/or other present
or future qualified plans provided by the Company, generally which benefits,
taken as a whole, must be at least as favorable as those in effect on the
Effective Date.
(b) The Employee shall be eligible to participate in any fringe
benefits which are or may become available to the Company's senior management
employees, including for example: any stock option or incentive compensation
plans, club memberships, and any other benefits which are commensurate with the
responsibilities and functions to be performed by the Employee under this
Agreement. The Employee shall be reimbursed for all reasonable out-of-pocket
business expenses which he shall incur in connection with his services under
this Agreement upon substantiation of such expenses in accordance with the
policies of the Company.
6. Term. The Company hereby employs the Employee, and the Employee
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hereby accepts such employment under this Agreement, for the period commencing
on the Effective Date and ending 36 months thereafter (or such earlier date as
is determined in accordance with Section 9). Additionally, on each annual
anniversary date from the Effective Date, the Employee's term of employment
shall be extended for an additional one-year period beyond the then effective
expiration date, provided the Board determines in a duly adopted resolution that
the performance of the Employee has met the Board's requirements and standards,
and that this Agreement shall be extended. Only those members of the Board of
Directors who have no personal interest in this Employment Agreement shall
discuss and vote on the approval and subsequent review of this Agreement.
7. Loyalty; Noncompetition.
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(a) During the period of his employment hereunder and except for
illnesses, reasonable vacation periods, and reasonable leaves of absence, the
Employee shall devote all his full business time, attention, skill, and efforts
to the faithful performance of his duties hereunder; provided, however, from
time to time, the Employee may serve on the boards of directors of, and hold any
other offices or positions in, companies or organizations, which will not
present any conflict of interest with the Company or any of its subsidiaries or
affiliates, or unfavorably affect the performance of the Employee's duties
pursuant to this Agreement, or will not violate any applicable statute or
regulation. "Full business time" is hereby defined as that amount of time
usually devoted to like companies by similarly situated executive officers.
During the term of his employment under this Agreement, the Employee shall not
engage in any business or activity contrary to the business affairs or interests
of the Company, or be gainfully employed in any other position or job other than
as provided above.
(b) Nothing contained in this Paragraph 6 shall be deemed to prevent
or limit the Employee's right to invest in the capital stock or other securities
of any business dissimilar from that of the Company, or, solely as a passive or
minority investor, in any business.
8. Standards. The Employee shall perform his duties under this
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Agreement in accordance with such reasonable standards as the Board may
establish from time to time. The Company will provide Employee with the working
facilities and staff customary for similar executives and necessary for him to
perform his duties.
9. Vacation and Sick Leave. At such reasonable times as the Board shall
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in its discretion permit, the Employee shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his employment under this
Agreement, all such voluntary absences to count as vacation time, provided that:
(a) The Employee shall be entitled to an annual vacation in accordance
with the policies that the Board periodically establishes for senior management
employees of the Company.
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(b) The Employee shall not receive any additional compensation from
the Company on account of his failure to take a vacation or sick leave, and the
Employee shall not accumulate unused vacation from one fiscal year to the next,
except in either case to the extent authorized by the Board.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment with the Company for such additional periods of
time and for such valid and legitimate reasons as the Board may in its
discretion determine. Further, the Board may grant to the Employee a leave or
leaves of absence, with or without pay, at such time or times and upon such
terms and conditions as such Board in its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick
leave benefit as established by the Board.
10. Termination and Termination Pay. Subject to Section 12 hereof, the
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Employee's employment hereunder may be terminated under the following
circumstances:
(a) Death. The Employee's employment under this Agreement shall
terminate upon his death during the term of this Agreement, in which event the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which his death occurred.
(b) Disability. (1) The Company may terminate the Employee's
employment after having established the Employee's Disability. For purposes of
this Agreement, "Disability" means a physical or mental infirmity which impairs
the Employee's ability to substantially perform his duties under this Agreement
and which results in the Employee becoming eligible for long-term disability
benefits under the Company's long-term disability plan (or, if the Company has
no such plan in effect, which impairs the Employee's ability to substantially
perform his duties under this Agreement for a period of 180 consecutive days).
The Employee shall be entitled to the compensation and benefits provided for
under this Agreement for (i) any period during the term of this Agreement and
prior to the establishment of the Employee's Disability during which the
Employee is unable to work due to the physical or mental infirmity, or (ii) any
period of Disability which is prior to the Employee's termination of employment
pursuant to this Section 10(b); provided that any benefits paid pursuant to the
Company's long-term disability plan will continue as provided in such plan.
(2) During any period that the Employee shall receive disability
benefits and to the extent that the Employee shall be physically and mentally
able to do so, he shall furnish such information, assistance and documents so as
to assist in the continued ongoing business of the Company and, if able, shall
make himself available to the Company to undertake reasonable assignments
consistent with his prior position and his physical and mental health. The
Company shall pay all reasonable expenses incident to the performance of any
assignment given to the Employee during the disability period.
(c) Just Cause. The Board may, by written notice to the Employee,
immediately terminate his employment at any time, for Just Cause. The Employee
shall have no right to receive compensation or other benefits for any period
after termination for Just Cause.
(d) Without Just Cause; Constructive Discharge. The Board may, by
written notice to the Employee, immediately terminate his employment at any time
for a reason other than Just Cause, in which event the Employee shall be
entitled to receive the following compensation and benefits (unless such
termination occurs during the Protected Period, in which event the benefits and
compensation provided for in Section 12 shall apply): (i) the salary provided
pursuant to Section 3 hereof, up to the expiration date of this Agreement
including any renewal term (the "Expiration Date"), plus said salary for an
additional 12-month period, and (ii) at the Employee's election either (A) cash
in an amount equal to the cost to the Employee of obtaining all health, life,
disability and other benefits which the Employee would have been eligible to
participate in through the Expiration Date, based upon the benefit levels
substantially equal to those that the Company provided for the Employee at the
date of termination of employ-
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ment or (B) continued participation under such Company benefit plans through the
Expiration Date, but only to the extent the Employee continues to qualify for
participation therein. All amounts payable to the Employee shall be paid, at
the option of the Employee, either (I) in periodic payments through the
Expiration Date, or (II) in one lump sum within ten days of such termination.
(e) Good Reason. The Employee shall be entitled to receive the
compensation and benefits payable under subsection 10(d) hereof in the event
that the Employee voluntarily terminates employment within 90 days of an event
that constitutes Good Reason, (unless such voluntary termination occurs during
the Protected Period, in which event the benefits and compensation provided for
in Section 12 shall apply).
(f) Termination or Suspension Under Federal Law. Any payments made to
the Employee pursuant to this Agreement, or otherwise, are subject to and
conditioned upon their compliance with 12 U.S.C. Section 1828(k) and any
regulations promulgated thereunder and shall not exceed applicable limits under
Office of Thrift Supervision Regulatory Bulletin 27a.
(g) Voluntary Termination by Employee. Subject to Section 12 hereof,
the Employee may voluntarily terminate employment with the Company during the
term of this Agreement, upon at least 90 days' prior written notice to the Board
of Directors, in which case the Employee shall receive only his compensation,
vested rights and employee benefits up to the date of his termination (unless
such termination occurs pursuant to Section 10(d) hereof or within the Protected
Period, in Section 12(a) hereof, in which event the benefits and compensation
provided for in Sections 10(d) or 12, as applicable, shall apply).
11. No Mitigation. The Employee shall not be required to mitigate the
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amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.
12. Change in Control.
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(a) Trigger Events. The Employee shall be entitled to collect the
severance benefits set forth in Subsection (b) hereof in the event that either
(i) the Employee voluntarily terminates employment for any reason within the 30-
day period beginning on the date of a Change in Control, (ii) the Employee
voluntarily terminates employment within 90 days of an event that both occurs
during the Protected Period and constitutes Good Reason, or (iii) the
Association or the Company or their successor(s) in interest terminate the
Employee's employment without his written consent and for any reason other than
Just Cause during the Protected Period.
(b) Amount of Severance Benefit. If the Employee becomes entitled to
collect severance benefits pursuant to Section 12(a) hereof, the Association
shall:
(i) pay the Employee a severance benefit equal to the difference
between the Code (S)280G Maximum and the sum of any other "parachute
payments" as defined under Code (S)280G(b)(2) that the Employee
receives on account of the Change in Control.
(ii) provide such long-term disability insurance and medical
insurance benefits as are available to the Employee under the
provisions of COBRA, for 18 months (or such longer period, as may be
required thereunder).
Said sum shall be paid in one lump sum within ten days of the later of the
date of the Change in Control and the Employee's last day of employment with the
Association or the Company. In the event that the Employee, the Association,
and the Company jointly agree that the Employee has collected an amount
exceeding the Code (S)280G Maximum, the parties may agree in writing that such
excess shall be treated as a loan ab initio which the
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<PAGE>
Employee shall repay to the Association, on terms and conditions mutually
agreeable to the parties, together with interest at the applicable federal rate
provided for in Section 7872(f)(2)(B) of the Code.
13. Indemnification. The Company agrees that its Bylaws shall continue
---------------
to provide for indemnification of directors, officers, employees and agents of
the Company, including the Employee, during the full term of this Agreement,
and to at all times provide adequate insurance for such purposes.
14. Reimbursement of Employee for Enforcement Proceedings. In the event
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that any dispute arises between the Employee and the Company as to the terms or
interpretation of this Agreement, whether instituted by formal legal proceedings
or otherwise, including any action that the Employee takes to defend against any
action taken by the Company, the Employee shall be reimbursed for all costs and
expenses, including reasonable attorneys' fees, arising from such dispute,
proceedings or actions, provided that the Employee obtains either a written
settlement or a final judgement by a court of competent jurisdiction
substantially in his favor. Such reimbursement shall be paid within ten days of
Employee's furnishing to the Company written evidence, which may be in the form,
among other things, of a cancelled check or receipt, of any costs or expenses
incurred by the Employee.
15. Federal Income Tax Withholding. The Company may withhold all federal
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and state income or other taxes from any benefit payable under this Agreement as
shall be required pursuant to any law or government regulation or ruling.
16. Successors and Assigns.
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(a) Company. This Agreement shall inure to the benefit of and be
binding upon any corporate or other successor of the Company which shall
acquire, directly or indirectly, by merger, consolidation, purchase or
otherwise, all or substantially all of the assets or stock of the Company.
(b) Employee. Since the Company is contracting for the unique and
personal skills of the Employee, the Employee shall be precluded from assigning
or delegating his rights or duties hereunder without first obtaining the written
consent of the Company; provided, however, that nothing in this paragraph shall
preclude (i) the Employee from designating a beneficiary to receive any benefit
payable hereunder upon his death, or (ii) the executors, administrators, or
other legal representatives of the Employee or his estate from assigning any
rights hereunder to the person or persons entitled thereunto.
(c) Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to exclusion, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
17. Amendments. No amendments or additions to this Agreement shall be
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binding unless made in writing and signed by all of the parties, except as
herein otherwise specifically provided.
18. Applicable Law. Except to the extent preempted by Federal law, the
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laws of the State of Colorado shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
19. Severability. The provisions of this Agreement shall be deemed
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severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
20. Entire Agreement. This Agreement, together with any understanding or
----------------
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
year first hereinabove written.
ATTEST: ROCKY FORD FINANCIAL, INC.
By:
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Secretary Its Chairman of the Board
WITNESS:
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Keith E. Waggoner
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<PAGE>
Exhibit 10.3
ROCKY FORD FINANCIAL, INC.
1997 STOCK OPTION AND INCENTIVE PLAN
1. Purpose of the Plan.
The purpose of this Plan is to advance the interests of the Company
through providing select key Employees and Directors of the Association, the
Company, and their Affiliates with the opportunity to acquire Shares. By
encouraging such stock ownership, the Company seeks to attract, retain and
motivate the best available personnel for positions of substantial
responsibility and to provide additional incentives to Directors and key
Employees of the Company or any Affiliate to promote the success of the
business.
2. Definitions.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in
accordance with Paragraph 5(c).
(c) "Association" shall mean Rocky Ford Federal Savings & Loan
Association.
(d) "Awards" shall mean, collectively, Options and SARs, unless the
context clearly indicates a different meaning.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean both the Stock Option Committee appointed
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by the Board in accordance with Paragraph 5(a) hereof, and the Board.
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(h) "Common Stock" shall mean the common stock of the Company.
(i) "Company" shall mean Rocky Ford Financial, Inc.
(j) "Continuous Service" shall mean the absence of any interruption
or termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case of
sick leave, military leave or any other leave of absence approved by the
Company, in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus or advisory capacity.
(k) "Director" shall mean any member of the Board, and any member of
the board of directors of any Affiliate that the Board has by resolution
designated as being eligible for participation in this Plan.
(l) "Disability" shall mean a physical or mental condition, which in
the sole and absolute discretion of the Committee, is reasonably expected to be
of indefinite duration and to substantially prevent a Participant from
fulfilling his or her duties or responsibilities to the Company or an Affiliate.
(m) "Effective Date" shall mean the date specified in Paragraph 14
hereof.
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(n) "Employee" shall mean any person employed by the Company, the
Association, or an Affiliate.
(o) "Exercise Price" shall mean the price per Optioned Share at
which an Option or SAR may be exercised.
(p) "ISO" shall mean an option to purchase Common Stock which meets
the requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.
(q) "Market Value" shall mean the fair market value of the Common
Stock, as determined under Paragraph 7(b) hereof.
(r) "Non-Employee Director" shall have the meaning provided in
Rule 16b-3.
(s) "Non-ISO" means an option to purchase Common Stock which meets
the requirements set forth in the Plan but which is not intended to be and is
not identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an Award granted
pursuant to this Plan.
(v) "Participant" shall mean any person who receives an Award
pursuant to the Plan.
(w) "Plan" shall mean this 1997 Stock Option and Incentive Plan.
(x) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.
(y) "Share" shall mean one share of Common Stock.
(z) "SAR" (or "Stock Appreciation Right") means a right to receive
the appreciation in value, or a portion of the appreciation in value, of a
specified number of shares of Common Stock.
(aa) "Year of Service" shall mean a full twelve-month period,
measured from the date of an Award and each annual anniversary of that date,
during which a Participant has not terminated Continuous Service for any reason.
3. Term of the Plan and Awards.
(a) Term of the Plan. The Plan shall continue in effect for a term
of ten years from the Effective Date, unless sooner terminated pursuant to
Paragraph 16 hereof. No Award shall be granted under the Plan after ten years
from the Effective Date.
(b) Term of Awards. The term of each Award granted under the Plan
shall be established by the Committee, but shall not exceed 10 years; provided,
however, that in the case of an Employee who owns Shares representing more than
10% of the outstanding Common Stock at the time an ISO is granted, the term of
such ISO shall not exceed five years.
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4. Shares Subject to the Plan.
(a) General Rule. Except as otherwise required under Section 11,
the aggregate number of Shares deliverable pursuant to Awards shall not exceed
________ Shares, which equals 10% of the Shares issued by the Company in
connection with the Association's conversion from mutual to stock form. Such
Shares may either be authorized but unissued Shares, Shares held in treasury, or
Shares held in a grantor trust created by the Company. If any Awards should
expire, become unexercisable, or be forfeited for any reason without having been
exercised, the Optioned Shares shall, unless the Plan shall have been
terminated, be available for the grant of additional Awards under the Plan.
(b) Special Rule for SARs. The number of Shares with respect to
which an SAR is granted, but not the number of Shares which the Company delivers
or could deliver to an Employee or individual upon exercise of an SAR, shall be
charged against the aggregate number of Shares remaining available under the
Plan; provided, however, that in the case of an SAR granted in conjunction with
an Option, under circumstances in which the exercise of the SAR results in
termination of the Option and vice versa, only the number of Shares subject to
the Option shall be charged against the aggregate number of Shares remaining
available under the Plan. The Shares involved in an Option as to which option
rights have terminated by reason of the exercise of a related SAR, as provided
in Paragraph 10 hereof, shall not be available for the grant of further Options
under the Plan.
5. Administration of the Plan.
(a) Composition of the Committee. The Plan shall be administered by
the Committee, which shall consist of not less than two (2) members of the Board
who are Non-Employee Directors. Members of the Committee shall serve at the
pleasure of the Board. In the absence at any time of a duly appointed
Committee, the Plan shall be administered by the Board.
(b) Powers of the Committee. Except as limited by the express
provisions of the Plan or by resolutions adopted by the Board, the Committee
shall have sole and complete authority and discretion (i) to select Participants
and grant Awards, (ii) to determine the form and content of Awards to be issued
in the form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and (v)
to make other determinations necessary or advisable for the administration of
the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee without a meeting, shall be
deemed the action of the Committee.
(c) Agreement. Each Award shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The
terms of each such Agreement shall be in accordance with the Plan, but each
Agreement may include such additional provisions and restrictions determined by
the Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular,
the Committee shall set forth in each Agreement (i) the Exercise Price of an
Option or SAR, (ii) the number of Shares subject to the Award, and its
expiration date, (iii) the manner, time, and rate (cumulative or otherwise) of
exercise or vesting of such Award, and (iv) the restrictions, if any, to be
placed upon such Award, or upon Shares which may be issued upon exercise of such
Award. The Chairman of the Committee and such other Directors and officers as
shall be designated by the Committee are hereby authorized to execute Agreements
on behalf of the Company and to cause them to be delivered to the recipients of
Awards.
(d) Effect of the Committee's Decisions. All decisions,
determinations and interpretations of the Committee shall be final and
conclusive on all persons affected thereby.
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<PAGE>
(e) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Committee shall be
indemnified by the Company in connection with any claim, action, suit or
proceeding relating to any action taken or failure to act under or in connection
with the Plan or any Award, granted hereunder to the full extent provided for
under the Company's governing instruments with respect to the indemnification of
Directors.
6. Grant of Options.
(a) General Rule. Only Employees shall be eligible to receive
Awards. In selecting those Employees to whom Awards will be granted and the
number of shares covered by such Awards, the Committee shall consider the
position, duties and responsibilities of the eligible Employees, the value of
their services to the Company and its Affiliates, and any other factors the
Committee may deem relevant. Notwithstanding the foregoing, the Committee shall
automatically make the Awards specified in Sections 6(b) and 9 hereof, and (ii)
no Employee shall receive Options to purchase more than 25% of the Shares
reserved under Paragraph 4(a), and no non-Employee Director shall receive
Options on the Effective Date to purchase more than 5% of the Shares reserved
under Paragraph 4(a), with all non-Employee Directors as a group receiving
Options on the Effective Date to purchase no more than 30% of the Shares
reserved under Paragraph 4(a). [THESE RESTRICTIONS WILL BE INAPPLICABLE IF THE
PLAN IS ADOPTED MORE THAN ONE YEAR AFTER THE CONVERSION.]
(b) Automatic Grants to Employees. On the Effective Date, each of the
following Employees shall receive an Option (in the form of an ISO, to the
extent permissible under the Code) to purchase the number of Shares listed
below, at an Exercise Price per Share equal to the Market Value of a Share on
the Effective Date; provided that such grant shall not be made to an Employee
whose Continuous Service terminates on or before the Effective Date:
Percentage of Shares
Participant Reserved under Paragraph 4(a)
----------- -----------------------------
Keith E. Waggoner 25%
With respect to each of the above-named Participants, the Option
granted to the Participant hereunder (i) shall vest in accordance with the
general rule set forth in Paragraph 8(a) of the Plan, (ii) shall have a term of
ten years from the Effective Date, and (iii) shall be subject to the general
rule set forth in Paragraph 8(c) with respect to the effect of a Participant's
termination of Continuous Service on the Participant's right to exercise his
Options.
(c) Special Rules for ISOs. The aggregate Market Value, as of the
date the Option is granted, of the Shares with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (under
all incentive stock option plans, as defined in Section 422 of the Code, of the
Company or any present or future Affiliate of the Company) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may grant Options in
excess of the foregoing limitations, in which case Options granted in excess of
such limitation shall be Non-ISOs.
7. Exercise Price for Options.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 100% of the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns
Shares representing more than 10% of the Company's outstanding Shares of Common
Stock at the time an ISO is granted, the Exercise Price shall not be less than
110% of the Market Value of the Optioned Shares at the time the ISO is granted.
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(b) Standards for Determining Exercise Price. If the Common Stock is
listed on a national securities exchange (including the NASDAQ National Market
System) on the date in question, then the Market Value per Share shall be the
average of the highest and lowest selling price on such exchange on such date,
or if there were no sales on such date, then the Exercise Price shall be the
mean between the bid and asked price on such date. If the Common Stock is traded
otherwise than on a national securities exchange on the date in question, then
the Market Value per Share shall be the mean between the bid and asked price on
such date, or, if there is no bid and asked price on such date, then on the next
prior business day on which there was a bid and asked price. If no such bid and
asked price is available, then the Market Value per Share shall be its fair
market value as determined by the Committee, in its sole and absolute
discretion.
8. Exercise of Options.
(a) Generally. Each Option shall become exercisable with respect to
twenty percent (20%) of the Optioned Shares upon the Participant's completion of
each of five Years of Service, provided that an Option shall become fully (100%)
exercisable immediately upon termination of the Participant's Continuous Service
due to the Participant's Disability or death. An Option may not be exercised
for a fractional Share. IF THE PLAN IS ADOPTED MORE THAN ONE YEAR AFTER THE
ASSOCIATION'S CONVERSION, OPTIONS MAY BECOME EXERCISABLE ACCORDING TO A
DIFFERENT SCHEDULE, WITH VESTING ACCELERATED TO 100% UPON AN OPTIONEE'S
RETIREMENT OR TERMINATION OF SERVICE IN CONNECTION WITH A CHANGE IN CONTROL.
(b) Procedure for Exercise. A Participant may exercise Options,
subject to provisions relative to its termination and limitations on its
exercise, only by (1) written notice of intent to exercise the Option with
respect to a specified number of Shares, and (2) payment to the Company
(contemporaneously with delivery of such notice) in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the Exercise Price for
the number of Shares with respect to which the Option is then being exercised.
Each such notice (and payment where required) shall be delivered, or mailed by
prepaid registered or certified mail, addressed to the Treasurer of the Company
at its executive offices. Common Stock utilized in full or partial payment of
the Exercise Price for Options shall be valued at its Market Value at the date
of exercise, and may consist of Shares subject to the Option being exercised.
Upon a Participant's exercise of an Option, the Company may, if provided by the
Committee in the underlying Agreement, pay to the Participant a cash amount up
to but not exceeding the amount of dividends, if any, declared on the underlying
Shares between the date of grant and the date of exercise of the Option.
(c) Period of Exercisability. Except to the extent otherwise provided
in the terms of an Agreement, an Option may be exercised by a Participant only
while he is an Employee and has maintained Continuous Service from the date of
the grant of the Option, or within one year after termination of such Continuous
Service (but not later than the date on which the Option would otherwise
expire), except if the Employee's Continuous Service terminates by reason of --
(1) "Just Cause" which for purposes hereof shall have the
meaning set forth in any unexpired employment or severance agreement
between the Participant and the Association and/or the Company (and, in
the absence of any such agreement, shall mean termination because of
the Employee's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure
to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order), then the Participant's rights to exercise such
Option shall expire on the date of such termination;
(2) death, then to the extent that the Participant would have
been entitled to exercise the Option immediately prior to his death,
such Option of the deceased Participant may be exercised within two
years from the date of his death (but not later than the date on which
the Option would otherwise expire) by the personal representatives of
his estate or person or persons to whom his rights under such Option
shall have passed by will or by laws of descent and distribution.
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(d) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
(e) Mandatory Six-Month Holding Period. Notwithstanding any other
provision of this Plan to the contrary, common stock of the Company that is
purchased upon exercise of an Option or SAR may not be sold within the six-month
period following the grant of that Option or SAR.
9. Grants of Options to Non-employee Directors
(a) Automatic Grants. Notwithstanding any other provisions of this
Plan, each Director who is not an Employee but is a Director on the Effective
Date shall receive, on said date, Non-ISOs to purchase a number of Shares equal
to the lesser of five percent (5%) of the number of Shares reserved under
Paragraph 4(a) hereof, and the quotient obtained by dividing --
(i) 30 percent (30%) of the number of Shares reserved under
Paragraph 4(a) hereof, by
(ii) the number of Directors entitled to receive an Option on the
Effective Date, pursuant to this Paragraph 9(a).
Such Non-ISOs shall have an Exercise Price per Share equal to the
Market Value of a Share on the date of grant. Each Director who joins the Board
after the Effective Date and who is not then an Employee shall receive, on the
date of joining the Board, Non-ISOs to purchase ___% of the Shares reserved
under Paragraph 4(a) of the Plan, at an Exercise Price per Share equal to its
Market Value on the date of grant.
(b) Terms of Exercise. Options received under the provisions of this
Paragraph (i) shall become exercisable in accordance with paragraph 8(a) of the
Plan, and (ii) may be exercised from time to time by written notice of intent to
exercise the Option with respect to all or a specified number of the Optioned
Shares, and payment to the Company (contemporaneously with the delivery of such
notice), in cash, in Common Stock, or a combination of cash and Common Stock, of
the amount of the Exercise Price for the number of the Optioned Shares with
respect to which the Option is then being exercised. Each such notice and
payment shall be delivered, or mailed by prepaid registered or certified mail,
addressed to the Treasurer of the Company at the Company's executive offices.
Upon a Director's exercise of an Option, the Company may, if provided by the
Committee in the underlying Agreement (which may not be utilized to pay out such
dividends unless the Plan would maintain conformity with Rule 16b-3), pay to the
Director a cash amount up to but not exceeding the amount of dividends, if any,
declared on the underlying Shares between the date of grant and the date of
exercise of the Option. A Director who exercises Options pursuant to this
Paragraph may satisfy all applicable federal, state and local income and
employment tax withholding obligations, in whole or in part, by irrevocably
electing to have the Company withhold shares of Common Stock, or to deliver to
the Company shares of Common Stock that he already owns, having a value equal to
the amount required to be withheld; provided that to the extent not inconsistent
herewith, such election otherwise complies with those requirements of Paragraphs
8 and 19 hereof.
Options granted under this Paragraph shall have a term of ten years;
provided that Options granted under this Paragraph shall expire one year after
the date on which a Director terminates Continuous Service on the Board for a
reason other than death, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's death during
the term of his directorship, Options granted under this Paragraph shall become
immediately exercisable, and may be exercised within two years from the date of
his death by the personal representatives of his estate or person or persons to
whom his rights under such Option shall have passed by will or by laws of
descent and distribution, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's Disability
during his or her directorship, the Director's Option shall become immediately
exercisable, and such Option may be exercised within one year of the termination
of directorship due to Disability, but not later than the date that the Option
would otherwise expire. Unless otherwise inapplicable or
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inconsistent with the provisions of this Paragraph, the Options to be granted to
Directors hereunder shall be subject to all other provisions of this Plan.
(c) Effect of the Committee's Decisions. The Committee's
determination whether a Participant's Continuous Service has ceased, and the
effective date thereof, shall be final and conclusive on all persons affected
thereby.
10. SARs (Stock Appreciation Rights)
(a) Granting of SARs. In its sole discretion, the Committee may from
time to time grant SARs to Employees either in conjunction with, or
independently of, any Options granted under the Plan. An SAR granted in
conjunction with an Option may be an alternative right wherein the exercise of
the Option terminates the SAR to the extent of the number of shares purchased
upon exercise of the Option and, correspondingly, the exercise of the SAR
terminates the Option to the extent of the number of Shares with respect to
which the SAR is exercised. Alternatively, an SAR granted in conjunction with an
Option may be an additional right wherein both the SAR and the Option may be
exercised. An SAR may not be granted in conjunction with an ISO under
circumstances in which the exercise of the SAR affects the right to exercise the
ISO or vice versa, unless the SAR, by its terms, meets all of the following
requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference between the
Exercise Price of the ISO and the Market Value of the Shares subject to
the ISO at the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is transferable, and
under the same conditions;
(4) The SAR may be exercised only when the ISO may be exercised; and
(5) The SAR may be exercised only when the Market Value of the
Shares subject to the ISO exceeds the Exercise Price of the ISO.
(b) Exercise Price. The Exercise Price as to any particular SAR
shall not be less than the Market Value of the Optioned Shares on the date of
grant.
(c) Timing of Exercise. The provisions of Paragraph 8(c) regarding
the period of exercisability of Options are incorporated by reference herein,
and shall determine the period of exercisability of SARs.
(d) Exercise of SARs. An SAR granted hereunder shall be exercisable
at such times and under such conditions as shall be permissible under the terms
of the Plan and of the Agreement granted to a Participant, provided that an SAR
may not be exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the Company except
for applicable withholding taxes, an amount equal to the excess of (or, in the
discretion of the Committee if provided in the Agreement, a portion of) the
excess of the then aggregate Market Value of the number of Optioned Shares with
respect to which the Participant exercises the SAR, over the aggregate Exercise
Price of such number of Optioned Shares. This amount shall be payable by the
Company, in the discretion of the Committee, in cash or in Shares valued at the
then Market Value thereof, or any combination thereof.
(e) Procedure for Exercising SARs. To the extent not inconsistent
herewith, the provisions of Paragraph 8(b) as to the procedure for exercising
Options are incorporated by reference, and shall determine the procedure for
exercising SARs.
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<PAGE>
11. Effect of Changes in Common Stock Subject to the Plan.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of
shares reserved for issuance under the Plan, and the number and kind of shares
subject to outstanding Awards, and the Exercise Price thereof, shall be
proportionately adjusted for any increase, decrease, change or exchange of
Shares for a different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
without the receipt or payment of consideration by the Company.
(b) Transactions in which the Company is Not the Surviving Entity.
In the event of (i) the liquidation or dissolution of the Company, (ii) a merger
or consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding
Awards, together with the Exercise Prices thereof, shall be equitably adjusted
for any change or exchange of Shares for a different number or kind of shares or
other securities which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant to
subparagraphs (a) or (b)(1) hereof shall be made in such a manner as not to
constitute a modification, within the meaning of Section 424(h) of the Code, of
outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or Different
Shares or Securities. If, by reason of any adjustment made pursuant to this
Paragraph, a Participant becomes entitled to new, additional, or different
shares of stock or securities, such new, additional, or different shares of
stock or securities shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the Award before
the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph,
the issuance by the Company or an Affiliate of shares of stock of any class, or
of securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Awards or reserved for issuance under the Plan.
(f) Certain Special Dividends. The Exercise Price of shares subject
to outstanding Awards shall be proportionately adjusted upon the payment of a
special large and nonrecurring dividend that has the effect of a return of
capital to the stockholders, except that this subparagraph (f) shall not apply
to any dividend which is paid to the Participant pursuant to Paragraph 8(b) or
9(b) hereof.
12. Non-Transferability of Awards.
Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, or any other provision of this
Plan, a Participant who holds Awards may transfer such Awards (but not Incentive
Stock Options) to his or her spouse, lineal ascendants, lineal descendants, or
to a duly established trust for the benefit of one or more of these individuals.
Awards so transferred may thereafter be transferred only to the Participant who
originally received the grant or to an individual or trust to whom the
Participant could have initially transferred the Awards pursuant to this
Paragraph 12. Awards which are transferred pursuant to this Paragraph 12 shall
be exercisable by the transferee according to the same terms and conditions as
applied to the Participant.
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<PAGE>
13. Time of Granting Awards.
The date of grant of an Award shall, for all purposes, be the later of
the date on which the Committee makes the determination of granting such Award,
and the Effective Date. Notice of the determination shall be given to each
Participant to whom an Award is so granted within a reasonable time after the
date of such grant.
14. Effective Date.
The Plan shall become effective immediately upon its approval by a
favorable vote of stockholders owning at least a majority of the total votes
eligible to be cast at a duly called meeting of the Company's stockholders held
in accordance with applicable laws, provided that the Plan shall not be
submitted for such approval within the six-month period after the Association
completes its mutual-to-stock conversion. No Awards may be made prior to
approval of the Plan by the stockholders of the Company.
15. Modification of Awards.
At any time, and from time to time, the Board may authorize the
Committee to direct execution of an instrument providing for the modification of
any outstanding Award, provided no such modification shall confer on the holder
of said Award any right or benefit which could not be conferred on him by the
grant of a new Award at such time, or impair the Award without the consent of
the holder of the Award.
16. Amendment and Termination of the Plan.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plan. No amendment, suspension or termination of the Plan shall, without
the consent of any affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
17. Conditions Upon Issuance of Shares.
(a) Compliance with Securities Laws. Shares of Common Stock shall
not be issued with respect to any Award unless the issuance and delivery of such
Shares shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and the
requirements of any stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Company to obtain
approval from any regulatory body or authority deemed by the Company's counsel
to be necessary to the lawful issuance and sale of any Shares hereunder shall
relieve the Company of any liability in respect of the non-issuance or sale of
such Shares. As a condition to the exercise of an Option or SAR, the Company may
require the person exercising the Option or SAR to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal or to establish repurchase rights or both of these
restrictions.
18. Reservation of Shares.
The Company, during the term of the Plan, will reserve and keep
available a number of Shares sufficient to satisfy the requirements of the Plan.
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19. Withholding Tax.
The Company's obligation to deliver Shares upon exercise of Options
and/or SARs shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and employment tax withholding obligations. The
Committee, in its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have the Company
withhold Shares, or to deliver to the Company Shares that he already owns,
having a value equal to the amount required to be withheld. The value of the
Shares to be withheld, or delivered to the Company, shall be based on the Market
Value of the Shares on the date the amount of tax to be withheld is to be
determined. As an alternative, the Company may retain, or sell without notice, a
number of such Shares sufficient to cover the amount required to be withheld.
20. No Employment or Other Rights.
In no event shall an Employee's or Director's eligibility to
participate or participation in the Plan create or be deemed to create any legal
or equitable right of the Employee, Director, or any other party to continue
service with the Company, the Association, or any Affiliate of such
corporations. Except to the extent provided in Paragraphs 6(b) and 9(a), no
Employee or Director shall have a right to be granted an Award or, having
received an Award, the right to again be granted an Award. However, an Employee
or Director who has been granted an Award may, if otherwise eligible, be granted
an additional Award or Awards.
21. Governing Law.
The Plan shall be governed by and construed in accordance with the laws
of the State of Colorado, except to the extent that federal law shall be deemed
to apply.
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Exhibit 10.4
ROCKY FORD FINANCIAL, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the terms and
conditions hereinafter stated.
1.02 Through acceptance of their appointment to the Committee, each member
of the Committee hereby accepts his or her appointment hereunder upon the terms
and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain personnel of
experience and ability in key positions of responsibility by providing Employees
and Directors of the Company, the Association, and their Affiliates with a
proprietary interest in the Company, and as compensation for their past
contributions to the Association, and as an incentive to make such contributions
in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Internal Revenue Code of 1986, as amended.
3.02 "Association" means Rocky Ford Federal Savings & Loan Association.
3.03 "Beneficiary" means the person or persons designated by a Participant
to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if any
or if none, his estate.
3.04 "Board" means the Board of Directors of the Company.
3.05 "Committee" means the Management Recognition Plan Committee appointed
by the Board pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock of the Company.
3.07 "Company" means Rocky Ford Financial, Inc.
3.08 "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus or advisory capacity.
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3.09 "Date of Conversion" means the date of the conversion of the
Association from mutual to stock form.
3.10 "Director" means a member of the Board.
3.11 "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
3.12 "Effective Date" means the date on which the Plan first becomes
effective, as determined under Section 8.07 hereof.
3.13 "Employee" means any person who is employed by the Company or an
Affiliate.
3.14 "Non-Employee Director" shall have the meaning provided in Rule 16b-3
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
3.15 "Participant" means an Employee or Director who holds a Plan Share
Award.
3.16 "Plan" means this Rocky Ford Financial, Inc. Management Recognition
Plan.
3.17 "Plan Shares" means shares of Common Stock held in the Trust which
are awarded or issuable to a Participant pursuant to the Plan.
3.18 "Plan Share Award" means a right granted under this Plan to receive
Plan Shares.
3.19 "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.02 and 5.03.
3.20 "Trust" and "Trust Agreement" mean that agreement entered into
pursuant to the terms hereof between the Company and the Trustee, and "Trust"
means the trust created thereunder.
3.21 "Trustee" means that person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan assets for the
purposes set forth herein.
3.22 "Year of Service" shall mean a full twelve-month period, measured
from the date of a Plan Share Award and each annual anniversary of that date,
during which a Participant's Continuous Service has not terminated for any
reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role and Powers of the Committee. The Plan shall be administered
and interpreted by the Committee, which shall consist of not less than two
members of the Board who are Non-Employee Directors. In the absence at any time
of a duly appointed Committee, the Plan shall be administered by those members
of the Board who are Non-Employee Directors, and by the Board if there are less
than two Non-Employee Directors.
The Committee shall have all of the powers allocated to it in this and
other Sections of the Plan. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion (i) to make Plan Share Awards to such
Employees as the Committee may select, (ii) to determine the form and content of
Plan Share Awards to be issued under the Plan, (iii) to interpret the Plan, (iv)
to prescribe, amend and rescind rules and regulations relating to the Plan, and
(v) to make other deter-
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minations necessary or advisable for the administration of the Plan. The
Committee shall have and may exercise such other power and authority as may be
delegated to it by the Board from time to time. Subject to Section 4.02, the
interpretation and construction by the Committee of any provisions of the Plan
or of any Plan Share Award granted hereunder shall be final and binding. The
Committee shall act by vote or written consent of a majority of its members, and
shall report its actions and decisions with respect to the Plan to the Board at
appropriate times, but in no event less than one time per calendar year. The
Committee may recommend to the Board one or more persons or entity to act as
Trustee(s) in accordance with the provisions of this Plan and the Trust.
4.02 Role of the Board. The members of the Committee shall be appointed
or approved by, and will serve at the pleasure of, the Board. The Board may in
its discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with respect to the
Plan which the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan Share Award
already made or impair a participant's vested rights under a Plan Share Award.
Members of the Board who are eligible for or who have been granted Plan Share
Awards (other than pursuant to Section 6.04) may not vote on any matters
affecting the administration of the Plan or the grant of Plan Shares or Plan
Share Awards (although such members may be counted in determining the existence
of a quorum at any meeting of the Board during which actions with regard thereto
are taken). Further, with respect to all actions taken by the Board in regard
to the Plan, such action shall be taken by a majority of the Board where such a
majority of the directors acting in the matter are Non-Employee Directors.
4.03 Limitation on Liability. No member of the Board or the Committee or
the Trustee(s) shall be liable for any determination made in good faith with
respect to the Plan or any Plan Shares or Plan Share Awards granted under it.
If a member of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Company shall indemnify such member, subject to the
indemnification provisions of 12 C.F.R. Section 545.121, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Company to the Trust, provided that the Association may also make contributions
to the Trust. Such amounts shall be paid to the Trustee at the time of
contribution. No contributions to the Trust by Employees shall be permitted.
5.02 Investment of Trust Assets; Maximum Plan Share Awards. The Trustee
shall invest Trust assets only in accordance with the Trust Agreement; provided
that the Trust shall not purchase, and Plan Share Awards shall not be made with
respect to, more than four percent (4%) of the number of Shares issued on the
Date of Conversion.
5.03 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Plan Share Awards under Section 6.02, the Plan
Share Reserve shall be reduced by the number of Shares subject to the Awards so
allocated. Any Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to Section 7.01 shall
be added to the Plan Share Reserve.
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ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Except as otherwise provided in Section 6.04 hereof,
the Committee shall make Plan Share Awards only to Employees. In selecting
those Employees to whom Plan Share Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the position, duties
and responsibilities of the eligible Employees, the value of their services to
the Company and its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, (i) the Committee shall automatically
make the Plan Share Awards specified in Sections 6.04 and 6.05 hereof; and (ii)
no Employee shall receive Plan Share Awards relating to more than 25% of the
Plan Shares reserved under Section 5.02, and no non-employee Director shall
receive Plan Share Awards relating to more than 5% of the Plan Shares reserved
under Section 5.02, with all non-employee Directors as a group receiving Plan
Share Awards on the Effective Date relating to no more than 30% of the Plan
Shares reserved under Section 5.02. [THESE RESTRICTIONS WILL BE INAPPLICABLE IF
THE PLAN RECEIVES STOCKHOLDER APPROVAL MORE THAN ONE YEAR AFTER THE DATE OF
CONVERSION.]
6.02 Allocations. The Committee will determine which Employees will be
granted discretionary Plan Share Awards, and the number of Shares covered by
each Plan Share Award, provided that in no event shall any Awards be made which
will violate the governing instruments of the Association or its Affiliates or
any applicable federal or state law or regulation. In the event Plan Shares are
forfeited for any reason or additional shares of Common Stock are purchased by
the Trustee, the Committee may, from time to time, determine which of the
Employees referenced in Section 6.01 above will be granted additional Plan Share
Awards to be awarded from the forfeited or acquired Plan Shares.
6.03 Form of Allocation. As promptly as practicable after a determination
is made pursuant to Section 6.02 that a Plan Share Award is to be made, the
Committee shall notify the Participant in writing of the grant of the Award, the
number of Plan Shares covered by the Award, and the terms upon which the Plan
Shares subject to the Award may be earned. The date on which the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards. The Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 Automatic Grants to Non-Employee Directors. Notwithstanding any
other provisions of this Plan, each Director who is not an Employee but is a
Director on the Effective Date shall receive, on said date, a Plan Share Award
for a number of Shares equal to the lesser of five (5%) of the number of Plan
Shares which the Trust is authorized to purchase pursuant to Section 5.02 of the
Plan and the quotient obtained by dividing --
(i) 30 percent (30%) of the number of Plan Shares which the Trust is
authorized to purchase pursuant to Section 5.02 of the Plan, by
(ii) the number of Directors entitled to receive Plan Share Awards on the
Effective Date, pursuant to this Section 6.04.
Each Director who joins the Board after the Effective Date shall receive, on
said date, a Plan Share Award of ___ percent (___%) of the number of Plan Shares
which the Trust is authorized to purchase pursuant to Section 5.02 of the Plan
(or such lesser number as are available hereunder for Plan Share Awards). Plan
Share Awards received under the provisions of this Section shall become vested
and nonforfeitable according to the general rules set forth in subsections (a),
and (b) of Section 7.01, and the Committee shall have no discretion to alter or
accelerate said vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share Awards to be
granted hereunder shall be subject to all other provisions of this Plan.
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6.05 Automatic Grants to Employees. On the Effective Date, each of the
following individuals shall receive a Plan Share Award as to the number of Plan
Shares listed below, provided that such award shall not be made to an individual
who is not an Employee on the Effective Date:
Employee Shares Subject to Plan Share Award
-------- ----------------------------------
Keith E. Waggoner 25%
Plan Share Awards received under the provisions of this Section shall
become vested and nonforfeitable according to the general rules set forth in
subsections (a) and (b) of Section 7.01, and the Committee shall have no
discretion to alter said vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share Awards to be
granted hereunder shall be subject to all other provisions of this Plan.
6.06 Allocations Not Required. Notwithstanding anything to the contrary
in Sections 6.01 and 6.02, but subject to Sections 6.04 and 6.05, no Employee or
Director shall have any right or entitlement to receive a Plan Share Award
hereunder, such Awards being at the total discretion of the Committee, nor shall
any Employees or Directors as a group have such a right. The Committee may,
with the approval of the Board (or, if so directed by the Board) return all
Common Stock in the Plan Share Reserve to the Company at any time, and cease
issuing Plan Share Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Twenty percent (20%) of the Plan Shares subject to a
Plan Share Award shall be earned and become non-forfeitable by a Participant
upon his or her completion of each of five Years of Service. [MAY BE DIFFERENT
IF PLAN RECEIVES STOCKHOLDER APPROVAL MORE THAN ONE YEAR AFTER THE DATE OF
CONVERSION.]
(b) Exception for Terminations Due to Death or Disability.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose service with
the Company or an Affiliate terminates due to the Participant's death or
Disability, shall be deemed earned as of the Participant's last day of service
with the Company or an Affiliate and shall be distributed as soon as practicable
thereafter. [IF THE PLAN RECEIVES STOCKHOLDER APPROVAL MORE THAN ONE YEAR AFTER
THE DATE OF CONVERSION, VESTING WOULD ACCELERATE TO 100% UPON A PARTICIPANT'S
RETIREMENT OR TERMINATION OF SERVICE IN CONNECTION WITH A CHANGE IN CONTROL.]
7.02 Accrual of Dividends. Whenever Plan Shares are paid to a Participant
or Beneficiary under Section 7.03, such Participant or Beneficiary shall also be
entitled to receive, with respect to each Plan Share paid, an amount equal to
any cash dividends (including special large and nonrecurring dividends,
including one that has the effect of a return of capital to the Company's
stockholders) and a number of shares of Common Stock equal to any stock
dividends, declared and paid with respect to a share of Common Stock between the
date the relevant Plan Share Award was initially granted to such Participant and
the date the Plan Shares are being distributed. There shall also be distributed
an appropriate amount of net earnings, if any, of the Trust with respect to any
cash dividends so paid out.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as provided in
Subsections (c), and (d) below, the Trustee shall distribute Plan Shares and
accumulated cash from dividends and interest to the Participant or his
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Beneficiary, as the case may be, as soon as practicable after they have been
earned. No fractional shares shall be distributed.
(b) Form of Distribution. The Trustee shall distribute all Plan Shares,
together with any shares representing stock dividends, in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned.
Payments representing cash dividends (and earnings thereon) shall be made in
cash.
(c) Withholding. The Trustee shall withhold from any cash payment made
under this Plan sufficient amounts to cover any applicable withholding and
employment taxes, and if the amount of such cash payment is not sufficient, the
Trustee shall require the Participant or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the Plan Shares.
The Trustee shall pay over to the Company or Affiliate which employs or employed
such Participant any such amount withheld from or paid by the Participant or
Beneficiary.
(d) Timing: Exception for 10% Shareholders. Notwithstanding Subsections
(a) and (b) above, no Plan Shares may be distributed prior to the date which is
five (5) years from the Date of Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares of Common Stock
unless such action is approved in advance by a majority vote of non-employee
directors of the Board. To the extent this limitation would delay the date on
which a Participant receives Plan Shares, the Participant may elect to receive
from the Trust, in lieu of such Plan Shares, the cash equivalent thereof. Any
Plan Shares remaining undistributed solely by reason of the operation of this
Subsection (d) shall be distributed to the Participant or his Beneficiary on the
date which is five years from the Date of Conversion.
(e) Regulatory Exceptions. No Plan Shares shall be distributed unless and
until all of the requirements of all applicable law and regulation shall have
been fully complied with, including the receipt of approval of the Plan by the
stockholders of the Company by such vote, if any, as may be required by
applicable law and regulations.
7.04 Voting of Plan Shares. All shares of Common Stock held by the Trust
(whether or not subject to a Plan Share Award) shall be voted by the Trustee in
the same proportion as the trustee of the Company's Employee Stock Ownership
Plan votes Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner directed by the Board.
7.05. Deferral Elections by Participants. At any time that is at least
six months prior to the date on which a Participant becomes vested in the first
20% of his or her Plan Share Award, the Participant may irrevocably elect, on
the form attached hereto as Exhibit "A" (the "Election Form"), to defer the
receipt of all or a percentage of the Plan Shares that would otherwise be
transferred to the Participant upon the vesting of such award (the "Deferred
Shares"). The MRP Committee shall establish and maintain an individual account
in the name of each Participant who files an Election Form for the purpose of
tracking deferred earnings attributable to cash dividends paid on Deferred
Shares (the "Cash Account"). On the last day of each fiscal year of the
Company, the Committee shall credit to the Participant's Cash Account earnings
on the balance of the Cash Account at a rate equal to the yield on Common Stock,
as determined from time to time by the MRP Committee in its sole discretion.
The Deferred Shares, together with any cash or stock dividends attributable
thereto (the "Deferred Earnings"), will be distributed to the Participant in
accordance with the deferral schedule (the "Deferral Schedule") selected by the
Participant in his or her Election Form. The Trustees shall hold each
Participant's Deferred Shares and Deferred Earnings in the Trust until
distribution is required pursuant to the election set forth in the
Participant's Election Form.
The Trustee shall distribute a Participant's Deferred Shares and Deferred
Earnings in accordance with the Participant's Election Form, unless the
Participant terminates Continuous Service for a reason other than the
Participant's (i) death, (ii) Disability, (iii) early retirement after age 55
and completion of 10 or more years of Continuous Service, or (iv) normal
retirement after age 65. Within 90 days after receiving notice of a
Participant's
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death, the Trustee shall distribute any balance of the Participant's Deferred
Shares and Deferred Earnings to the Participant's designated beneficiary, if
living, or if such designated beneficiary is deceased or the Participant failed
to designate a beneficiary, to the Participant's estate. Notwithstanding the
preceding, at any time prior to his or her death, a Participant may elect to
have the balance of his or her Deferred Shares and Deferred Earnings distributed
to his or her beneficiary or estate over a period of time designated by the
Participant. If, on the other hand, a Participant's Continuous Service
terminates for a reason other than the Participant's death, Disability, early
retirement, or normal retirement, the Participant's Deferred Shares and Deferred
Earnings shall be distributed to the Participant in a lump sum occurring as soon
as reasonably practicable.
Notwithstanding any other provision of the Plan or a Participant's Election
Form, in the event the Participant suffers an unforeseeable emergency hardship
within the contemplation of this paragraph, the Participant may apply to the
Committee for a distribution of all or a portion of his Deferred Shares and
Deferred Earnings prior to the basis for any such distribution. The hardship
must result from a sudden and unexpected illness or accident of the Participant
or a dependent of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of purposes which
are not considered hardships include post-secondary school expenses or the
desire to purchase a residence. In no event will a distribution be made to the
extent the hardship could be relieved through reimbursement or compensation by
insurance or otherwise, or by liquidation of the Participant's nonessential
assets to the extent such liquidation would not itself cause a severe financial
hardship. The amount of any distribution hereunder shall be limited to the
amount necessary to relieve the Participant's financial hardship. The
determination of whether a Participant has a qualifying hardship and the amount
which qualifies for distribution, if any, shall be made by the Committee in its
sole discretion. The Committee may require evidence of the purpose and amount
of the need, and may establish such application or other procedures as it deems
appropriate.
No Participant may assign his or her claim to Deferred Shares and Deferred
Earnings during his or her lifetime, and any deferral election made hereunder
shall be irrevocable. A Participant's right to Deferred Shares and Deferred
Earnings shall at all times constitute an unsecured promise of the Company to
pay benefits as they come due. The right of the Participant or his or her
beneficiary to receive benefits hereunder shall be solely an unsecured claim
against the general assets of the Company. Neither the Participant nor his or
her beneficiary shall have any claim against or rights in any specific assets or
other fund of the Company, and any assets in the Trust shall be deemed general
assets of the Company.
All distributions made by the Company and/or the Trustees pursuant to
elections made hereunder shall be subject to applicable federal, state, and
local tax withholding and to such other deductions as shall at the time of such
payment be required under any income tax or other law, whether of the United
States or any other jurisdiction, and, in the case of payments to a beneficiary,
the delivery to the Committee and/or Trustees of all necessary waivers,
qualifications and other documentation.
ARTICLE VIII
MISCELLANEOUS
8.01 Adjustments for Capital Changes.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of shares
which may be purchased under the Plan, and the number and kind of shares subject
to outstanding Plan Share Awards, shall be proportionately adjusted for any
increase, decrease, change or exchange of shares of Common Stock for a different
number or kind of shares or other securities of the Company which results from a
merger, consolidation, recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event in which the number
or kind of shares is changed without the receipt or payment of consideration by
the Company.
(b) Transactions in which the Company is Not the Surviving Entity. In the
event of (i) the liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred
7
<PAGE>
to herein as a "Transaction"), all outstanding Plan Share Awards shall be
adjusted for any change or exchange of shares of Common Stock for a different
number or kind of shares or other securities which results from the Transaction.
(c) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Section, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the shares pursuant to the Plan Share Award before the adjustment
was made. In addition, the Committee shall have the discretionary authority to
impose on the Shares subject to Plan Share Awards to Employees such restrictions
as the Committee may deem appropriate or desirable, including but not limited to
a right of first refusal, or repurchase option, or both of these restrictions.
(d) Other Issuances. Except as expressly provided in this Section, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into shares of Common Stock or stock of another class,
for cash or property or for labor or services either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, shall not affect, and
no adjustment shall be made with respect to, the number or class of shares of
Common Stock then subject to Plan Share Awards or reserved for issuance under
the Plan.
8.02 Amendment and Termination of Plan. The Board may, by resolution, at
any time amend or terminate the Plan; provided that no amendment or termination
of the Plan shall, without the written consent of a Participant, impair any
rights or obligations under a Plan Share Award theretofore granted to the
Participant.
The power to amend or terminate the Plan in accordance with this Section
8.02 shall include the power to direct the Trustee to return to the Company all
or any part of the assets of the Trust, including shares of Common Stock held in
the Plan Share Reserve. However, the termination of the Trust shall not affect
a Participant's right to earn Plan Share Awards and to receive a distribution of
Common Stock relating thereto, including earnings thereon, in accordance with
the terms of this Plan and the grant by the Committee or the Board.
8.03 Nontransferability. Plan Share Awards may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution. Notwithstanding the foregoing,
or any other provision of this Plan, a Participant who holds Plan Share Awards
may transfer such Awards to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Plan Share Awards so transferred may thereafter be
transferred only to the Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially transferred the
Awards pursuant to this Section 8.03. Plan Share Awards which are transferred
pursuant to this Section 8.03 shall be exercisable by the transferee according
to the same terms and conditions as applied to the Participant.
8.04 No Employment or Other Rights. Neither the Plan nor any grant of a
Plan Share Award or Plan Shares hereunder nor any action taken by the Trustee,
the Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Employee or Director to continue
in the service of the Company, the Association, or an Affiliate thereof.
8.05 Voting and Dividend Rights. No Participant shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award prior to the time said Plan Shares are actually
distributed to him.
8.06 Governing Law. The Plan and Trust shall be governed and construed
under the laws of the State of Colorado to the extent not preempted by Federal
law.
8.07 Effective Date. The Plan shall become effective immediately upon its
approval by a favorable vote of stockholders of the Company who own at least a
majority of the total votes eligible to be cast at a duly called meeting of the
Company's stockholders held in accordance with applicable laws, provided that
the Plan shall not be
8
<PAGE>
submitted for such approval within the six-month period after the Date of
Conversion. In no event shall Plan Share Awards be made prior to the Effective
Date.
8.08 Term of Plan. This Plan shall remain in effect until the earlier of
(i) termination by the Board, or (ii) the distribution of all assets of the
Trust. Termination of the Plan shall not affect any Plan Share Awards
previously granted, and such Awards shall remain valid and in effect until they
have been earned and paid, or by their terms expire or are forfeited.
8.09 Tax Status of Trust. It is intended that (i) the Trust associated
with the Plan be treated as a grantor trust of the Company under the provisions
of Section 671 et seq. of the Code, as the same may be amended from time to
-- ---
time, and (ii) that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of general unsecured
creditors of the Company, the Plan constitutes a mere unfunded promise to make
benefit payments in the future, the Plan is unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and the Trust has been and will continue to be maintained in conformity
with Revenue Procedure 92-64 (as the same may be amended from time to time).
9
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Exhibit 10.5
ROCKY FORD FEDERAL SAVINGS & LOAN ASSOCIATION
RETIREMENT PLAN FOR DIRECTORS AND SENIOR OFFICER
The Board of Directors of Rocky Ford Federal Savings & Loan Association has
adopted this Retirement Plan for Directors and Senior Officer, effective
November 13, 1996, in order to provide competitive compensation for its
Directors and Senior Officer, to attract, retain, and motivate its Directors and
Senior Officer, and to encourage the long-term financial success of the
Association through a performance-based benefit formula.
ARTICLE I
Definitions
-----------
The following words and phrases, when used in the Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise.
"Account" shall mean a bookkeeping account maintained by the Association in
the name of the Participant.
"Affiliate" shall mean any "parent corporation" or "subsidiary corporation"
of the Association, as the terms are defined in Section 424(e) and (f),
respectively, of the Code.
"Association" shall mean Rocky Ford Federal Savings & Loan Association, and
any successor to its interest.
"Beneficiary" shall mean the person or persons whom a Participant may
designate as the beneficiary of the Participant's Benefits under Articles II and
III. A Participant's election of a Beneficiary shall be made on the Election
Form, shall be revocable by the Participant during his or her lifetime, and
shall be effective only upon its delivery to an executive officer of the
Association and acceptance by the Board (which acceptance shall be presumed
unless, within ten business days of delivery of the Participant's election, the
Board provides the Participant with a written notice detailing the reasons for
its rejection).
"Benefits" shall mean, collectively, the benefits payable under Articles II
and III of the Plan.
"Board" shall mean the Board of Directors of the Association.
"Change in Control" shall mean any of the following events:
(a) When the Association is in the "mutual" form of organization, a "Change
in Control" shall be deemed to have occurred if:
(i) as a result of, or in connection with, any exchange offer, merger
or other business combination, sale of assets or contested election, any
combination of the
<PAGE>
foregoing transactions, or any similar transaction, the persons who were
Directors of the Association before such transaction cease to constitute a
majority of the Board of Directors of the Association or any successor to
the Association;
(ii) the Association transfers substantially all of its assets to
another corporation which is not an Affiliate of the Association;
(iii) the Association sells substantially all of the assets of an
Affiliate which accounted for 50% or more of the controlled group's assets
immediately prior to such sale;
(iv) any "person" including a "group", exclusive of the Board of
Directors of the Association or any committee thereof, is or becomes the
"beneficial owner", directly or indirectly, of proxies of the Association
representing twenty-five percent (25%) or more of the combined voting power
of the Association's members; or
(v) the Association is merged or consolidated with another
corporation and, as a result of the merger or consolidation, less than
seventy percent (70%) of the outstanding proxies relating to the surviving
or resulting corporation are given, in the aggregate, by the former members
of the Association.
(b) If the Association shall be in the "stock" form of organization, a
"Change in Control" shall be deemed to have occurred if:
(i) as a result of, or in connection with, any initial public
offering, tender offer or exchange offer, merger or other business
combination, sale of assets or contested election, any combination of the
foregoing transactions, or any similar transaction, the persons who were
Directors of the Association before such transaction cease to constitute a
majority of the Board of Directors of the Association or any successor to
the Association;
(ii) the Association transfers substantially all of its assets to
another corporation which is not an Affiliate of the Association;
(iii) the Association sells substantially all of the assets of an
Affiliate which accounted for 50% or more of the controlled group's assets
immediately prior to such sale;
(iv) any "person" including a "group" is or becomes the "beneficial
owner", directly or indirectly, of securities of the Association
representing twenty-five percent (25%) or more of the combined voting power
of the Association's outstanding securities (with the terms in quotation
marks having the meaning set forth under the federal securities laws); or
2
<PAGE>
(v) the Association is merged or consolidated with another
corporation and, as a result of the merger or consolidation, less than
seventy percent (70%) of the outstanding voting securities of the surviving
or resulting corporation is owned in the aggregate by the former
stockholders of the Association.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
---
occur solely by reason of a transaction in which the Association converts to the
stock form of organization, or creates an independent holding company in
connection therewith. The decision of the Board as to whether a Change in
Control has occurred shall be conclusive and binding.
"Director" shall mean a member of the Board.
"Effective Date" shall mean the date on which the Plan first becomes
effective, as referenced in the opening paragraph of this document.
"Election Form" shall mean the form attached hereto as Exhibit "A".
"Employee" shall mean any person who is employed by the Association.
"Participant" shall mean (i) an individual who serves on the Board at some
time on or after the Effective Date, and is not an Employee on the date of being
both nominated and elected (or re-elected) to the Board, or (ii) a Senior
Officer. A Director who becomes a Participant shall remain a Participant even
if he or she later becomes an Employee of the Association.
"Plan" shall mean this Rocky Ford Federal Savings & Loan Association
Retirement Plan for Directors and Senior Officer.
"Safe Performance Factor" shall be determined by the Board, in its
discretion, for each calendar year during the term of this Plan; provided that
said Safe Performance Factor shall in no event be less than 0 or more than 1.2.
Attached as Exhibit "B" is the formula that the Board expects to follow (and
shall be entitled to rely upon) in making this determination.
"Senior Officer" shall mean Keith Waggoner, Executive Vice President of the
Association.
"Trust Agreement" shall mean that agreement entered into pursuant to the
terms hereof between the Association and the Trustee, and "Trust" means the
trust created thereunder.
"Trustee" shall mean that person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan Assets for the
purposes set forth herein.
3
<PAGE>
ARTICLE II
Credits to Accounts
-------------------
Directors. Each Participant who is a Director on the Effective Date shall
have his or her Account credited with an amount equal to the product of $1,840
and his full years of service as a Director prior to the Effective Date.
Notwithstanding the foregoing, Director Gause's Account shall be credited on the
Effective Date with an amount equal to the product of $2,723 and his full years
of service as a Director prior to the Effective Date.
On each September 30 following the Effective Date, each Participant who is
a Director (but not a Senior Officer) on such date shall have his or her Account
credited with an amount equal to the product of $1,840 and the Safe Performance
Factor. Notwithstanding the foregoing, on each September 30 following the
Effective Date, Director Gause's Account shall be credited with an amount equal
to the product of $2,723 and the Safe Performance Factor, provided he is a
Director on such date.
Senior Officer. The Account of the Senior Officer shall be credited on the
Effective Date with an amount equal to $4,000 for each full year of his service
with the Association prior to the Effective Date. On the September 30 occurring
during each of the next eleven years following the Effective Date, the Senior
Officer's Account will be credited an additional amount equal to $20,669 times
the Safe Performance Factor, provided he is an Employee on such date.
Investment Return. Until distributed in accordance with the terms of the
Plan, each Participant's Account shall be credited with a rate of return, on any
amounts previously credited, equal to the highest rate of interest paid by the
Association on certificates of deposit having a term of one year.
Notwithstanding the foregoing, if the Association has converted to stock form,
said rate of return on the vested balances of Accounts shall equal the dividend-
adjusted rate of return on the Association's common stock (or that of its
holding company, if one exists).
Vesting. Amount credited to Accounts of Participants on the Effective Date
shall vest according to the following schedule:
Vesting Date Percentage
------------ ----------
Effective Date 50%
March 31, 1997 100%
Amounts credited to Participants' Accounts after the Effective Date shall
be fully vested at all times.
Final Year Adjustments. In the event of the Senior Officer's disability or
death, his Account shall be credited with an amount equal to the difference (if
any) between (i) 50% of the present value of all benefits which would have been
credited to his Account if he had otherwise remained employed by the Association
to age 62, and (ii) the benefits which are actually credited to his Account at
the time of his termination. If the Senior Officer's employment terminates for
4
<PAGE>
any reason other than Just Cause in connection with or following a Change in
Control, his Account shall be credited with an amount equal to the difference
(if any) between (i) 100% of the present value of all benefits which would have
been credited to his Account if he had otherwise remained employed by the
Association to age 62, and (ii) the benefits which are actually credited to his
Account at the time of his termination, subject to applicable "golden parachute"
limitations under (S)280G of the Internal Revenue Code.
ARTICLE III
Distribution from Accounts; Election Forms
------------------------------------------
General Rule. Account balances shall be paid, in cash, in ten equal annual
installments beginning during the first quarter of the calendar year which next
follows the calendar year in which the Participant ceases to be a Director or
Senior Officer (whichever first occurs) for any reason, with any subsequent
payments being made by the last day of the first quarter of each subsequent
calendar year until the Participant has collected the entire value of his or her
Account. Notwithstanding the foregoing: (i) a Participant may elect on his or
her Election Form to have his or her Account paid in a single lump sum
distribution, or in annual payments over a period of less than ten years, and
(ii) to the extent required under federal banking law, the amounts otherwise
payable to a Participant shall be reduced to the extent that on the date of a
Participant's termination of employment, either (A) the present value of his or
her Benefits exceeds the limitations that are set forth in Regulatory Bulletin
27a of the Office of Thrift Supervision, as in effect on the Effective Date, or
(B) such reduction is necessary to avoid subjecting the Association to liability
under Section 280G of the Internal Revenue Code of 1986, as amended.
Death Benefits. If a Participant dies before receiving all Benefits
payable pursuant to the preceding paragraph, then the remaining balance of the
Participant's Account shall be distributed in a lump sum to the Participant's
designated Beneficiary (or estate, in the absence of a validly named or living
Beneficiary) not later than the first day of the second month following the date
of the Participant's death; provided that a Participant may specify on the
Election Form a distribution period of up to 10 years (with payments to be made
in substantially equal annual installments).
Elections. In order to be effective, a Participant's initial Election Form
must be submitted within one year following the date on which the Participant
first becomes eligible to participate in the Plan. Elections made pursuant to
this Article III shall be irrevocable, provided that beneficiary designations
made pursuant to executed Election Forms shall be revocable during the
Participant's lifetime and a Participant may, by submitting an effective
superseding Election Form at any time and from time to time, prospectively
change the designated Beneficiary and the manner of payment to a Beneficiary.
5
<PAGE>
ARTICLE IV
Source of Benefits
------------------
General Rule. Benefits shall constitute an unfunded, unsecured promise by
the Association to provide such payments in the future, as and to the extent
such Benefits become payable. Benefits shall be paid from the general assets of
the Association, and no person shall, by virtue of this Plan, have any interest
in such assets (other than as an unsecured creditor of the Association). For
any fiscal year during which a Trust is maintained, (i) the Trustee shall inform
the Board annually prior to the commencement of each fiscal year as to the
manner in which such Trust assets shall be invested, and (ii) the Board shall,
as soon as practicable after the end of each fiscal year of the Association,
provide the Trustee with a schedule specifying the amounts payable to each
Participant, and the time for making such payments.
Change in Control. In the event of a Change in Control, the Association
shall contribute to the Trust an amount sufficient to provide the Trust with
assets having an overall value equivalent to the value of the aggregate Account
balances under the Plan.
ARTICLE V
Assignment
----------
Except as otherwise provided by this Plan, it is agreed that neither the
Participant nor his Beneficiary nor any other person or persons shall have any
right to commute, sell, assign, transfer, encumber and pledge or otherwise
convey the right to receive any Benefits hereunder, which Benefits and the
rights thereto are expressly declared to be nontransferable.
ARTICLE VI
No Retention of Services
------------------------
The Benefits payable under this Plan shall be independent of, and in
addition to, any other compensation payable by the Association to a Participant,
whether in the form of fees, bonus, retirement income under employee benefit
plans sponsored or maintained by the Association or otherwise. This Plan shall
not be deemed to constitute a contract of employment between the Association and
any Participant.
ARTICLE VII
Rights of Directors;
--------------------
Termination or Suspension under Federal Law
-------------------------------------------
The rights of the Participants under this Plan and of their Beneficiaries
(if any) shall be solely those of unsecured creditors of the Association. If
the Participant is removed and/or permanently prohibited from participating in
the conduct of the Association's affairs by an order issued under Sections
8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12 U.S.C.
1818(e)(4) or (g)(1)), all obligations of the Association under this Plan shall
terminate, as of the effective date of the order, but vested rights of the
parties shall not be affected. If the Association is in default (as defined in
Section 3(x)(1) of FDIA), all obligations under this Plan
6
<PAGE>
shall terminate as of the date of default; however, this Paragraph shall not
affect the vested rights of the parties.
All obligations under this Plan shall terminate, except to the extent that
continuation of this Plan is necessary for the continued operation of the
Association: (i) by the Director of the Office of Thrift Supervision ("Director
of OTS"), or his or her designee, at the time that the Federal Deposit Insurance
Corporation ("FDIC") or the Resolution Trust Corporation enters into an
agreement to provide assistance to or on behalf of the Association under the
authority contained in Section 13(c) of FDIA; or (ii) by the Director of the
OTS, or his or her designee, at the time that the Director of the OTS, or his or
her designee approves a supervisory merger to resolve problems related to
operation of the Association or when the Association is determined by the
Director of the OTS to be in an unsafe or unsound condition. Such action shall
not affect any vested rights of the parties.
If a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12 U.S.C.
1818(e)(3) or (g)(1)) suspends and/or temporarily prohibits the Participant from
participating in the conduct of the Association's affairs, the Association's
obligations under this Plan shall be suspended as of the date of such service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Association may in its discretion (i) pay the Participant all or
part of the compensation withheld while its contract obligations were suspended,
and (ii) reinstate (in whole or in part) any of its obligations which were
suspended.
ARTICLE VIII
Reorganization
--------------
The Association agrees that it will not merge or consolidate with any other
corporation or organization, or permit its business activities to be taken over
by any other organization, unless and until the succeeding or continuing
corporation or other organization shall expressly assume the rights and
obligations of the Association herein set forth. The Association further agrees
that it will not cease its business activities or terminate its existence, other
than as heretofore set forth in this paragraph, without having made adequate
provision for the fulfillment of its obligation hereunder.
ARTICLE IX
Amendment and Termination
-------------------------
The Board may amend or terminate the Plan at any time, provided that no
such amendment or termination shall, without the written consent of an affected
Participant, alter or impair any vested rights of the Participant under the
Plan.
ARTICLE X
State Law
---------
This Plan shall be construed and governed in all respects under and by the
laws of the State of Colorado, except to the extent preempted by federal law.
If any provision of this Plan
7
<PAGE>
shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
ARTICLE XI
Headings; Gender
----------------
Headings and subheadings in this Plan are inserted for convenience and
reference only and constitute no part of this Plan. This Plan shall be
construed, where required, so that the masculine gender includes the feminine.
ARTICLE XII
Interpretation of the Plan
--------------------------
The Board shall have sole and absolute discretion to administer, construe,
and interpret the Plan, and the decisions of the Board shall be conclusive and
binding on all affected parties (unless such decisions are arbitrary and
capricious).
ARTICLE XIII
Legal Fees
----------
In the event any dispute shall arise between a Participant and the
Association as to the terms or interpretation of this Plan, whether instituted
by formal legal proceedings or otherwise, including any action taken by a
Participant to enforce the terms of this Plan or in defending against any action
taken by the Association, the Association shall reimburse the Participant for
all costs and expenses, including reasonable attorneys' fees, arising from such
dispute, proceedings or actions; provided that the Participant shall return such
amounts to the Association if he or she fails to obtain a final judgment by a
court of competent jurisdiction or obtain a settlement of such dispute,
proceedings, or actions substantially in his or her favor. Such reimbursements
to a Participant shall be paid within 10 days of the Participant furnishing to
the Association written evidence, which may be in the form, among other things,
of a cancelled check or receipt, of any costs or expenses incurred by the
Participant. Any such request for reimbursement by a Participant shall be made
no more frequently than at 30 day intervals.
ARTICLE XIV
Duration of Plan
----------------
Unless terminated earlier in accordance with Article IX, this Plan shall
remain in effect during the term of service of the Participants and until all
Benefits payable hereunder have been made.
8
<PAGE>
Exhibit A
ROCKY FORD FEDERAL SAVINGS & LOAN ASSOCIATION
RETIREMENT PLAN FOR DIRECTORS AND SENIOR OFFICER
-------------------------------
Election Form
-------------------------------
AGREEMENT, made this ____ day of ________, 19__, by and between
____________ (the "Participant"), and Rocky Ford Federal Savings & Loan
Association (the "Association").
WHEREAS, the Association has established the Rocky Ford Federal Savings &
Loan Association Retirement Plan for Directors and Senior Officer (the "Plan"),
and the Participant is eligible to participate in the Plan.
NOW THEREFORE, it is mutually agreed as follows:
1. Form of Payment. The Participant, by the execution hereof, agrees to
---------------
participate in the Plan upon the terms and conditions set forth therein, and, in
accordance therewith, elects to have his Account distributed in:
[_] one lump sum payment.
[_] substantially equal annual payments over a period of _____ years
(no more than 10).
Payment of the Participant's Account shall begin during the first quarter of the
calendar year which next follows the calendar year in which the Participant
ceases to be a Director or Senior Officer of the Association (whichever first
occurs).
2. Designation of Beneficiary. In the event of the Participant's death
--------------------------
before he or she has collected all of the benefits payable under the Plan, the
Participant hereby directs that any survivorship benefits payable under Article
III of the Plan be distributed to the beneficiary or beneficiaries designated
under subparagraphs a and b of this paragraph 2 in the manner elected pursuant
to paragraph 3 hereof:
a. Primary Beneficiary. The Participant hereby designates the person(s)
-------------------
named below to be his or her primary beneficiary and to receive the balance of
any unpaid benefits under the Plan.
<TABLE>
<CAPTION>
==============================================================================
Name of Primary Beneficiary Mailing Address Percentage of Death
Benefit
- ------------------------------------------------------------------------------
<S> <C> <C>
%
- ------------------------------------------------------------------------------
%
==============================================================================
</TABLE>
<PAGE>
Election Form
Page 10 of 3
b. Contingent Beneficiary. In the event that the Primary beneficiary or
---------------------
beneficiaries named above are not living at the time of the Participant's death,
the Participant hereby designates the following person(s) to be his or her
contingent beneficiary for purposes of the Plan:
<TABLE>
<CAPTION>
==============================================================================
Name of Contingent Mailing Address Percentage of Death
Beneficiary Benefit
- ------------------------------------------------------------------------------
<S> <C> <C>
%
- ------------------------------------------------------------------------------
%
==============================================================================
</TABLE>
3. The Participant elects to have his Account distributed to his
beneficiary in:
[_] one lump sum payment.
[_] substantially equal annual payments over a period of _____ years
(no more than 10).
4. Effect of Election. The elections made hereunder shall be irrevocable
------------------
during the Participant's lifetime. Notwithstanding the foregoing, the
Participant may, by submitting an effective superseding Election Form at any
time and from time to time, prospectively change the Beneficiary designation and
the manner of payment to a Beneficiary. Such elections shall, however, become
irrevocable upon the Participant's death.
5. Association's Commitment. The Association agrees to make payment of
------------------------
all amounts due the Participant in accordance with the terms of the Plan and the
elections made by the Participant herein.
10
<PAGE>
Election Form
Page 11 of 3
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
Witnessed by: PARTICIPANT
- ----------------------- ------------------------------
Print Name: Participant
------------
Witnessed by: ASSOCIATION
- ----------------------- ROCKY FORD FEDERAL SAVINGS & LOAN
Print Name: ASSOCIATION
------------
By
---------------------------------
Its
-----------------------------
11
<PAGE>
Exhibit 10.6
ROCKY FORD FEDERAL SAVINGS & LOAN ASSOCIATION
INCENTIVE COMPENSATION PLAN
---------------------------
Adoption Agreement
---------------------------
The Employer named below is hereby establishing an incentive compensation
plan having the terms and conditions set forth in the attached Basic Plan
Document, as modified by the elections made in this Adoption Agreement. The
Employer recognizes and affirms that by leaving any box or line blank in this
Adoption Agreement, the Employer has rejected the choice associated therewith.
I. General Information about the Plan
A. The name of this Plan is the Rocky Ford Federal Savings & Loan
Association Incentive Compensation Plan (the "Plan").
B. The effective date of the Plan is October 1, 1996 (the "Effective
Date").
C. The fiscal year for the Plan is the 12-month period ending September
30 (the "Plan Year"), with the initial Plan Year beginning on the
Effective Date and ending on September 30, 1997.
D. The Plan is contingent upon its approval by --
1. [_] The Employer's primary banking regulator.
2. [_] a stockholder vote sufficient to satisfy the requirements of
[_] SEC Rule 16b-3, and/or [ ] Section 422 of the Code.
3. [X] None of the above.
II. General Information about the Employer
A. The employer sponsoring the Plan is Rocky Ford Federal Savings & Loan
Association (the "Employer").
B. The address of the Employer is 801 Swink Avenue, Rocky Ford, Colorado
81067.
<PAGE>
C. The Employer's taxpayer identification number is 84-0305807.
D. The telephone number of the Employer is (719) 254-7642.
E. The Employer directs that the following individual receive information
about the Plan: Keith E. Waggoner, Chief Executive Officer of the
Employer.
F. The committee (the "Committee") responsible for administering and
interpreting the Plan shall --
1. [X] consist of the following individuals: Norman L. Bailey, R.
Dean Jones and Wayne M. Whittaker.
2. [_] be the Employer's Incentive Compensation Plan Committee, as
appointed by the Board from time to time, and shall consist
of the Company's non-employee directors.
G. The common stock to be reserved for issuance under the Plan shall be
N/A shares of common stock, par value $[ N/A ] per share, of Rocky
---
Ford Federal Savings & Loan Association (the "Common Stock").
III. Eligibility and Participation
A. For each Plan Year, an individual will participate in the Plan if he
or she falls within any one of the following classes on a Participant
Determination Date:
1. [_] Each non-employee member of the Board ("Eligible Directors").
2. [_] Key Employees designated by the Board ("Eligible Key
Employees").
3. [X] Employees who are employed by the Employer ("Eligible
Employees").
B. The following date or dates will constitute Participant Determination
Dates:
1. [_] The first day of the Plan Year.
2. [_] The last day of the Plan Year.
-2-
<PAGE>
3. [X] Service is required on both of the above dates, unless the
Committee decides, in its sole and absolute discretion, to
waive either or both of these requirements for a select
Employee or Employees.
C. Notwithstanding the choices made in Items III. A. and III. B. hereof
the following persons or classes of persons shall participate in the Plan for
the fiscal year ending June 30, 1997: the top six officers of the Employer.
IV. Calculation of the Bonus Pool
A. For each Plan Year, the Bonus Pool will equal $30,000 times the ROAA
-----
Factor times the NPA Factor times the CAMEL Factor.
-----
B. The ROAA Factor will equal the ratio of the Employer's actual return
on average assets to its budgeted return on average assets for the
Plan Year.
C. The NPA Factor will be determined according to the following schedule:
NPA Ratio NPA Factor
--------- ----------
1.0% or Less 1.0
Between 1.0% and 2.0% Pro rata *
2.0% or More 0
* Calculated as one minus the ratio of (i) the actual NPA Ratio for
-----
the Plan Year minus 1.0% to (ii) 1.0%.
D. The CAMEL Rating Factor will be determined according to the following
schedule:
1. 1.20 for a CAMEL Rating of 1.
2. 1.00 for a CAMEL Rating of 2.
3. 0 for a CAMEL Rating of 3, 4, or 5.
E. Notwithstanding the foregoing: (1) if the ROAA is less than .40% for
any Plan Year, no Bonus Pool shall be created, and (2) in calculating
the ROAA or NPA Ratio for any Plan Year, the Committee shall have the
discretion to take into account or to disregard any extraordinary
financial events.
-3-
<PAGE>
V. Incentive Awards
A. For each Plan Year, Bonuses will be paid in accordance with Section
4.01 and the following elections (unless otherwise provided by the
Committee):
1. [_] Each Eligible Director will receive a Bonus equal to the
quotient obtained by dividing (i) 15% of the Bonus Pool for
the Plan Year, by (ii) the number of Eligible Directors.
2. [X] The Chief Executive Officer of the Employer will receive a
Bonus equal to 50% of the Bonus Pool, and each of the other
Eligible Employees will receive a bonus equal to the multiple
of (i) 50% of the Bonus Pool times (ii) the ratio that the
Eligible Employee's Compensation bears to the total
Compensation of all Eligible Employees other than the Chief
Executive Officer.
B. For each Plan Year, Restricted Stock Awards will be made in accordance
with Section 4.02 and the following elections:
1. [_] Each Eligible Director will receive a Restricted Stock Award
of Shares having a Market Value on the date of the award
equal to ___% of the Bonus he or she receives for the Plan
Year.
2. [_] Each Eligible Key Employee will receive a Restricted Stock
Award of Shares having a Market Value on the date of the
award equal to ___% of the Bonus he or she receives for the
Plan Year.
3. Each Restricted Stock Award shall become vested at the rate of
___% per Year of Service, provided that vesting will accelerate
to 100% upon a Change in Control or the Participant's termination
of service with the Employer due to his death, Disability or
retirement at or after age __.
C. For each Plan Year, Options will be granted in accordance with Section
4.03 and the following elections:
1. [_] Each Eligible Director will receive an Option to purchase a
number of Shares equal to ___% of the number of Shares
subject to the Participant's Restricted Stock Award for the
Plan Year.
2. [_] Each Eligible Key Employee will receive an Option to purchase
a number of Shares equal to ___% of the number of Shares
subject to the Participant's Restricted Stock Award for the
Plan Year.
-4-
<PAGE>
3. Each Option will become exercisable at the rate of ___% per Year
of Service, but will become immediately exercisable upon a Change
in Control or termination of the Participant's service due to
death, Disability, or retirement or after age _______.
VI. Deferred Compensation
A. Who may make deferred compensation elections in accordance with
Article V of the Basic Plan Document?
1. [X] Non-employee Directors.
2. [X] The following Key Employees: Keith E. Waggoner.
B. What investments may Participants select for the rate of return on
their deferred compensation?
1. [X] The highest interest rate being paid by the Employer on
12-month certificates of deposit.
2. [X] The rate of return on Common Stock.
3. [_] Other:______________________________________.
C. How does this deferred compensation program affect any existing
deferred compensation program maintained by the Employer?
1. [X] There is no existing non-qualified deferred compensation
program.
2. [_] The existing deferred compensation program will not be
affected by the adoption of the Plan.
3. [_] The existing deferred compensation program will remain in
effect, but only for amounts deferred prior to __________
___, 19___.
D. How will fee deferrals subject to Article V of the Plan be held until
distributed to Participants?
1. [X] As part of the Employer's general assets.
2. [X] In a grantor ("rabbi") trust.
-5-
<PAGE>
VII. Miscellaneous Provision
A. Section _____ of this Adoption Agreement shall be modified in the
following manner:
----------------------------------------------------------------------
----------------------------------------------------------------------
---------
B. Section _____ of this Adoption Agreement shall be modified in the
following manner:
----------------------------------------------------------------------
----------------------------------------------------------------------
---------
WHEREFORE, on this ____ day of _______, 1997, the Employer hereby executes
this Adoption Agreement, and thereby establishes the Plan upon the terms and
conditions set forth herein and in the Basic Plan Document.
ROCKY FORD FEDERAL SAVINGS &
LOAN ASSOCIATION
By
-----------------------------------
Its President
Witness:
- ------------------------- [SEAL]
-6-
<PAGE>
ROCKY FORD FEDERAL SAVINGS & LOAN ASSOCIATION
INCENTIVE COMPENSATION PLAN
-------------------
Basic Plan Document
-------------------
<PAGE>
ROCKY FORD FEDERAL SAVINGS & LOAN ASSOCIATION
INCENTIVE COMPENSATION PLAN
---------------------------
Basic Plan Document
---------------------------
Table of Contents
Page
ARTICLE I. General Provisions..................................... 1
ARTICLE II. Definitions............................................ 1
ARTICLE III. Eligibility and Participation.......................... 4
ARTICLE IV. Benefits............................................... 5
ARTICLE V. Deferred Compensation.................................. 7
ARTICLE VI. Plan Administration.................................... 8
ARTICLE VII. Amendment and Termination.............................. 9
ARTICLE VIII. General Provisions..................................... 9
<PAGE>
ROCKY FORD FEDERAL SAVINGS & LOAN ASSOCIATION
INCENTIVE COMPENSATION PLAN
-------------------
Basic Plan Document
-------------------
ARTICLE I. GENERAL PROVISIONS
1.01 Purpose. This Basic Plan Document and the Adoption Agreement
-------
executed by the Employer together establish the Plan, which is being implemented
and maintained for the purpose of providing select Directors, Key Employees, and
Employees with incentive compensation in the form of Bonuses, Stock Options, and
Restricted Stock in the event the Employer meets certain performance goals
indicative of its profitability and stability in comparison to other financial
institutions in its Peer Group.
1.02 Construction. The Employer intends that the Plan be an unfunded
------------
plan maintained primarily for the purpose of providing Incentive Awards, and
that the Plan not constitute an "employee benefit plan" within the meaning of
---
ERISA. Notwithstanding the foregoing, it is intended that Article V of the Plan
shall be maintained primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees within the
meaning of Section 201(2) of ERISA. The Plan shall be administered, construed,
and interpreted in a manner consistent with the purpose and intent set forth in
this Section.
1.03 Effective Date. The Plan shall become effective on July 1, 1996.
--------------
ARTICLE II. DEFINITIONS
Unless the context clearly requires otherwise, the terms defined in this
Article II shall, for all purposes of this Plan, have the respective meanings
specified in this Article II.
2.01 "Adoption Agreement" means the Adoption Agreement executed by the
------------------
Employer.
2.02 "Basic Plan Document" means this Basic Plan Document associated with
-------------------
the Rocky Ford Federal Savings & Loan Association Incentive Compensation Plan.
2.03 "Beneficiary" means the person or persons designated as a
-----------
Participant's beneficiary or beneficiaries in accordance with Section 4.07
hereof or a Participant's deferred compensation agreement.
2.04 "Board" means the Employer's Board of Directors.
-----
-1-
<PAGE>
2.05 "Bonus Pool" has the meaning set forth in the Adoption Agreement.
----------
2.06 "Bonuses" mean cash bonuses payable to Participants pursuant to
-------
Section 4.01 hereof.
2.07 "CAMEL Rating" means the most recent CAMEL rating given for its
------------
safety and soundness.
2.08 "Cause" means personal dishonesty, incompetence, willful misconduct,
-----
breach of duty involving personal profits, intentional failure to perform stated
duties, willful violation of a material provision of any law, rule or regulation
(other than traffic violations or similar offense), or a material violation of a
final cease-and-desist order or any other action which results in a substantial
financial loss to the Employer. A determination of "Cause" shall be made by the
Committee within its sole discretion.
2.09 "Change in Control" means (i) in the case of a stock institution,
-----------------
the acquisition of beneficial ownership of 25% or more of any Employer's
outstanding voting stock, and (ii) in the case of a mutual institution, a change
in the Board such that as the result of a merger or other business combination,
the persons who were Directors at any time during the one-year period before the
transaction cease to constitute a majority of the Board of the Employer or its
successor.
2.10 "Code" means the Internal Revenue Code of 1986, as amended from time
----
to time. References to a Code section shall include any comparable section or
sections of future legislation that amends, supplements or supersedes such
section.
2.11 "Committee" means the committee specified in the Adoption Agreement.
---------
In the absence at any time of a duly appointed committee, the Plan shall be
administered by those members of the Employer's Board who are "disinterested
persons" within the meaning of Rule 16b-3.
2.12 "Common Stock" means the common stock identified in the Adoption
------------
Agreement.
2.13 "Compensation" means (i) in the case of an Employee, the Employee's
------------
base salary for the Plan Year, as in effect on the last day of the Plan Year,
and (ii) in the case of a Director who is not an Employee, the total fees that
the Director receives for service on the Board during the Plan Year.
2.14 "CRA" means the rating that the Employer or its primary banking
---
subsidiary receives for compliance with the Community Reinvestment Act, as
amended from time to time, and for any particular Plan Year shall mean the most
recent CRA Rating as of the last day of the Plan Year.
2.15 "Director" means any member of the Board.
--------
-2-
<PAGE>
2.16 "Disability" means a physical or mental condition that is expected
----------
to be of indefinite duration and to substantially impair the ability of a
Participant to fulfill his duties to the Employer.
2.17 "Eligible Director", "Eligible Employee", and "Eligible Key
----------------- ----------------- ------------
Employee" shall have the meaning set forth in the Adoption Agreement.
2.18 "Employee" means any individual who performs service for any
--------
Employer and who is treated as an employee for payroll tax purposes.
2.19 "Employer" has the meaning set forth in the Adoption Agreement.
--------
2.20 "ERISA" means the Employee Retirement Income Security Act of 1974,
-----
as amended from time to time.
2.21 "Factors" mean, collectively, the factors identified in the Adoption
-------
Agreement as being determinant of the Bonus Pool. When used in the singular,
Factor means any Factor identified in the Adoption Agreement.
- ------
2.22 "Incentive Awards" mean any benefits provided pursuant to Article IV
----------------
hereof, as modified by the Adoption Agreement.
2.23 "Market Value" means the fair market value of a Share on the date of
------------
an Incentive Award, and shall be determined by the Committee in its discretion,
provided that --
(i) if the Common Stock is listed on a national securities exchange
(including the Nasdaq National Market System or SmallCap Market), Market
Value means the average of the highest and lowest selling prices on the
exchange on the most recent date on which a sale occurred; and
(ii) if the Common Stock is traded otherwise than on a national
securities exchange but bid and asked prices are available, Market Value
means the average of its bid and asked price on the most recent date on
which there was a bid and asked price.
2.24 "NPA Ratio" means nonperforming loans (loans over 90 days delinquent
---------
and real estate owned) as a percentage of the Employer's total assets as of the
last day of the Plan Year, as determined by the Committee in accordance with
generally accepted accounting principles.
2.25 "Option" a stock option that is granted pursuant to Section 4.03
------
hereof.
2.26 "Participant" means an individual who has received an Incentive Award
-----------
pursuant to Article IV hereof or has made a deferred compensation election
pursuant to Article V hereof.
2.27 "Participant Determination Date" has the meaning set forth in the
------------------------------
Adoption Agreement.
-3-
<PAGE>
2.28 "Peer Group" means the group of publicly-traded financial
----------
institutions identified in the Adoption Agreement.
2.29 "Peer Group Adjustment Factor" means with respect to each Factor
----------------------------
other than the NPA Factor, the ratio of the median Factor for the Peer Group for
the current Plan Year to the median Factor for the Peer Group for the
immediately preceding Plan Year, and the converse of this ratio for the NPA
Factor.
2.30 "Plan" means the Employer's Incentive Compensation Plan, as
----
established by the Employer's execution of the Adoption Agreement.
2.31 "Restricted Stock Award" means an award pursuant to Section 4.02
----------------------
hereof.
2.32 "ROAA" means return-on-average assets, as determined by the Committee
----
(i) in accordance with generally accepted accounting principles, and (ii) on a
pre-dividend, pre-loan loss reserve, and pre-Plan payment basis.
2.33 "Safety and Soundness Factor" has the meaning set forth in the
---------------------------
Adoption Agreement.
2.34 "Share" means one share of Common Stock.
-----
2.35 "Year of Service" means the number of full 12-month periods, measured
---------------
from the date of an Incentive Award and each anniversary of that date during
which a Participant has remained in the service of the Employer.
ARTICLE III. ELIGIBILITY AND PARTICIPATION
The Committee shall make determinations of eligibility and participation in
accordance with the Adoption Agreement. The Committee shall have the
discretion, before a new Plan Year begins, to change (i) the employees
participating in the Plan, and/or (ii) the formula for calculating the Bonus
Pool.
ARTICLE IV. BENEFITS
As soon as practicable after the end of the Plan Year, the Committee shall
make the Incentive Awards provided for in this Article IV.
4.01 Bonuses. In accordance with the Adoption Agreement, the Committee
-------
shall determine the Bonuses payable to Eligible Directors, Eligible Employees,
and Eligible Key Employees, and shall promptly notify the Employer of the
Bonuses to be paid to such individuals. Notwithstanding the foregoing, the
Committee shall, except under extraordinary circumstances, proportionately
reduce the Bonuses paid hereunder for the Plan Year to the extent necessary to
ensure that the aggregate amount paid as Bonuses does not jeopardize the status
of the Employer (or its primary banking subsidiary) as a well-capitalized
institution.
-4-
<PAGE>
4.02 Restricted Stock Award. To the extent, if any, required under the
----------------------
Adoption Agreement, the Committee shall make Restricted Stock Awards to Eligible
Directors and Eligible Key Employees, and shall promptly provide each recipient
of an award with a notice thereof.
(a) General Vesting Rule. The Shares subject to a Restricted Stock
Award shall become vested and nonforfeitable according to the schedule set forth
in the Adoption Agreement. The Employer shall deliver to the Committee all
Shares subject to Restricted Stock Awards, and the Committee shall hold such
Shares in escrow until they are transferred to Participants in accordance with
this Section. In this regard, the relationship of the Committee to the Employer
shall be that of agent to principal.
(b) Exception for Change in Control or Termination due to Death or
Disability. Notwithstanding the vesting schedule set forth in the Adoption
Agreement, all Shares subject to a Participant's Restricted Stock Award shall
become fully (100%) vested upon the date of a Change in Control, or the
Participant's termination of service with the Employer due to his death or
Disability. Such Shares shall be transferred to the Participant (or, in the
event of his death, his Beneficiary) as soon as practicable after the event that
accelerates vesting hereunder.
(c) Accrual of Dividends. Whenever the Committee transfers Shares to
a Participant or Beneficiary under this Section, such Participant or Beneficiary
shall also be entitled to receive, with respect to each Share transferred, both
an amount equal to any cash dividends declared and paid between the date the
relevant Restricted Stock Award was initially granted to the Participant and the
date the Shares are being transferred. The Participant shall also receive the
net earnings, if any, that are attributable to any cash dividends so paid out.
(d) Timing of Distributions. The Committee shall transfer the Shares
subject to a Restricted Stock Award to the Participant or his Beneficiary, as
the case may be, as soon as practicable after the later of (i) the date they
have become fully vested and nonforfeitable, or (ii) the date of distribution
that the Participant elects in writing on a form and in a manner that is both
acceptable to the Committee and delivered to the Committee within the 30-day
period after the Participant receives the Restricted Stock Award covering such
Shares. Any election that a Participant makes hereunder shall be irrevocable.
(e) Form of Distribution. Whenever a Participant becomes entitled to
receive Shares in accordance herewith, the Committee shall transfer such Shares,
together with any Shares representing stock dividends, in the form of Common
Stock. One Share of Common Stock shall be given for each Share earned.
Payments representing cash dividends (and earnings thereon) shall be made in
cash.
(f) Voting of Shares held in Escrow. After a Restricted Stock Award
has been granted hereunder, the Committee shall vote the Shares subject thereto
in the manner directed by the Board, and otherwise in the manner determined by
the Committee in its sole discretion.
-5-
<PAGE>
4.03 Stock Options. To the extent, if any, required under the Adoption
-------------
Agreement, the Committee shall grant Options to Eligible Directors and Eligible
Key Employees, and shall promptly provide each recipient of an Option with a
stock option agreement specifying the terms and conditions of the Option;
provided that each Option shall have an exercise price per Share equal to its
Market Value on the date of the grant, shall become exercisable in accordance
with the schedule set forth in the Adoption Agreement, and shall expire on the
earlier of ten years after the date of its grant, and --
(a) two years after a Participant's service with the Employer
terminates due to his death;
(b) immediately upon the Participant's termination of service for
Cause;
(c) three months after a Participant's service with the Employer
terminates for a reason other than death or Cause.
Notwithstanding the provision of any Option which provides for its exercise
in installments, all Options outstanding on the date of a Change in Control
shall become immediately exercisable.
4.04 Revocation for Cause. Notwithstanding anything herein to the
--------------------
contrary, if the Participant is discharged from service with the Employer for
Cause or is discovered after termination of service to have engaged in conduct
that would have justified termination for Cause, the Committee may immediately
revoke, rescind, and terminate any Incentive Award made under this Plan to the
extent a Participant has not collected a Bonus, exercised an Option, or received
Shares upon the vesting of a Restricted Stock Award.
4.05 Duty of the Committee. The Committee shall have no responsibility to
---------------------
Participants other than (i) to inform the Employer, as soon as practicable after
the end of each Plan Year, in writing, as to the Bonuses to be provided, (ii) to
provide Eligible Directors and Eligible Key Employees with stock option
agreements and Restricted Stock Awards, and (iii) to follow such reasonable
directions as the Employer shall make as to the provision of such Incentive
Awards to Participants.
4.06 Minority, Disability, or Incompetency. If any Incentive Award
-------------------------------------
becomes payable or transferable under this Plan to a minor, to a person under
legal disability or to a person not adjudicated incompetent but who the
Committee in its discretion determines to be incapable by reason of illness or
mental or physical disability of managing his financial affairs, the Committee
may direct that such Incentive Award be paid or transferred to the legal
representative or custodian of such person or to any relative or friend of such
person, or that such amount be paid directly for such person's support and
maintenance. Payments so made in good faith shall completely discharge the
Committee and the Employer of any and all obligations and liabilities with
respect to such Incentive Awards.
-6-
<PAGE>
4.07 Designation of Beneficiary. A Participant may file with the Committee
--------------------------
a written designation of a Beneficiary who is to receive his or her vested
benefits in the event of the Participant's death prior to his or her collection
of said benefits. Such designation of Beneficiary may be changed at any time by
written notice to the Committee. The designation last filed with the Committee
shall be controlling. In the event of the death of a Participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of the Participant's death, the Participant's estate shall be deemed to be
the Beneficiary for purposes of this Plan.
4.08 Source of Benefits. To the extent required under the Adoption
------------------
Agreement, the Employer shall pay Bonuses out of its general assets, provided
that the Board may in its discretion establish and fund a grantor trust meeting
the requirements of Revenue Procedure 92-64, as amended or revised from time to
time. Nothing contained in the Plan itself shall constitute, or be treated as,
a trust or create any fiduciary relationship (other than the Committee's
retention of Shares in escrow pursuant to Section 4.02) . Except to the extent
provided in Section 4.02 the Employer, shall be under any obligation to
segregate any assets for the purpose of providing Incentive Awards, and no
person or entity which is entitled to payment under the terms of the Plan shall
have any claim, right, security interest, or other interest in any fund, trust,
account, insurance contract, or asset of the Employer. To the extent that a
Participant or any other person acquires a right to receive any Benefit under
the Plan, such right shall be limited to that of a recipient of an unfunded,
unsecured promise to pay amounts in the future and the Participant's (or other
person's) position with respect to such amounts shall be that of a general
unsecured creditor.
4.09 Shares Subject to the Plan. Except as otherwise required hereunder,
--------------------------
the aggregate number of Shares deliverable to Participants pursuant to the Plan
shall not exceed the number of Shares designated in the Adoption Agreement.
Such Shares may either be authorized but unissued Shares or Shares held in
treasury. The number and kind of shares which may be purchased or issued under
the Plan, and the number and kind of shares subject to outstanding Incentive
Awards, shall be equitably adjusted for any increase, decrease, change, or
exchange of Shares for a different number or kind of shares or other securities
of the Company or another company which results from a merger, consolidation,
recapitalization, reorganization, reclassification, stock dividend, split-up,
combination of shares, or similar event in which the number or kind of shares is
changed (including a transaction in which the Employer is not the surviving
entity). In addition, the Committee shall have the discretionary authority to
impose on the Shares subject to Incentive Awards such restrictions as the
Committee may deem appropriate or desirable, including but not limited to a
right of first refusal, or repurchase option, or both of these restrictions.
If an Option should expire, become unexercisable or be forfeited for any
reason without having been exercised in full, or if a Restricted Stock Award
should be forfeited for any reason, the Shares subject to such Options or
Restricted Stock Award shall, unless the Plan shall have been terminated, be
available for the grant of additional Options or Restricted Share Awards under
the Plan.
-7-
<PAGE>
ARTICLE V. DEFERRED COMPENSATION
This Article of the Plan establishes a deferred compensation program for
Participants, subject to the terms and conditions provided in this Basic Plan
Document and in the Adoption Agreement. In addition, the terms and conditions
of the Deferred Compensation attached as Exhibit "A" are incorporated herein by
reference, and may not be changed except through affirmative Board action in
accordance with Article VII hereof.
5.01 General Deferral Procedure. In accordance with this Article, the
--------------------------
individuals specified in the Adoption Agreement may elect, within 30 days of
becoming a Participant or in advance of any October 1st, to defer all or any
portion of the fees and/or salary otherwise payable to him from any Employer, in
cash, for any future Plan Year in which the Plan is in effect. Deferred amounts
shall be credited by the Employer at the end of each calendar quarter, in
accordance with the terms of the deferred compensation agreement entered into
between the Participants and the Employer that would otherwise pay the
Participant cash compensation.
The funds so credited quarter-annually shall be credited by the Employer to
a bookkeeping account ("Deferral Account") in the name of each Participant
according to the terms of the Participant's deferred compensation agreement. In
addition to the funds deferred quarter-annually and credited to the Deferral
Accounts of Participants, the Employer shall adjust each Account at the end of
each Plan Year (i) to credit the Participant's Deferral Account with the
appreciation or depreciation that would have occurred if the Deferral Account
had been invested in the manner that the Participant selects in the deferred
compensation agreement from among the measures selected by the Employer in the
Adoption Agreement.
5.02 Distributions to Participants. A Participant's Deferral Account shall
-----------------------------
be paid, in cash, in accordance with those terms set forth in his deferred
compensation agreement which are applicable to the deferred amounts. If a
Participant should die before receiving all deferred compensation benefits
payable under this Article, then such payment(s) shall be made to the
Participant's Beneficiary.
5.03 Agreements. Deferred compensation agreements made hereunder shall be
----------
prospective only and shall be irrevocable with respect to amounts deferred
pursuant thereto, except that a Participant may at any time and from time to
time (i) change the Beneficiary designated therein, (ii) prospectively change
the investment selection applicable to his Deferral Account, and/or (iii) file a
deferred compensation agreement which supersedes a prior deferred compensation
agreement as to amounts deferred on or after the October 1st which coincides
with or next follows execution of the superseding agreement. In addition, a
Participant may at any time file a written notice with the Employer pursuant to
which the Participant ceases future accruals as soon as practicable after the
Employer receives such notice.
-8-
<PAGE>
ARTICLE VI. PLAN ADMINISTRATION
6.01 The Committee. In its sole and absolute discretion, which discretion
-------------
when exercised shall be final and binding on all parties affected thereby, the
Committee shall have the authority and the responsibility to control the
administration and operation of the Plan in accordance with its terms including,
without limiting the generality of the foregoing, the powers and duties: (i) to
interpret, apply, and administer the Plan, to decide all questions of
eligibility, participation, status, benefits, and rights of Participants and
Beneficiaries under the Plan; (ii) to establish and amend such rules and
procedures as it deems necessary or appropriate to the proper administration of
the Plan; (iii) to employ or retain such agents as it deems necessary or
advisable to assist in the administration of the Plan, and to delegate to the
extent permitted by applicable law such powers and duties as it deems necessary
or advisable, (iv) to prepare and file all statements, returns, and reports
required to be filed by the Plan with any agency of government; (v) to comply
with all requirements of applicable state and federal law including applicable
securities, labor, and tax law; and (vi) to perform all functions otherwise
assigned to it under the terms of the Plan.
6.02 Claims Procedure. Claims for Benefits under the Plan shall be filed
----------------
in writing with the Committee. Written notice of the Committee's disposition of
a claim generally shall be furnished to the claimant within 60 days after the
application therefor is filed. However, if special circumstances exist of which
the Committee notifies the claimant within such 60 day period, the Committee may
extend such period to the extent necessary, but in no event beyond 180 days
after the claim is filed. In the event the claim is denied, the reasons for the
denial shall be specifically set forth in writing, pertinent provisions of the
Plan shall be cited and, where appropriate, an explanation as to how the
claimant can perfect the claim will be provided. Any claimant who has been
denied a Benefit shall be entitled, upon request to the Committee, to appeal the
denial of his claim within 60 days following the Committee's determination
described in the preceding sentence. Upon such appeal, the claimant, or his
representative, shall be entitled to examine pertinent documents, submit issues
and comments in writing to the Committee, and meet with the Committee. The
Committee shall review its decision and issue a final decision to the claimant
in writing, generally within 60 days following such appeal. However, if special
circumstances exist of which the Committee notifies the claimant within such 60
day period, the Committee may extend such period to the extent necessary, but in
no event beyond 120 days following such appeal.
ARTICLE VII. AMENDMENT AND TERMINATION
The Employer, acting by its Board, reserves the right at any time to
terminate or amend the Plan in any manner and for any reason; provided, that no
amendment or termination shall, without the consent of the Participant or, if
applicable, the Beneficiary, either (i) adversely affect such Participant's or
Beneficiary's rights with respect to Benefits accrued as of the date of such
amendment or termination, or (ii) suspend or terminate the Plan during a Plan
Year without providing for both advance written notice to Participants and the
payment of Benefits for the portion of the Plan Year during which the Plan was
in effect.
-9-
<PAGE>
ARTICLE VIII. GENERAL PROVISIONS
8.01 Prohibition Against Alienation. Benefits payable to a Participant or
------------------------------
Beneficiary under the terms of this Plan shall not be subject in any manner to
alienation, anticipation, sale, transfer, assignment, pledge, hypothecation,
attachment, receivership, or encumbrance of any kind, nor shall it pass to any
trustee in bankruptcy or be reached or applied by any legal process for the
payment of any obligations of the Participant or Beneficiary, except at such
times and in such manner as provided in this Plan.
8.02 No Enlargement of Employment Rights. Nothing contained in this Plan
-----------------------------------
shall give or be construed as giving any Employee or Director the right to be
retained in the service of any Employer, or shall interfere with the right of
any Employer to discharge or otherwise terminate any Employee's or Director's
service at any time.
8.03 Gender. Whenever any masculine terminology is used in this Plan, it
------
shall be taken to include the feminine, unless the context otherwise indicates.
8.04 Applicable Law. This Plan shall be construed and regulated, and its
--------------
validity and effect and the rights hereunder of all parties interested shall at
all times be determined, in accordance with the laws of the State of Colorado,
except to the extent such state law is preempted by federal law.
8.05 Titles and Headings. The titles and headings included herein are
-------------------
included for convenience only and shall not be construed as in any way affecting
or modifying the text of this Plan, which text shall control.
8.06 Withholding. The Committee and each Employer reserve the right to
-----------
withhold from payments of Bonuses and other Incentive Awards such amounts of
income, payroll, and other taxes as it deems advisable or required, and if the
amount of such cash payment is not sufficient, the Committee or any Employer may
require that the Participant or Beneficiary pay the amount required to be
withheld as a condition of delivering Bonuses or other Incentive Awards.
8.07 Stockholder Approval. The effectiveness of this Plan shall be
--------------------
contingent on its approval by the favorable vote of the holders of the Common
Stock, only to the extent required under federal or state law or the Adoption
Agreement. Any Incentive Awards made prior to the receipt of such approval
shall be contingent thereon. Section 4.01 and Article V of the Plan shall be
effective whether or not the Plan receives stockholder approval.
-10-
<PAGE>
Exhibit "A"
ROCKY FORD FEDERAL SAVINGS & LOAN ASSOCIATION
INCENTIVE COMPENSATION PLAN
-------------------------------
Deferred Compensation Agreement
-------------------------------
AGREEMENT, made this ____ day of ________, 199_, by and between
_______________ (the "Participant"), and Rocky Ford Federal Savings & Loan
Association (the "Employer").
WHEREAS, Rocky Ford Federal Savings & Loan Association has established the
Rocky Ford Federal Savings & Loan Association Incentive Compensation Plan (the
"Plan"), and the Participant is eligible to make a deferred compensation
election pursuant to Article V of said Plan;
NOW THEREFORE, it is mutually agreed as follows:
1. The Participant, by the execution hereof, agrees to participate in the
Plan upon the terms and conditions set forth therein, and, in accordance
therewith, makes the following elections:
a. The Participant hereby elects to defer ______ percent (____%) of the
fees/salary and _____ percent (____%) of bonus compensation otherwise earned
from the date of this Agreement forward.
b. Until distributed to the Participant, the amounts deferred pursuant
hereto shall appreciate or depreciate for each Plan Year as though they were
invested as follows:
___% in a fund having the highest interest rate which the Employer pays
on certificates of deposit having a term of one year.
___% in a fund invested in common stock of Rocky Ford Financial, Inc.
c. The amounts deferred and any related accumulated income on such
deferrals shall be distributed, in cash, beginning on the first day of the month
following the Participant's _____ termination of service with the Employer,/*/
______ attainment of age ______, OR ______ the later to occur of these events.
d. The Participant hereby elects to have the amount deferred
hereunder and any earnings attributable thereto be distributed as follows: _____
one lump sum, OR _____ substantially equal annual (____ monthly) payments over a
period of ______ years.
- --------------------
/*/ The Participant shall be treated as having terminated service upon ending
all duties and positions with the Employer (including those of an honorary
director).
<PAGE>
Rocky Ford federal Savings & Loan Association
Deferred Compensation Election
Page 2 of 2
2. The Participant hereby designates _______________________ to be his or
her beneficiary and to receive the balance of any unpaid deferred compensation
and related earnings.
3. With respect to amounts deferred while this Agreement is in effect,
the elections made hereunder shall be irrevocable, except that a Participant may
at any time and from time to time prospectively change (i) the investment
election made in paragraph 1.b. hereof, and (ii) the beneficiary designation
made in paragraph 2 hereof. A Participant may at any time file a new agreement
that supersedes this Agreement with respect to amounts earned from the date of
the superseding agreement forward.
4. The Employer agrees to make payment of the amount due the Participant
in accordance with the terms of the Plan and the elections made by the
Participant herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
PARTICIPANT
-------------------------
Participant
EMPLOYER
ROCKY FORD FEDERAL SAVINGS & LOAN
ASSOCIATION
By
-----------------------------------
Its
--------------------------------
A-2
<PAGE>
Exhibit 23.1
[GRIMSLEY, WHITE & COMPANY LETTERHEAD]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
As the independent certified public accountant of Rocky Ford Federal Savings and
Loan Association, we hereby consent to the use of our report and to all
references to our Firm included in or made part of this Conversion Application.
January 24, 1997
/s/ Grimsley, White & Company
Grimsley, White & Company
<PAGE>
[FERGUSON & CO., LLP LETTERHEAD]
January 27, 1997
Board of Directors
Rocky Ford Federal Savings and Loan Association
of Colorado
801 Swink Avenue
Rocky Ford, Colorado 81067
Directors:
We hereby consent to the use of our firm's name in the Form AC Application
for Conversion of Rocky Ford Federal Savings and Loan Association of Colorado,
Rocky Ford, Colorado, and any amendments thereto, in the Form SB-2 Registration
Statement of Rocky Ford Financial, Inc., and any amendments thereto, and in the
Application H-(e)1-S for Rocky Ford Financial, Inc. We also hereby consent to
the inclusion of, summary of, and references to our Appraisal Report and our
opinion concerning subscription rights in such filings including the Prospectus
of Rocky Ford Financial, Inc.
Sincerely,
/s/ Robin L. Fussell
Robin L. Fussell
Principal
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 0
<INT-BEARING-DEPOSITS> 3,897
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 585
<INVESTMENTS-CARRYING> 3,117
<INVESTMENTS-MARKET> 3,149
<LOANS> 12,287
<ALLOWANCE> 60
<TOTAL-ASSETS> 20,388
<DEPOSITS> 17,145
<SHORT-TERM> 0
<LIABILITIES-OTHER> 465
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 2,778
<TOTAL-LIABILITIES-AND-EQUITY> 20,388
<INTEREST-LOAN> 1,030
<INTEREST-INVEST> 495
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 1,525
<INTEREST-DEPOSIT> 820
<INTEREST-EXPENSE> 820
<INTEREST-INCOME-NET> 705
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 539
<INCOME-PRETAX> 187
<INCOME-PRE-EXTRAORDINARY> 187
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 60
<CHARGE-OFFS> 0
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 60
<ALLOWANCE-DOMESTIC> 60
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
801 Swink Avenue
Rocky Ford, Colorado 81067-0032
(719) 254-7642
NOTICE OF SPECIAL MEETING OF MEMBERS
Notice is hereby given that a Special Meeting of Members (the "Special
Meeting") of Rocky Ford Federal Savings and Loan Association (the "Association")
will be held at the Association's office located at 801 Swink Avenue, Rocky
Ford, Colorado, on ____________, 1997 at __:__ .m. Business to be taken up at
the Special Meeting shall be:
(1) To consider and vote upon the adoption of a Plan of Conversion
providing for the conversion of the Association from a federally
chartered mutual savings and loan association to a federally chartered
stock savings and loan association (the "Converted Association") as a
wholly owned subsidiary of Rocky Ford Financial, Inc., a newly
organized Delaware corporation formed by the Association for the
purpose of becoming the holding company for the Association, and the
related transactions provided for in such plan, including the adoption
of an amended Federal Stock Charter and Bylaws for the Converted
Association pursuant to the laws of the United States and the Rules
and Regulations administered by the Office of Thrift Supervision.
(2) To consider and vote upon any other matters that may lawfully come
before the Special Meeting.
Note: As of the date of mailing of this Notice of Special Meeting of
Members, the Board of Directors is not aware of any other matters that
may come before the Special Meeting.
The members entitled to vote at the Special Meeting shall be those members
of the Association at the close of business on ___________, 1997, who continue
as members until the Special Meeting and, should the Special Meeting be, from
time to time, adjourned to a later time, until the final adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Keith E. Waggoner
Secretary
, 1997
- -----------
Rocky Ford, Colorado
---------------------
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THIS PROXY MATERIAL
AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO
FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO
ASSURE THAT YOUR VOTES WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING
IN PERSON IF YOU ATTEND THE SPECIAL MEETING.
<PAGE>
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
801 Swink Avenue
Rocky Ford, Colorado 81067-0032
(719) 254-7642
PROXY STATEMENT
YOUR PROXY, IN THE FORM ENCLOSED, IS SOLICITED BY THE BOARD OF DIRECTORS OF
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION FOR USE AT A SPECIAL MEETING OF
ITS MEMBERS TO BE HELD ON ____________, 1997 AND ANY ADJOURNMENT OF THAT
MEETING, FOR THE PURPOSES SET FORTH IN THE FOREGOING NOTICE OF SPECIAL MEETING.
YOUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR THE PLAN OF CONVERSION.
PURPOSE OF MEETING -- SUMMARY
A Special Meeting of Members (the "Special Meeting") of Rocky Ford Federal
Savings and Loan Association (the "Association") will be held at the
Association's office located at 801 Swink Avenue, Rocky Ford, Colorado on
_________, ____________, 1997, at __:__ .m., local time, for the purpose of
considering and voting upon a Plan of Conversion (the "Plan"), which was
unanimously adopted by the Association's Board of Directors and which, if
approved by a majority of the total votes eligible to be cast by the members,
will permit the Association to convert from a federal mutual savings and loan
association to a federal stock savings and loan association (the "Converted
Association") as a wholly owned subsidiary of Rocky Ford Financial, Inc. (the
"Company"), a Delaware corporation formed by the Association for the purpose of
becoming the holding company for the Association. The conversion of the
Association to the Converted Association, the acquisition of control of the
Converted Association by the Company and the issuance and sale of the Company's
common stock, par value $.01 per share (the "Common Stock") are collectively
referred to herein as the "Conversion." The Conversion is contingent upon the
members' approval of the Plan at the Special Meeting or any adjournment thereof.
The Plan provides in part that after receiving final authorization from the
Office of Thrift Supervision ("OTS"), the Company will offer for sale shares of
its Common Stock through the issuance of nontransferable subscription rights,
first to depositors as of December 31, 1995, with $50.00 or more on deposit in
the Association on that date ("Eligible Account Holders"), second to the
Company's Employee Stock Ownership Plan (the "ESOP") (a tax-qualified employee
stock benefit plan of the Company, as defined in the Plan), third to depositors
with $50.00 or more on deposit in the Association on March 31, 1997, the last
day of the calendar quarter preceding approval of the Plan by the OTS
("Supplemental Eligible Account Holders"), and fourth to other members entitled
to vote at the Special Meeting ("Other Members") (the "Subscription Offering").
Subscription rights received in any of the foregoing categories will be
subordinated to the subscription rights of those in a prior category, with the
exception that any shares of Common Stock sold in excess of the high end of the
estimated value range as established in an independent appraisal, as discussed
below, may be first sold to the ESOP. The Company may offer any shares
remaining after the Subscription Offering to certain members of the general
public in a community offering (the "Community Offering"). In the Community
Offering, preference will be given to natural persons and trusts of natural
persons who are permanent residents of Otero County, Colorado (the "Local
Community"). Any shares of Common Stock not purchased in the Subscription and
Community Offerings may be sold as part of a community offering on a best
efforts basis by a selling group of selected broker-dealers to be managed by
Trident Securities, Inc. (the "Syndicated Community Offering"). The aggregate
price of the Common Stock to be issued by the Company under the Plan is
currently estimated to be between $2,720,000 and $3,680,000, subject to
adjustment, as determined by an independent appraisal of the Association's
estimated pro forma market value as converted and as a wholly owned subsidiary
of the Company. See "The Conversion -- Stock Pricing and Number of Shares to be
Issued" in the accompanying Prospectus.
<PAGE>
Adoption of the proposed Charter and Bylaws of the Converted Association is
an integral part of the Plan. Copies of the Plan and the proposed Charter and
Bylaws for the Converted Association are attached to this Proxy Statement as
exhibits. These documents provide, among other things, for the termination of
voting rights of members and creation of their rights to receive any surplus
remaining in the event of liquidation of the Association. These rights, except
for the rights of Eligible Account Holders and Supplemental Eligible Account
Holders in the liquidation account established for their benefit upon completion
of the Conversion, will vest exclusively in the Company as the sole holder of
the Converted Association's outstanding capital stock. For further information,
see "The Conversion -- Effect of Conversion to Stock Form on Depositors and
Borrowers of the Association" in the accompanying Prospectus.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE ASSOCIATION UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" APPROVAL OF THE PLAN OF CONVERSION. VOTING IN FAVOR OF THE PLAN OF
CONVERSION WILL NOT OBLIGATE ANY PERSON TO PURCHASE STOCK.
---
The Conversion will be accomplished through adoption of a new Charter and
Bylaws to authorize the issuance of capital stock by the Association to the
Company. Under the Plan, up to 368,000 shares of the Common Stock, subject to
adjustment, are being offered for sale by the Company. Upon completion of the
Conversion, the Converted Association will issue all of its newly issued shares
of capital stock (100,000 shares) to the Company in exchange for at least 50% of
the net proceeds of the Conversion. None of the Association's assets will be
distributed in order to effect the Conversion other than to pay expenses
incident thereto.
The net proceeds from the sale of Common Stock in the Conversion will
substantially increase the Association's capital, which will increase the amount
of funds available for lending and investment, and support current operations
and the continued growth of the Association's business. The holding company
structure will provide greater flexibility than the Association alone would have
for diversification of business activities and geographic operations.
Management believes that this increased capital and operating flexibility will
enable the Association to compete more effectively with other savings
institutions and other types of financial service organizations. Management
also believes that the Conversion will enhance the future access of the Company
and the Converted Association to the capital markets.
ROCKY FORD FINANCIAL, INC.
Rocky Ford Financial, Inc. was incorporated under the laws of the State of
Delaware in January 1997 at the direction of the Board of Directors of the
Association for the purpose of serving as a savings and loan holding company of
the Converted Association upon the acquisition of all of the capital stock
issued by the Converted Association in the Conversion. The Company has received
approval from the OTS to acquire control of the Converted Association, subject
to satisfaction of certain conditions. Prior to the Conversion, the Company has
not engaged and will not engage in any material operations. Upon consummation
of the Conversion, the Company will have no significant assets other than the
outstanding capital stock of the Converted Association, up to 50% of the net
proceeds of the Conversion (after deducting amounts infused into the Converted
Association and used to fund the ESOP) and a note receivable from the ESOP.
Upon consummation of the Conversion, the Company's principal business will be
overseeing the business of the Association and investing the portion of the net
Conversion proceeds retained by it, and the Company will register with the OTS
as a savings and loan holding company.
As a holding company, the Company will have greater flexibility than the
Association to diversify its business activities through existing or newly
formed subsidiaries or through acquisition or merger with other financial
institutions, although the Company currently does not have any plans,
agreements, arrangements or understandings with respect to any such acquisitions
or mergers. After the Conversion, the Company will be classified as a unitary
savings and loan holding company and will be subject to regulation by the OTS.
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The Company's executive offices are located at 801 Swink Avenue, Rocky
Ford, Colorado 81067-0032, and its main telephone number is (719) 254-7642.
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
The Association is a federal mutual savings and loan association operating
through a single office located in Rocky Ford, Colorado and serving Otero
County, Colorado. The Association was chartered as a federal mutual savings and
loan association and received federal insurance of its deposit accounts in 1934,
under its current name of Rocky Ford Federal Savings and Loan Association. At
September 30, 1996, the Association had total assets of $20.4 million, total
deposits of $17.1 million and equity of $2.8 million.
The principal business of the Association consists of attracting deposits
from the general public and investing these deposits in loans secured by first
mortgages on one- to four-family ("single-family") residences in the
Association's market area. The Association derives its income principally from
interest earned on loans and, to a lesser extent, interest earned on mortgage-
backed securities and investment securities and noninterest income. Funds for
these activities are provided principally by operating revenues, deposits and
repayments of outstanding loans and investment securities and mortgage-backed
securities.
The Association's executive offices are located at 801 Swink Avenue, Rocky
Ford, Colorado 81067-0032, and its main telephone number is (719) 254-7642.
INFORMATION RELATING TO VOTING AT THE SPECIAL MEETING
The Board of Directors of the Association has fixed the close of business
on ___________, 1997 as the record date (the "Voting Record Date") for the
determination of members entitled to notice of and to vote at the Special
Meeting. All holders of the Association's deposits or other authorized accounts
are members of the Association under its current mutual charter. Borrowers as
of _____________, 1997, the date of the Association's adoption of its present
federal mutual charter, are members of the Association for as long as such
borrowings are in existence. However, persons who had borrowings at such date
but who no longer had such borrowings on the Voting Record Date, as well as
persons who became borrowers after such date, are not members of the
Association. All members of record as of the close of business on the Voting
Record Date who continue as such until the date of the Special Meeting will be
entitled to vote at the Special Meeting or any adjournment thereof.
Each depositor member will be entitled at the Special Meeting to cast one
vote for each $100, or fraction thereof, of the aggregate withdrawal value of
all of his savings accounts in the Association as of the Voting Record Date.
Borrower members will be entitled to one vote at the Special Meeting in addition
to any votes such borrower member may have as a result of being a depositor in
the Association. No member may cast more than 1,000 votes.
Approval of the Plan to be presented at the Special Meeting will require
the affirmative vote of at least a majority of the total outstanding votes of
the Association's members eligible to be cast at the Special Meeting. As of the
Voting Record Date for the Special Meeting, there were approximately _____ votes
eligible to be cast, of which _____ votes constitute a majority.
Members may vote at the Special Meeting or any adjournment thereof in
person or by proxy. All properly executed proxies received by the Association
will be voted in accordance with the instructions indicated thereon by the
members giving such proxies. If no contrary instructions are given, such
proxies will be voted in favor of the Plan. If any other matters are properly
presented before the Special Meeting and may properly be voted upon, the proxies
solicited hereby will be voted on such matters by the proxy holders named
therein as directed by the Board of Directors of the Association. Valid,
previously executed general proxies, which typically are obtained from members
when they open their accounts at the Association, will not be used to vote for
approval of the Plan of Conversion, even if the respective members do not
execute another proxy or attend the Special Meeting and vote
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in person. Any member giving a proxy will have the right to revoke his proxy at
any time before it is voted by delivering written notice or a duly executed
proxy bearing a later date to the Secretary of the Association, provided that
such written notice is received by the Secretary prior to the Special Meeting or
any adjournment thereof, or by attending the Special Meeting and voting in
person. Attendance at the Special Meeting, by itself, will not be sufficient to
revoke a proxy.
FAILURE TO RETURN AN EXECUTED PROXY FOR THE SPECIAL MEETING OR TO ATTEND
THE SPECIAL MEETING AND VOTE IN PERSON WOULD HAVE THE SAME EFFECT AS VOTING
AGAINST THE CONVERSION.
Proxies may be solicited by officers, directors or other employees of the
Association, in person, by telephone or through other forms of communication.
Such persons will be reimbursed by the Association only for their expenses
incurred in connection with such solicitation.
The proxies solicited hereby will be used only at the Special Meeting and
at any adjournment thereof; they will not be used at any other meeting.
DESCRIPTION OF PLAN OF CONVERSION
THE OTS HAS APPROVED THE PLAN, SUBJECT TO THE PLAN'S APPROVAL BY THE
MEMBERS OF THE ASSOCIATION ENTITLED TO VOTE ON THE MATTER AND SUBJECT TO THE
SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL.
APPROVAL BY THE OTS, HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN.
Effect of Conversion to Stock Form on Depositors and Borrowers of the
Association
General. Each depositor in a mutual savings institution such as the
Association has both a deposit account and a pro rata ownership interest in the
retained earnings of that institution based upon the balance in his or her
deposit account. However, this ownership interest is tied to the depositor's
account and has no tangible market value separate from such deposit account.
Any other depositor who opens a deposit account obtains a pro rata interest in
the retained earnings of the institution without any additional payment beyond
the amount of the deposit. A depositor who reduces or closes his or her account
receives a portion or all of the balance in the account but nothing for his or
her ownership interest, which is lost to the extent that the balance in the
account is reduced.
Consequently, depositors normally do not have a way to realize the value of
their ownership, which has realizable value only in the unlikely event that the
mutual institution is liquidated. In such event, the depositors of record at
that time, as owners, would share pro rata in any residual retained earnings
after other claims are paid.
Upon consummation of the Conversion, permanent nonwithdrawable capital
stock will be created to represent the ownership of the institution. The stock
is separate and apart from deposit accounts and is not and cannot be insured by
the FDIC. Transferable certificates will be issued to evidence ownership of the
stock, which will enable the stock to be sold or traded, if a purchaser is
available, with no effect on any account held in the Association. Under the
Plan, all of the capital stock of the Converted Association will be acquired by
the Company in exchange for a portion of the net proceeds from the sale of the
Common Stock in the Conversion. The Common Stock will represent an ownership
interest in the Company and will be issued upon consummation of the Conversion
to persons who elect to participate in the Conversion by purchasing the shares
of Common Stock being offered by the Company.
Continuity. During the Conversion process, the normal business of the
Association of accepting deposits and making loans will continue without
interruption. The Converted Association will continue to be subject to
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regulation by the OTS and the FDIC, and FDIC insurance of accounts will continue
without interruption. After the Conversion, the Converted Association will
continue to provide services for depositors and borrowers under current policies
and by its present management and staff.
The Board of Directors serving the Association at the time of the
Conversion will serve as the Board of Directors of the Converted Association
after the Conversion. The Board of Directors of the Company will consist of the
individuals currently serving on the Board of Directors of the Association. All
officers of the Association at the time of the Conversion will retain their
positions with the Converted Association after the Conversion.
Voting Rights. Upon the completion of the Conversion, depositor and
borrower members as such will have no voting rights in the Converted Association
or the Company and, therefore, will not be able to elect directors of the
Converted Association or the Company or to control their affairs. Currently
these rights are accorded to depositors of the Association. Subsequent to the
Conversion, exclusive voting rights with respect to the Company shall be vested
in the holders of the Common Stock. Holders of savings accounts in and obligors
on loans of the Converted Association will not have any voting rights in the
Company except and to the extent that such persons become stockholders of the
Company, and the Company will have exclusive voting rights with respect to the
Converted Association's capital stock. Each holder of Common Stock shall be
entitled to vote on any matter to be considered by the stockholders of the
Company, subject to the provisions of the Company's Certificate of
Incorporation.
Deposit Accounts and Loans. THE ASSOCIATION'S DEPOSIT ACCOUNTS, THE
BALANCES OF INDIVIDUAL ACCOUNTS AND EXISTING FEDERAL DEPOSIT INSURANCE COVERAGE
WILL NOT BE AFFECTED BY THE CONVERSION. Furthermore, the Conversion will not
affect the loan accounts, the balances of these accounts and the obligations of
the borrowers under their individual contractual arrangements with the
Association.
Tax Effects. The Association has received an opinion from its special
counsel, Housley Kantarian & Bronstein, P.C., Washington, D.C., as to the
material federal income tax consequences of the Conversion to the Association,
and as to the generally applicable material federal income tax consequences of
the Conversion to the Association's account holders and to persons who purchase
Common Stock in the Conversion. The opinion provides that the Conversion will
constitute a reorganization for federal income tax purposes under Section
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the "Code").
Among other things, the opinion also provides that: (i) no gain or loss will be
recognized by the Association in its mutual or stock form by reason of the
Conversion; (ii) no gain or loss will be recognized by its account holders upon
the issuance to them of accounts in the Converted Association in stock form
immediately after the Conversion, in the same dollar amounts and on the same
terms and conditions as their accounts at the Association immediately prior to
the Conversion; (iii) the tax basis of each account holder's interest in the
liquidation account will be equal to the value, if any, of that interest; (iv)
the tax basis of the Common Stock purchased in the Conversion will be equal to
the amount paid therefor increased, in the case of Common Stock acquired
pursuant to the exercise of Subscription Rights, by the fair market value, if
any, of the Subscription Rights exercised; (v) the holding period for the Common
Stock purchased in the Conversion will commence upon the exercise of such
holder's Subscription Rights and otherwise on the day following the date of such
purchase; and (vi) gain or loss will be recognized to account holders upon the
receipt of liquidation rights or the receipt or exercise of Subscription Rights
in the Conversion, to the extent such liquidation rights and Subscription Rights
are deemed to have value, as discussed below.
The opinion of Housley Kantarian & Bronstein, P.C., is based in part upon,
and subject to the continuing validity in all material respects through the date
of the Conversion of, various representations of the Association and upon
certain assumptions and qualifications, including that the Conversion is
consummated in the manner and according to the terms provided in the Plan. Such
opinion is also based upon the Code, regulations now in effect or proposed
thereunder, current administrative rulings and practice and judicial authority,
all of which are subject to change and such change may be made with retroactive
effect. Unlike private letter rulings received from the Internal Revenue
Service ("IRS"), an opinion is not binding upon the IRS and there can be no
assurance that the IRS
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will not take a position contrary to the positions reflected in such opinion, or
that such opinion will be upheld by the courts if challenged by the IRS.
Housley Kantarian & Bronstein, P.C. has advised the Association that an
interest in a liquidation account has been treated by the IRS, in a series of
private letter rulings which do not constitute formal precedent, as having
nominal, if any, fair market value and therefore it is likely that the interests
in the liquidation account established by the Association as part of the
Conversion will similarly be treated as having nominal, if any, fair market
value. Accordingly, it is likely that such depositors of the Association who
receive an interest in such liquidation account established by the Association
pursuant to the Conversion will not recognize any gain or loss upon such
receipt.
Housley Kantarian & Bronstein, P.C. has further advised the Association
that the federal income tax treatment of the receipt of Subscription Rights
pursuant to the Conversion is uncertain, and recent private letter rulings
issued by the IRS have been in conflict. For instance, the IRS adopted the
position in one private ruling that Subscription Rights will be deemed to have
been received to the extent of the minimum pro rata distribution of such rights,
together with the rights actually exercised in excess of such pro rata
distribution, and with gain recognized to the extent of the combined fair market
value of the pro rata distribution of Subscription Rights plus the Subscription
Rights actually exercised. Persons who do not exercise their Subscription
Rights under this analysis would recognize gain upon receipt of rights equal to
the fair market value of such rights, regardless of exercise, and would
recognize a corresponding loss upon the expiration of unexercised rights that
may be available to offset the previously recognized gain. Under another IRS
private ruling, Subscription Rights were deemed to have been received only to
the extent actually exercised. This private ruling required that gain be
recognized only if the holder of such rights exercised such rights, and that no
loss be recognized if such rights were allowed to expire unexercised. There is
no authority that clearly resolves this conflict among these private rulings,
which may not be relied upon for precedential effect. However, based upon
express provisions of the Code and in the absence of contrary authoritative
guidance, Housley Kantarian & Bronstein, P.C. has provided in its opinion that
gain will be recognized upon the receipt rather than the exercise of
Subscription Rights. Further, also based upon a published IRS ruling and
consistent with recognition of gain upon receipt rather than exercise of the
Subscription Rights, Housley Kantarian & Bronstein, P.C. has provided in its
opinion that the subsequent exercise of the Subscription Rights will not give
rise to gain or loss. Regardless of the position eventually adopted by the IRS,
the tax consequences of the receipt of the Subscription Rights will depend, in
part, upon their valuation for federal income tax purposes.
If the Subscription Rights are deemed to have a fair market value, the
receipt of such rights will be taxable to Eligible Account Holders, Supplemental
Eligible Account Holders and other eligible members who exercise their
Subscription Rights, even though such persons would not have received any cash
from which to pay taxes on such taxable income. The Association could also
recognize a gain on the distribution of such Subscription Rights in an amount
equal to their aggregate value. In the opinion of Ferguson & Co., LLP., whose
opinion is not binding upon the IRS, the Subscription Rights do not have any
value, based on the fact that such rights are acquired by the recipients without
cost, are non-transferable and of short duration and afford the recipients the
right only to purchase shares of the Common Stock at a price equal to its
estimated fair market value, which will be the same price as the price paid by
purchasers in the Community Offering for unsubscribed shares of Common Stock.
Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members are encouraged to consult with their own tax advisors as to the tax
consequences in the event that the Subscription Rights are deemed to have a fair
market value. Because the fair market value, if any, of the Subscription Rights
issued in the Conversion depends primarily upon the existence of certain facts
rather than the resolution of legal issues, Housley Kantarian & Bronstein, P.C.,
has neither adopted the opinion of Ferguson & Co., LLP., as its own nor
incorporated such opinion of Ferguson & Co., LLP., in its opinion issued in
connection with Conversion.
The Association has also received the opinion of Grimsley, White & Company
that no gain or loss will be recognized as a result of the Conversion for
purposes of Colorado income tax laws.
THE FEDERAL AND STATE INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT
PURPORT TO CONSIDER ALL ASPECTS OF FEDERAL AND STATE INCOME TAXATION WHICH
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MAY BE RELEVANT TO EACH ELIGIBLE ACCOUNT HOLDER, SUPPLEMENTAL ACCOUNT HOLDER AND
OTHER MEMBER ENTITLED TO SPECIAL TREATMENT UNDER THE INTERNAL REVENUE CODE, SUCH
AS TRUSTS, INDIVIDUAL RETIREMENT ACCOUNTS, OTHER EMPLOYEE BENEFIT PLANS,
INSURANCE COMPANIES AND ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL ELIGIBLE ACCOUNT
HOLDERS AND OTHER MEMBERS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH ELIGIBLE ACCOUNT
HOLDER, SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER AND OTHER MEMBER IS URGED TO
CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISOR AS TO THE EFFECT OF SUCH
FEDERAL AND STATE INCOME TAX CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS AND
CIRCUMSTANCES, INCLUDING THE RECEIPT AND EXERCISE OF SUBSCRIPTION RIGHTS, AND
ALSO AS TO ANY OTHER TAX CONSEQUENCES ARISING OUT OF THE CONVERSION.
Liquidation Account. In the unlikely event of a complete liquidation of
the Association in its present mutual form, each holder of a deposit account in
the Association would receive his pro rata share of any assets of the
Association remaining after payment of claims of all creditors (including the
claims of all depositors to the withdrawal value of their accounts). His pro
rata share of such remaining assets would be the same proportion of such assets
as the value of his deposit account was to the total of the value of all deposit
accounts in the Association at the time of liquidation.
After the Conversion, each deposit account holder on a complete liquidation
would have a claim of the same general priority as the claims of all other
general creditors of the Association. Therefore, except as described below, a
claim of such an account holder would be solely in the amount of the balance in
the related deposit account plus accrued interest, and the account holder would
not have any interest in the value of the Association above that amount.
The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
the net worth of the Association as of the date of its latest statement of
financial condition contained in the final Prospectus. Each Eligible Account
Holder (a person with a deposit account in the Association on December 31, 1995)
and each Supplemental Eligible Account Holder (a person with a qualifying
deposit in the Association on March 31, 1997) would be entitled, on a complete
liquidation of the Converted Association after completion of the Conversion, to
an interest in the liquidation account. Each Eligible Account Holder would have
an initial interest in such liquidation account for each deposit account held in
the Association on December 31, 1995 and each Supplemental Eligible Account
Holder would have an initial interest in such liquidation account for each
qualifying deposit held in the Association on March 31, 1997. The interest as
to each qualifying deposit account would be in the same proportion of the total
liquidation account as the balance of such qualifying deposit account was to the
balance in all deposit accounts of Eligible Account Holders and Supplemental
Eligible Account Holders on such respective date. However, if the amount in the
qualifying deposit account on any annual closing date (September 30) of the
Association subsequent to the relevant eligibility date is less than the amount
in such account on the relevant eligibility date, or any subsequent closing
date, then the Eligible Account Holder's or Supplemental Eligible Account
Holder's interest in the liquidation account would be reduced from time to time
by an amount proportionate to any such reductions, and such interest would cease
to exist if he or she ceases to maintain an account at the Converted Association
that has the same Social Security number as appeared on his or her account(s) at
the relevant eligibility date. The interest in the liquidation account would
never be increased, notwithstanding any increase in the related deposit account
after the Conversion.
Any assets remaining after the above liquidation rights of Eligible Account
Holders and Supplemental Eligible Account Holders were satisfied would be
distributed to the entity or persons holding the Converted Association's capital
stock at that time.
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A merger, consolidation, sale of bulk assets or similar combination or
transaction with an FDIC-insured institution in which the Converted Association
is not the surviving insured institution would not be considered to be a
"liquidation" under which distribution of the liquidation account could be made.
In such a transaction, the liquidation account would be assumed by the surviving
institution.
The creation and maintenance of the liquidation account will not restrict
the use or application of any of the capital accounts of the Converted
Association, except that the Converted Association may not declare or pay a cash
dividend on, or repurchase any of, its capital stock if the effect of such
dividend or repurchase would be to cause its retained earnings to be reduced
below the aggregate amount then required for the liquidation account.
Interpretation and Amendment of the Plan
To the extent permitted by law, all interpretations of the Plan by the
Association will be final. The Plan provides that the Association's Board of
Directors shall have the sole discretion to interpret and apply the provisions
of the Plan to particular facts and circumstances and to make all determinations
necessary or desirable to implement such provisions, including but not limited
to matters with respect to giving preference in the Community Offering to
natural persons and trusts of natural persons who are permanent residents of the
Local Community, and any and all interpretations, applications and
determinations made by the Board of Directors in good faith and on the basis of
such information and assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the Association and its members and
subscribers in the Subscription and Community Offerings, subject to the
authority of the OTS.
The Plan provides that, if deemed necessary or desirable by the Board of
Directors, the Plan may be substantively amended by a two-thirds vote of the
Board of Directors at any time prior to submission of the Plan and proxy
materials to the Association's members. After submission of the Plan and proxy
materials to the members, the Plan may be amended by a two-thirds vote of the
Board of Directors at any time prior to the Special Meeting and at any time
following the Special Meeting with the concurrence of the OTS. In its
discretion, the Board of Directors may generally modify or terminate the Plan
upon the order of the regulatory authorities without resoliciting proxies or
obtaining approval of the amended Plan by members at another Special Meeting.
However, any modification of the Plan that results in a material change in the
terms of the Conversion would require such a resolicitation of proxies and
another meeting of members.
The Plan further provides that in the event that any mandatory new
regulations pertaining to conversions are adopted by the OTS or any successor
agency prior to completion of the Conversion, the Plan will be amended to
conform to such regulations without a resolicitation of proxies or another
Special Meeting. In the event that such new conversion regulations contain
optional provisions, the Plan may be amended to utilize such optional provisions
at the discretion of the Board of Directors without a resolicitation of proxies
or another Special Meeting. By adoption of the Plan, the Association's members
will be deemed to have authorized amendment of the Plan under the circumstances
described above.
Conditions and Termination
Completion of the Conversion requires the approval of the Plan by the
affirmative vote of not less than a majority of the total outstanding votes of
the members of the Association and the sale of all shares of the Common Stock
within 24 months following approval of the Plan by the members. If these
conditions are not satisfied, the Plan will be terminated, and the Association
will continue its business in the mutual form of organization. The Plan may be
terminated by the Board of Directors at any time prior to the Special Meeting
and, with the approval of the OTS, by the Board of Directors at any time
thereafter.
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Review By Administrative and Judicial Authorities
Federal law provides (i) that persons aggrieved by a final action of the
OTS which approves, with or without conditions, a plan of conversion may obtain
review of such final action only by filing a written petition in the United
States Court of Appeals for the circuit in which the principal office or
residence of such person is located, or in the United States Court of Appeals,
for the District of Columbia Circuit, requesting that the final action of the
OTS be modified, terminated or set aside, and (ii) that such petition must be
filed within 30 days after publication of notice of such final action in the
Federal Register, or 30 days after the date of mailing of the notice and proxy
statement for the meeting of the converting institution's members at which the
conversion is to be voted on, whichever is later.
Other
All statements made in this Proxy Statement are hereby qualified by the
contents of the Plan which is attached hereto as Exhibit A and should be
consulted for further information. In addition, attention is directed to the
section entitled "The Conversion" in the accompanying Prospectus for a more
detailed discussion of various aspects of the Plan. Adoption of the Plan by the
Association's members shall be deemed approval of the authority of the Board of
Directors to amend or terminate the Plan in accordance with its terms.
CHARTER AND BYLAWS
The following is a summary of certain provisions of the Charter and Bylaws
which will become effective upon the conversion of the Association into a
federally chartered stock savings and loan association. Complete copies of the
Charter and Bylaws of the Converted Association are attached as Exhibits B and
C, respectively, to this Proxy Statement.
The Converted Association will be authorized to issue 3,000,000 shares of
common stock with a par value of $0.01 per share. The Converted Association's
common stock will not be insured by the FDIC. All of the Converted
---
Association's outstanding common stock will be owned by the Company.
Accordingly, exclusive voting rights with respect to the affairs of the
Converted Association after the Conversion will be vested in the Board of
Directors of the Company.
The Converted Association's Charter will provide that the number of
Directors shall be not fewer than five nor more than 15, with the exact number
to be fixed in the Converted Association's Bylaws. The proposed Bylaws provide
that the number of the Converted Association's directors shall be eight.
(Current Chief Executive Officer Keith Waggoner will become the eighth
director). Directors generally will serve for terms of three years, and the
terms of Directors will be staggered so that approximately one-third of the
Board is elected each year.
In addition to the common stock, the Converted Association will be
authorized to issue 1,000,000 shares of serial preferred stock, par value $0.01
per share. The Board of Directors will be permitted, without further
stockholder approval, to authorize the issuance of preferred stock in series and
to fix the voting powers, designations, preferences and relative, participating,
optional, conversion and other special rights of the shares of each series of
the preferred stock and the qualifications, limitations and restrictions
thereof. Preferred stock may rank prior to common stock in dividend rights,
liquidation preferences, or both, and may have voting rights.
Neither the Charter nor the Bylaws of the Converted Association provide for
indemnification of officers and directors. However, the Converted Association
will be required by OTS regulations (as is currently required of the
Association) to indemnify its directors, officers and employees against legal
and other expenses incurred in defending lawsuits brought against them by
reasons of the performance of their official duties. Indemnification may be
made to any such person only if final judgment on the merits is in his or her
favor or, in case of (i) settlement, (ii) final judgment against him or her, or
(iii) final judgment in his or her favor, other than on the merits, if a
majority of the directors of the Converted Association determines that he or she
was acting in good faith within the scope of his or
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her employment or authority as he or she could reasonably have perceived it
under the circumstances and for a purpose he or she could have reasonably
believed under the circumstances was in the best interest of the Converted
Association or its stockholders. If a majority of the directors of the Converted
Association concludes that in connection with an action any person ultimately
may become entitled to indemnification, the directors may authorize payment of
reasonable costs and expenses arising from defense or settlement of such action.
HOW TO ORDER STOCK
The accompanying Prospectus contains information about the business and
financial condition of the Association and additional information about the
Conversion and the Subscription Offering and the Community Offering. Enclosed
is a Stock Order Form to be used to subscribe for stock. You are not obligated
to subscribe for stock, and voting to approve the Conversion will not obligate
you to subscribe for stock.
All Subscription Rights are nontransferable and will expire if not
exercised by returning the accompanying Stock Order Form with full payment (or
appropriate instructions authorizing withdrawal from a savings or certificate
account at the Association) for all shares for which subscription is made to the
Company by __:__ _.m., local time, on _____________, 1997, unless extended by
the Association. A postage-paid reply envelope is provided for this purpose.
Provided that not all of the shares are subscribed for in the Subscription
Offering by members of the Association, the remaining shares may be offered to
certain members of the general public in the Community Offering with preference
given to natural persons and trusts of natural persons who are permanent
residents of the Local Community. Any shares of Common Stock not purchased in
the Subscription and Community Offerings may be offered, at the discretion of
the Company, to certain members of the general public as part of a community
offering on a best efforts basis by a selling group of broker-dealers to be
managed by Trident Securities, Inc.
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS LIMITED IN ITS SCOPE
TO USE IN THE SOLICITATION OF PROXIES FOR THE SPECIAL MEETING TO VOTE ON THE
PLAN OF CONVERSION. IT IS NOT INTENDED FOR USE IN THE OFFERING OF THE COMMON
STOCK. SUCH OFFERING IS MADE ONLY BY THE PROSPECTUS.
ADDITIONAL INFORMATION
The information contained in the accompanying Prospectus, including a more
detailed description of the Plan, is intended to help you evaluate the
Conversion and is incorporated herein by reference.
All persons eligible to vote at the Special Meeting should review both this
Proxy Statement and the accompanying Prospectus.
YOUR BOARD OF DIRECTORS URGES YOU TO CONSIDER CAREFULLY THIS PROXY MATERIAL
AND, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE SPECIAL MEETING, TO
FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) AS SOON AS POSSIBLE TO
ASSURE THAT YOUR VOTES WILL BE COUNTED. THIS WILL NOT PREVENT YOU FROM VOTING
IN PERSON IF YOU ATTEND THE SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY BY
WRITTEN INSTRUMENT DELIVERED TO THE SECRETARY OF THE ASSOCIATION AT ANY TIME
PRIOR TO OR AT THE SPECIAL MEETING OR BY ATTENDING THE SPECIAL MEETING AND
VOTING IN PERSON.
10
<PAGE>
THIS PROXY STATEMENT IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY THE COMMON STOCK. THE OFFER IS MADE ONLY BY THE PROSPECTUS.
BY ORDER OF THE BOARD OF DIRECTORS
Keith E. Waggoner
Secretary
, 1997
- -----------
Rocky Ford, Colorado
11
<PAGE>
EXHIBIT A
Rocky Ford Federal Savings and Loan Association
Rocky Ford, Colorado
Plan of Conversion
From Mutual to Stock Organization
I. General.
On January 14, 1997, the Board of Directors of Rocky Ford Federal Savings
and Loan Association, Rocky Ford, Colorado (the "Association"), after careful
study and consideration, adopted by unanimous vote this Plan of Conversion from
Mutual to Stock Organization (the "Plan"), whereby the Association will convert
from a federal mutual savings and loan association to a federal capital stock
savings and loan association (the "Converted Association") as a wholly owned
subsidiary of a Holding Company to be formed at the direction of the Association
(the "Conversion").
The Conversion is subject to regulations of the Office of Thrift
Supervision of the United States Department of the Treasury ("OTS") pursuant to
Section 5(i) of the Home Owners' Loan Act and Part 563b of the Rules and
Regulations Applicable to All Savings Associations.
The Plan is subject to the prior written approval of the OTS and must be
adopted by the affirmative vote of at least a majority of the total outstanding
votes of the Members of the Association. Pursuant to the Plan, shares of
Conversion Stock in the Holding Company will be offered in a Subscription
Offering pursuant to non-transferable Subscription Rights at a predetermined and
uniform price first to the Association's Eligible Account Holders of record as
of December 31, 1995, second to the Association's Tax-Qualified Employee Stock
Benefit Plans, third to Supplemental Eligible Account Holders of record as of
the last day of the calendar quarter preceding OTS approval of the Association's
application to convert to stock form, and fourth to Other Members of the
Association. Concurrently with the Subscription Offering, shares not subscribed
for in the Subscription Offering may be offered by the Association to the
general public in a Community Offering. Shares remaining, if any, may then be
offered to the general public in an underwritten public offering or otherwise.
The aggregate Purchase Price of the Conversion Stock will be based upon an
independent appraisal of the Association and will reflect the estimated pro
forma market value of the Converted Association, as a subsidiary of the Holding
Company.
It is the desire of the Board of Directors to attract new capital to the
Converted Association to increase its net worth, to support future savings
growth, to increase the amount of funds available for other lending and
investment, to provide greater resources for the expansion of customer services
and to facilitate future expansion. In addition, the Board of Directors
currently intends to implement stock option plans and other stock benefit plans
subsequent to the Conversion to better attract and retain qualified directors
and officers. It is the further desire of the Board of Directors to reorganize
the Converted Association as the wholly owned subsidiary of the Holding Company
to enhance flexibility of operations, diversification of business opportunities
and financial capability for business and regulatory purposes and to enable the
Converted Association to compete more effectively with other financial service
organizations.
No change will be made in the Board of Directors or management of the
Association as a result of the Conversion.
II. Definitions.
Acting in Concert: The term "Acting in Concert" means (i) knowing
-----------------
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; or (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose
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pursuant to any contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise. A person (as defined by 12 C.F.R.
(S)563b.2(a)(26)) who acts in concert with another person ("other party") shall
also be deemed to be acting in concert with any person who is also acting in
concert with that other party, except that any Tax-Qualified Employee Stock
Benefit Plan will not be deemed to be acting in concert with its trustee or a
person who serves in a similar capacity solely for the purpose of determining
whether stock held by the trustee and stock held by the Tax-Qualified Employee
Benefit Plan will be aggregated.
Associate: The term "Associate," when used to indicate a relationship with
---------
any person, means (i) any corporation or organization (other than the
Association, the Holding Company or a majority-owned subsidiary of the
Association or the Holding Company) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities; (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity, except that such term shall not
include a "Tax-Qualified Employee Stock Benefit Plan," as defined herein; and
(iii) any relative or spouse of such person, or any relative of such spouse, who
has the same home as such person or who is a director of the Association or the
Holding Company, or any of their subsidiaries.
Association: The term "Association" means Rocky Ford Federal Savings and
-----------
Loan Association, in its present form as a federal mutual savings and loan
association.
Capital Stock: The term "Capital Stock" means any and all authorized
-------------
shares of stock of the Converted Association.
Community Offering: The term "Community Offering" means the offering of
------------------
shares of Conversion Stock to the general public by the Holding Company
concurrently with or after commencement of the Subscription Offering, giving
preference to natural persons and trusts of natural persons (including
individual retirement and Keogh retirement accounts and personal trusts in which
such natural persons have substantial interests) who are permanent Residents of
the Association's Local Community.
Conversion: The term "Conversion" means (i) the amendment of the
----------
Association's federal mutual charter and bylaws to authorize issuance of shares
of Capital Stock by the Converted Association and to conform to the requirements
of a federal capital stock savings and loan association under the laws of the
United States and applicable regulations; (ii) the issuance and sale of
Conversion Stock by the Holding Company in the Subscription and Community
Offerings and/or in an underwritten public offering or otherwise; and (iii) the
purchase by the Holding Company of all the Capital Stock of the Converted
Association to be issued in the Conversion immediately following or concurrently
with the close of the sale of the Conversion Stock.
Conversion Stock: The term "Conversion Stock" means the shares of common
----------------
stock to be issued and sold by the Holding Company pursuant to the Plan.
Converted Association: The term "Converted Association" means Rocky Ford
---------------------
Federal Savings and Loan Association in its form as a federal capital stock
savings and loan association resulting from the conversion of the Association to
the stock form of organization in accordance with the terms of the Plan.
Eligibility Record Date: The term "Eligibility Record Date" means the
-----------------------
close of business on December 31, 1995.
Eligible Account Holder: The term "Eligible Account Holder" means each
-----------------------
holder of one or more Qualifying Deposits in the Association on the Eligibility
Record Date.
Holding Company: The term "Holding Company" means a corporation to be
---------------
incorporated by the Association under state law for the purpose of becoming a
holding company for the Converted Association through
A-2
<PAGE>
the issuance and sale of Conversion Stock under the Plan and the concurrent
acquisition of 100% of the Capital Stock to be issued and sold pursuant to the
Plan.
Holding Company Stock: The term "Holding Company Stock" means any and all
---------------------
authorized shares of stock of the Holding Company.
Independent Appraiser: The term "Independent Appraiser" means a person
---------------------
independent of the Association, experienced and expert in the area of corporate
appraisal, and acceptable to the OTS, retained by the Association to prepare an
appraisal of the pro forma market value of the Converted Association, as a
subsidiary of the Holding Company.
Local Community: The term "Local Community" means the county in which the
---------------
Association's office is located.
Market Maker: The term "Market Maker" means a dealer (i.e., any person who
------------
engages, either for all or part of such person's time, directly or indirectly,
as agent, broker or principal in the business of offering, buying, selling or
otherwise dealing or trading in securities issued by another person) who, with
respect to a particular security, (i)(a) regularly publishes bona fide,
competitive bid and offer quotations in a recognized interdealer quotation
system or (b) furnishes bona fide competitive bid and offer quotations on
request and (ii) is ready, willing and able to effect transactions in reasonable
quantities at its quoted prices with other brokers or dealers.
Member: The term "Member" means any person or entity who qualifies as a
------
member of the Association under its federal mutual charter and bylaws prior to
the Conversion.
Officer: The term "Officer" means an executive officer of the Holding
-------
Company or the Association (as applicable), including the Chairman of the Board,
President, Executive Vice Presidents, Senior Vice Presidents in charge of
principal business functions, Secretary and Treasurer.
Order Form: The term "Order Form" means the order form or forms to be used
----------
by Eligible Account Holders, Supplemental Eligible Account Holders and other
persons eligible to purchase Conversion Stock pursuant to the Plan.
Other Member: The term "Other Member" means any person, other than an
------------
Eligible Account Holder or a Supplemental Eligible Account Holder, who is a
Member as of the Voting Record Date.
OTS: The term "OTS" means the Office of Thrift Supervision of the United
---
States Department of the Treasury or any successor agency having jurisdiction
over the Conversion.
Plan: The term "Plan" means this Plan of Conversion under which the
----
Association will convert from a federal mutual savings and loan association to a
federal capital stock savings and loan association as a wholly owned subsidiary
of the Holding Company, as originally adopted by the Board of Directors or
amended in accordance with the terms hereof.
Qualifying Deposit: The term "Qualifying Deposit" means each savings
------------------
balance in any Savings Account in the Association as of the close of business on
the Eligibility Record Date or the Supplemental Eligibility Record Date, as
applicable, which is equal to or greater than $50.00.
Registration Statement: The term "Registration Statement" means the
----------------------
Registration Statement on Form S-1, or such other form as may be appropriate,
and any amendments thereto, filed by the Holding Company with the SEC pursuant
to the Securities Act of 1933, as amended, to register shares of Conversion
Stock.
A-3
<PAGE>
Resident: The term "Resident," as used in this Plan in relation to the
--------
preference afforded natural persons and trusts of natural persons in the Local
Community, means any natural person who occupies a dwelling within the Local
Community, has an intention to remain within the Local Community for a period of
time (manifested by establishing a physical, ongoing, non-transitory presence
within the Local Community) and continues to reside therein at the time of the
Subscription and Community Offerings. The Association may utilize deposit or
loan records or such other evidence provided to it to make the determination as
to whether a person is residing in the Local Community. To the extent the
"person" is a corporation or other business entity, the principal place of
business or headquarters shall be within the Local Community. To the extent the
"person" is a personal benefit plan, the circumstances of the beneficiary shall
apply with respect to this definition. In the case of all other benefit plans,
circumstances of the trustee shall be examined for purposes of this definition.
In all cases, such determination shall be in the sole discretion of the
Association.
Sale: The terms "sale" and "sell" mean every contract to sell or otherwise
----
dispose of a security or an interest in a security for value, but such terms do
not include an exchange of securities in connection with a merger or acquisition
approved by the OTS or any other federal agency having jurisdiction.
Savings Account: The term "Savings Account" means a withdrawable deposit
---------------
in the Association.
SEC: The term "SEC" means the Securities and Exchange Commission or any
---
successor agency.
Special Meeting: The term "Special Meeting" means the Special Meeting of
---------------
Members to be called for the purpose of submitting the Plan to the Members for
their approval.
Subscription Offering: The term "Subscription Offering" means the offering
---------------------
of shares of Conversion Stock to Eligible Account Holders, Tax-Qualified
Employee Stock Benefit Plans, Supplemental Eligible Account Holders and Other
Members under the Plan, giving preference within each subscription priority
category to natural persons and trusts of natural persons (including individual
retirement and Keogh retirement accounts and personal trusts in which such
natural persons have substantial interests) who are permanent Residents of the
Local Community if such preference is permitted by applicable law and approved
by the Association's Board of Directors in its sole discretion.
Subscription and Community Prospectus: The term "Subscription and
-------------------------------------
Community Prospectus" means the final prospectus to be used in connection with
the Subscription and Community Offerings.
Subscription Rights: The term "Subscription Rights" means non-
-------------------
transferable, non-negotiable, personal rights of Eligible Account Holders, Tax-
Qualified Employee Stock Benefit Plans, Supplemental Eligible Account Holders
and Other Members to purchase Conversion Stock offered under the Plan.
Supplemental Eligibility Record Date: The term "Supplemental Eligibility
------------------------------------
Record Date" means the last day of the calendar quarter preceding the approval
of the Plan by the OTS.
Supplemental Eligible Account Holder: The term "Supplemental Eligible
------------------------------------
Account Holder" means each holder of one or more Qualifying Deposits in the
Association (other than Officers and directors of the Association and their
Associates) on the Supplemental Eligibility Record Date.
Tax-Qualified Employee Stock Benefit Plan: The term "Tax-Qualified
-----------------------------------------
Employee Stock Benefit Plan" means any defined benefit plan or defined
contribution plan of the Association or the Holding Company, such as an employee
stock ownership plan, stock bonus plan, profit sharing plan or other plan,
which, with its related trust, meets the requirements to be "qualified" under
section 401 of the Internal Revenue Code of 1986, as amended. "Non-Tax-
Qualified Employee Stock Benefit Plan" means any defined benefit plan or defined
contribution plan which is not so qualified.
A-4
<PAGE>
Voting Record Date: The term "Voting Record Date" means the date fixed by
------------------
the Board of Directors of the Association to determine Members of the
Association entitled to vote at the Special Meeting.
III. Steps Prior to Submission of the Plan to the Members for Approval.
Prior to submission of the Plan to its Members for approval, the
Association must receive approval from the OTS of an Application for Approval of
Conversion on Form AC, which includes the Plan to convert to the stock form of
organization (the "Application"). The following steps must be taken prior to
such regulatory approval:
A. The Board of Directors shall adopt the Plan by not less than a
two-thirds vote.
B. Promptly after adoption of the Plan by the Board of Directors, the
Association shall notify its Members of the adoption of the Plan by
publishing a statement in a newspaper having a general circulation in each
community in which the Association maintains an office and/or by mailing a
letter to each of its Members.
C. A press release relating to the proposed Conversion may be
submitted to the local media.
D. Copies of the Plan adopted by the Board of Directors shall be made
available for inspection by Members at each office of the Association.
E. The Association shall cause the Holding Company to be incorporated
under state law, and the Board of Directors of the Holding Company shall
concur in the Plan by at least a two-thirds vote.
F. The Association shall submit or cause to be submitted the
Application to the OTS. The Holding Company shall submit or cause to be
submitted an Application H-(e)1 or Application H-(e)1-S to the OTS and the
Registration Statement to the SEC. Upon receipt of advice from the
regulatory authorities that the Application has been received and is in the
prescribed form, the Association shall publish a "Notice of Filing of an
Application for Conversion to a Stock Savings and Loan Association" in a
newspaper of general circulation, as referred to in Paragraph III.B.
herein. The Association also shall prominently display a copy of such
notice in each of its offices. The Holding Company shall publish notice of
the filing of the Application H-(e)1 or H-(e)1-S in accordance with
applicable regulations.
G. The Association shall obtain an opinion of its tax advisors or a
favorable ruling from the United States Internal Revenue Service which
shall state that the Conversion will not result in a taxable reorganization
for federal income tax purposes to the Association. Receipt of a favorable
opinion or ruling is a condition precedent to completion of the Conversion.
H. The Plan shall be submitted to a vote of the Members at the
Special Meeting after approval by the OTS.
IV. Meeting of Members.
Following receipt of approval of the Plan by the OTS, the Special Meeting
to vote on the Plan shall be scheduled in accordance with the Association's
bylaws and applicable regulations. Notice of the Special Meeting will be given
by means of a proxy statement authorized for use by the OTS. Promptly after
receipt of approval and at least 20 days but not more than 45 days prior to the
Special Meeting, the Association will distribute proxy solicitation materials to
all voting Members as of the Voting Record Date established for voting at the
Special Meeting. Proxy materials will also be sent to each beneficial holder of
an Individual Retirement Account where the name of the beneficial holder is
disclosed on the Association's records. The proxy solicitation materials will
include a copy of the Proxy Statement and other documents authorized for use by
the regulatory authorities and may also include a Subscription and Community
Prospectus as provided in Paragraph VI. below. The Association will also
A-5
<PAGE>
advise each Eligible Account Holder and Supplemental Eligible Account Holder not
entitled to vote at the Special Meeting of the proposed Conversion and the
scheduled Special Meeting and provide a postage paid card on which to indicate
whether he or she wishes to receive the Subscription and Community Prospectus,
if the Subscription and Community Offerings are not held concurrently with the
proxy solicitation.
Pursuant to applicable regulations, an affirmative vote of at least a
majority of the total outstanding votes of the Members will be required for
approval of the Plan. Voting may be in person or by proxy. The OTS shall be
promptly notified of the actions of the Members at the Special Meeting.
V. Summary Proxy Statement.
The Proxy Statement to be furnished to Members may be in summary form,
provided that a statement is made in boldface type that a more detailed
description of the proposed transaction may be obtained by returning an enclosed
postage paid card or other written communication requesting a supplemental
information statement. Without prior approval from the OTS, the Special Meeting
shall not be held fewer than 20 days after the last day on which the
supplemental information statement is mailed to Members requesting the same.
The supplemental information statement may be combined with the Subscription and
Community Prospectus if the Subscription and Community Offerings are commenced
concurrently with the proxy solicitation of Members for the Special Meeting.
VI. Offering Documents.
The Holding Company may commence the Subscription Offering and, provided
that the Subscription Offering has commenced, may commence the Community
Offering concurrently with or during the proxy solicitation of Members and may
close the Subscription and Community Offerings before the Special Meeting,
provided that the offer and sale of the Conversion Stock shall be conditioned
upon approval of the Plan by the Members at the Special Meeting.
The Association's proxy solicitation materials may require Eligible Account
Holders, Supplemental Eligible Account Holders and Other Members to return to
the Association by a reasonable date certain a postage-paid written
communication requesting receipt of a Subscription and Community Prospectus in
order to be entitled to receive a Subscription and Community Prospectus,
provided that the Subscription Offering shall not be closed until the expiration
of 30 days after mailing proxy solicitation materials to voting Members and a
postage-paid written communication to non-voting Eligible Account Holders and
Supplemental Eligible Account Holders. If the Subscription Offering is
commenced within 45 days after the Special Meeting, the Association shall
transmit, no more than 30 days prior to the commencement of the Subscription
Offering, to each voting Member who had been furnished with proxy solicitation
materials and to each non-voting Eligible Account Holder and Supplemental
Eligible Account Holder, written notice of the commencement of the Subscription
Offering which shall state that the Association is not required to furnish a
Subscription and Community Prospectus to them unless they return by a reasonable
date certain a postage-paid written communication requesting the receipt of the
Subscription and Community Prospectus.
Prior to commencement of the Subscription and Community Offerings, the
Holding Company shall file the Registration Statement with the SEC pursuant to
the Securities Act of 1933, as amended. The Holding Company shall not
distribute the Subscription and Community Prospectus until the Registration
Statement containing the same has been declared effective by the SEC and the
aforementioned documents have been approved by the OTS. The Subscription and
Community Prospectus may be combined with the Proxy Statement for the Special
Meeting.
VII. Consummation of Conversion.
The date of consummation of the Conversion will be the effective date of
the amendment of the Association's federal mutual charter to read in the form of
a federal stock charter, which shall be the date of the issuance and sale of the
Conversion Stock. After receipt of all orders for Conversion Stock, and
concurrently with
A-6
<PAGE>
the execution thereof, the amendment of the Association's federal mutual charter
to authorize the issuance of shares of Capital Stock and to conform to the
requirements of a federal capital stock savings and loan association will be
declared effective by the OTS, and the amended bylaws approved by the Members
will become effective. At such time, the Conversion Stock will be issued and
sold by the Holding Company, the Capital Stock to be issued in the Conversion
will be issued and sold to the Holding Company, and the Converted Association
will become a wholly owned subsidiary of the Holding Company. The Converted
Association will issue to the Holding Company [100,000] shares of its common
stock, representing all of the shares of Capital Stock to be issued by the
Converted Association in the Conversion, and the Holding Company will make
payment to the Converted Association of at least 50 percent of the aggregate net
proceeds realized by the Holding Company from the sale of the Conversion Stock
under the Plan, or such other portion of the aggregate net proceeds as may be
authorized or required by the OTS.
VIII. Stock Offering.
A. General.
-------
The aggregate purchase price of all shares of Conversion Stock
which will be offered and sold will be equal to the estimated pro forma
market value of the Converted Association, as a subsidiary of the Holding
Company, as determined by an independent appraisal. The exact number of
shares of Conversion Stock to be offered will be determined by the Board
of Directors of the Association and the Board of Directors of the Holding
Company, or their respective designees, in conjunction with the
determination of the Purchase Price (as that term is defined in Paragraph
VIII.B. below). The number of shares to be offered may be subsequently
adjusted prior to completion of the Conversion as provided below.
B. Independent Evaluation and Purchase Price of Shares.
---------------------------------------------------
All shares of Conversion Stock sold in the Conversion will be sold
at a uniform price per share referred to in this Plan as the "Purchase
Price." The Purchase Price and the total number of shares of Conversion
Stock to be offered in the Conversion will be determined by the Board of
Directors of the Association and the Board of Directors of the Holding
Company, or their respective designees, immediately prior to the
simultaneous completion of all such sales contemplated by this Plan on
the basis of the estimated pro forma market value of the Converted
Association, as a subsidiary of the Holding Company, at such time. The
estimated pro forma market value of the Converted Association, as a
subsidiary of the Holding Company, will be determined for such purpose by
an Independent Appraiser on the basis of such appropriate factors as are
not inconsistent with applicable regulations. Immediately prior to the
Subscription and Community Offerings, a subscription price range of
shares for the offerings will be established (the "Valuation Range"),
which will vary from 15% above to 15% below the midpoint of such range.
The number of shares of Conversion Stock ultimately issued and sold will
be determined at the close of the Subscription and Community Offerings
and any other offering. The subscription price range and the number of
shares to be offered may be changed subsequent to the Subscription and
Community Offerings as the result of any appraisal updates prior to the
completion of the Conversion, without notifying eligible purchasers in
the Subscription and Community Offerings and without a resolicitation of
subscriptions, provided the aggregate Purchase Price is not below the low
end or more than 15 percent above the high end of the Valuation Range
previously approved by the OTS or if, in the opinion of the Boards of
Directors of the Association and the Holding Company, the new Valuation
Range established by the appraisal update does not result in a materially
different capital position of the Converted Association.
Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the Association and the Holding Company and to the OTS that,
to the best knowledge of the Independent Appraiser, nothing of a material
nature has occurred which, taking into account all relevant factors,
would cause the Independent Appraiser to conclude that the aggregate
value of the Conversion Stock at the Purchase Price is incompatible with
its estimate of the aggregate consolidated pro forma market value of the
Converted Association, as a subsidiary of the
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<PAGE>
Holding Company. If such confirmation is not received, the Association
may cancel the Subscription and Community Offerings and/or any other
offering, extend the Conversion, establish a new Valuation Range, extend,
reopen or hold new Subscription and Community Offerings and/or other
offerings or take such other action as the OTS may permit.
C. Subscription Offering.
---------------------
Non-transferable Subscription Rights to purchase shares of
Conversion Stock will be issued at no cost to Eligible Account Holders,
Tax-Qualified Employee Stock Benefits Plans, Supplemental Eligible
Account Holders and Other Members of the Association pursuant to
priorities established by applicable regulations. All shares must be
sold, and, to the extent that Conversion Stock is available, no
subscriber will be allowed to purchase fewer than 25 shares of Conversion
Stock, provided that this number shall be decreased if the aggregate
purchase price exceeds $500. The priorities established by applicable
regulations for the purchase of shares are as follows:
1. Category No. 1: Eligible Account Holders.
a. Each Eligible Account Holder shall receive, without
payment, non-transferable Subscription Rights to purchase
Conversion Stock in an amount equal to the greater of (i) the
lesser of 5% of the shares issued in the conversion or $150,000,
(ii) one-tenth of one percent of the total offering of shares of
Conversion Stock or (iii) 15 times the product (rounded down to the
next whole number) obtained by multiplying the total number of
shares of Conversion Stock to be issued by a fraction of which the
numerator is the amount of the Qualifying Deposit of the Eligible
Account Holder and the denominator is the total amount of
Qualifying Deposits of all Eligible Account Holders in the
Converted Association in each case on the Eligibility Record Date.
b. Non-transferable Subscription Rights to purchase
Conversion Stock received by Officers and directors of the
Association and their Associates based on their increased deposits
in the Association in the one year period preceding the Eligibility
Record Date shall be subordinated to all other subscriptions
involving the exercise of non-transferable Subscription Rights to
purchase shares pursuant to this Subscription Category.
c. In the event of an oversubscription for shares of
Conversion Stock pursuant to this Category, shares of Conversion
Stock shall be allocated among subscribing Eligible Account
Holders, giving preference to natural persons and trusts of natural
persons who are permanent Residents of the Local Community, if such
preference is permitted by applicable law and approved by the
Association's Board of Directors in its sole discretion, as
follows:
(I) Shares of Conversion Stock shall be allocated
among subscribing Eligible Account Holders so as to permit
each such Account Holder, to the extent possible, to
purchase a number of shares of Conversion Stock sufficient
to make its total allocation equal to 100 shares or the
total amount of its subscription, whichever is less.
(II) Any shares not so allocated shall be allocated
among the subscribing Eligible Account Holders on an
equitable basis, related to the amounts of their respective
aggregate Qualifying Deposits, as compared to the total
aggregate Qualifying Deposits of all subscribing Eligible
Account Holders.
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<PAGE>
2. Category No. 2: Tax-Qualified Employee Stock Benefit Plans.
a. Tax-Qualified Employee Stock Benefit Plans of the
Converted Association shall receive, without payment, non-
transferable Subscription Rights to purchase up to 10% of the
shares of Conversion Stock issued in the Conversion.
b. Subscription rights received in this Category shall be
subordinated to the Subscription Rights received by Eligible
Account Holders pursuant to Category No. 1, provided that any
shares of Conversion Stock sold in excess of the high end of the
Valuation Range may be first sold to Tax-Qualified Employee Stock
Benefit Plans.
3. Category No. 3: Supplemental Eligible Account Holders.
a. In the event that the Eligibility Record Date is more
than 15 months prior to the date of the latest amendment of the
Application filed prior to OTS approval, then each Supplemental
Eligible Account Holder shall receive, without payment, non-
transferable Subscription Rights to purchase Conversion Stock in an
amount equal to the greater of (i) the lesser of 5% of the shares
issued in the Conversion or $150,000, (ii) one-tenth of one percent
of the total offering of shares of Conversion Stock or (iii) 15
times the product (rounded down to the next whole number) obtained
by multiplying the total number of the shares of Conversion Stock
to be issued by a fraction of which the numerator is the amount of
the Qualifying Deposit of the Supplemental Eligible Account Holder
and the denominator is the total amount of the Qualifying Deposits
of all Supplemental Eligible Account Holders on the Supplemental
Eligibility Record Date.
b. Subscription Rights received pursuant to this Category
shall be subordinated to the Subscription Rights received by the
Eligible Account Holders and by Tax-Qualified Employee Stock
Benefit Plans pursuant to Category Nos. 1 and 2.
c. Any non-transferable Subscription Rights to purchase
shares received by an Eligible Account Holder in accordance with
Category No. 1 shall reduce to the extent thereof the Subscription
Rights to be distributed to such Eligible Account Holder pursuant
to this Category.
d. In the event of an oversubscription for shares of
Conversion Stock pursuant to this Category, shares of Conversion
Stock shall be allocated among the subscribing Supplemental
Eligible Account Holders, giving preference to natural persons and
trusts of natural persons who are permanent Residents of the Local
Community, if such preference is permitted by applicable law and
approved by the Association's Board of Directors in its sole
discretion, as follows:
(I) Shares of Conversion Stock shall be allocated
among subscribing Supplemental Eligible Account Holders so
as to permit each such Supplemental Eligible Account Holder,
to the extent possible, to purchase a number of shares of
Conversion Stock sufficient to make its total allocation
(including the number of shares of Conversion Stock, if any,
allocated in accordance with Category No. 1) equal to 100
shares of Conversion Stock or the total amount of its
subscription, whichever is less.
(II) Any shares of Conversion Stock not allocated in
accordance with subparagraph (I) above shall be allocated
among the subscribing Supplemental Eligible Account Holders
on an equitable basis, related to the amounts of their
respective aggregate Qualifying Deposits on the Supplemental
Eligibility Record Date as compared to the total aggregate
Qualifying Deposits of all subscribing Supplemental Eligible
Account Holders in each case on the Supplemental Eligibility
Record Date.
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<PAGE>
4. Category No. 4: Other Members.
a. Each Other Member, other than those Members who are
Eligible Account Holders or Supplemental Eligible Account Holders,
shall receive, without payment, non-transferable Subscription
Rights to purchase Conversion Stock in an amount equal to the
greater of (i) the lesser of 5% of the shares issued in the
Conversion or $150,000 or (ii) one-tenth of one percent of the
total offering of shares of Conversion Stock.
b. Subscription Rights received pursuant to this Category
shall be subordinated to the Subscription Rights received by
Eligible Account Holders, Tax-Qualified Employee Stock Benefit
Plans and Supplemental Eligible Account Holders pursuant to
Category Nos. 1, 2 and 3.
c. In the event of an oversubscription for shares of
Conversion Stock pursuant to this Category, the shares of
Conversion Stock available shall be allocated among subscribing
Other Members, giving preference to natural persons and trusts of
natural persons who are permanent Residents of the Local Community,
if such preference is permitted by applicable law and approved by
the Association's Board of Directors in its sole discretion, so as
to permit each subscribing Other Member, to the extent possible, to
purchase a number of shares sufficient to make his or her total
allocation of Conversion Stock equal to the lesser of 100 shares or
the number of shares subscribed for by the Other Member. The shares
remaining thereafter will be allocated among subscribing Other
Members whose subscriptions remain unsatisfied on an equitable
basis as determined by the Board of Directors.
Order Forms may provide that the maximum purchase limitation
shall be based on the midpoint of the Valuation Range. In the event
the aggregate Purchase Price of the Conversion Stock issued and
sold is below the midpoint of the Valuation Range, that portion of
subscriptions in excess of the maximum purchase limitation will be
refunded. In the event the aggregate Purchase Price of Conversion
Stock issued and sold is above the midpoint of the Valuation Range,
persons who have subscribed for the maximum purchase limitation may
be given the opportunity to increase their subscriptions so as to
purchase the maximum number of shares subject to the availability
of shares. The Association will not otherwise notify subscribers of
any change in the number of shares of Conversion Stock offered.
D. Community Offering.
------------------
1. Any shares of Conversion Stock not purchased through the
exercise of Subscription Rights in the Subscription Offering may be
sold in a Community Offering, which may commence concurrently with
the Subscription Offering. Shares of Conversion Stock will be
offered in the Community Offering to the general public, giving
preference to natural persons and the trusts of natural persons
(including individual retirement and Keogh retirement accounts and
personal trusts in which such natural persons have substantial
interests) who are permanent Residents of the Local Community. The
Community Offering may commence concurrently with or as soon as
practicable after the completion of the Subscription Offering and
must be completed within 45 days after the last day of the
Subscription Offering, unless extended by the Holding Company with
the approval of the OTS. The offering price of the Conversion Stock
to the general public in the Community Offering will be the same
price paid for such stock by Eligible Account Holders and other
persons in the Subscription Offering. If sufficient shares are not
available to satisfy all orders in the Community Offering, the
shares available will be allocated by the Holding Company in its
discretion. The Holding Company shall have the right to accept or
reject orders in the Community Offering in whole or in part.
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<PAGE>
2. Orders accepted in the Community Offering shall be filled
up to a maximum of 2% of the Conversion Stock, and thereafter
remaining shares shall be allocated on an equal number of shares
basis per order until all orders have been filled.
3. The Conversion Stock to be offered in the Community
Offering will be offered and sold in a manner that will achieve the
widest distribution of the Conversion Stock.
E. Other Offering.
--------------
In the event a Community Offering does not appear feasible,
the Association will immediately consult with the OTS to determine
the most viable alternative available to effect the completion of
the Conversion. Should no viable alternative exist, the Association
may terminate the Conversion with the concurrence of the OTS.
F. Limitations Upon Purchases of Shares of Conversion Stock.
--------------------------------------------------------
The following additional limitations and exceptions shall
apply to all purchases of Conversion Stock:
1. No Person may purchase fewer than 25 shares of
Conversion Stock in the Conversion, to the extent such shares are
available.
2. Purchases of Conversion Stock in the Community Offering
by any person, when aggregated with purchases by an Associate of that
person, or a group of persons Acting in Concert, shall not exceed the
lesser of 5% of the shares issued in the Conversion or $150,000 of the
Conversion Stock, except that Tax-Qualified Employee Stock Benefit
Plans may purchase up to 10% of the total shares of Conversion Stock
to be issued in the Conversion, and shares to be held by the Tax-
Qualified Employee Stock Benefit Plans and attributable to a
participant thereunder shall not be aggregated with shares of
Conversion Stock purchased by such participant or any other purchaser
of Conversion Stock in the Conversion.
3. Officers and directors of the Association and the
Holding Company, and Associates thereof, may not purchase in the
aggregate more than 35% of the shares of Conversion Stock issued in
the Conversion, or such greater amount as may be permitted under
applicable legal limits.
4. Directors of the Holding Company and the Association
shall not be deemed to be Associates or a group Acting in Concert with
other directors solely as a result of membership on the Board of
Directors of the Holding Company or the Association or any of their
subsidiaries.
5. Purchases of shares of Conversion Stock in the
Conversion by any person, when aggregated with purchases by an
Associate of that person, or a group of persons Acting in Concert,
shall not exceed the lesser of 5% of the shares issued in the
Conversion or $150,000 of the Conversion Stock, except that Tax-
Qualified Employee Stock Benefit Plans may purchase up to 10% of the
total shares of Conversion Stock to be issued in the Conversion, and
shares purchased by the Tax-Qualified Employee Stock Benefit Plans and
attributable to a participant thereunder shall not be aggregated with
shares purchased by such participant or any other purchaser of
Conversion Stock in the Conversion.
A-11
<PAGE>
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, the Holding Company and the Association
may increase or decrease any of the purchase limitations set forth herein
at any time. In the event that the individual purchase limitation is
increased after commencement of the Subscription and Community Offerings,
the Holding Company and the Association shall permit any person who
subscribed for the maximum number of shares of Conversion Stock to
purchase an additional number of shares, such that such person shall be
permitted to subscribe for the then maximum number of shares permitted to
be subscribed for by such person, subject to the rights and preferences
of any person who has priority Subscription Rights. In the event that
either the individual purchase limitation or the number of shares of
Conversion Stock to be sold in the Conversion is decreased after
commencement of the Subscription and Community Offerings, the orders of
any person who subscribed for the maximum number of shares of Conversion
Stock shall be decreased by the minimum amount necessary so that such
person shall be in compliance with the then maximum number of shares
permitted to be subscribed for by such person.
Each person purchasing Conversion Stock in the Conversion shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations under the Plan or otherwise imposed by law, rule or
regulation. In the event that such purchase limitations are violated by
any person (including any Associate or group of persons affiliated or
otherwise Acting in Concert with such person), the Holding Company shall
have the right to purchase from such person at the actual Purchase Price
per share all shares acquired by such person in excess of such purchase
limitations or, if such excess shares have been sold by such person, to
receive the difference between the actual Purchase Price per share paid
for such excess shares and the price at which such excess shares were
sold by such person. This right of the Holding Company to purchase such
excess shares shall be assignable by the Holding Company.
G. Restrictions on and Other Characteristics of Stock Being Sold.
-------------------------------------------------------------
1. Transferability.
---------------
Except as provided in Paragraph XIII. below, Conversion Stock
purchased by persons other than directors and Officers of the
Association and directors and Officers of the Holding Company will
be transferable without restriction. Conversion Stock purchased by
such directors or Officers shall not be sold for a period of one
year from the date of Conversion except for any sale of such shares
(i) following the death of the original purchaser or (ii) resulting
from an exchange of securities in a merger or acquisition approved
by the applicable regulatory authorities.
The Conversion Stock issued by the Holding Company to such
directors and Officers shall bear the following legend giving
appropriate notice of the one-year holding period restriction:
"The shares of stock evidenced by this Certificate are
restricted as to transfer for a period of one year from the
date of this Certificate pursuant to applicable regulations
of the Office of Thrift Supervision of the United States
Department of the Treasury. Except in the event of the death
of the registered holder, the shares represented by this
Certificate may not be sold prior thereto without a legal
opinion of counsel for the Holding Company that said sale is
permissible under the provisions of applicable laws and
regulations."
In addition, the Holding Company shall give appropriate
instructions to the transfer agent for the Holding Company Stock
with respect to the applicable restrictions relating to the
transfer of restricted stock. Any shares of Holding Company Stock
subsequently issued as a stock dividend, stock split or otherwise,
with respect to any such restricted stock, shall be subject to the
same holding period restrictions for such directors and Officers as
may be then applicable to such restricted stock.
A-12
<PAGE>
2. Repurchase and Dividend Rights.
------------------------------
Pursuant to present regulations, except as otherwise
permitted by the OTS, the Holding Company may not, for a period of
three years from the date of Conversion, repurchase Holding Company
Stock from any person, with the exception of (i) repurchases on a
pro rata basis pursuant to offers approved by the OTS and made to
all stockholders, (ii) repurchases of qualifying shares of
directors or, (iii) unless prohibited by the OTS, repurchases of
shares to fund employee stock benefit plans of the Holding Company
or the Association. Upon 10 days' written notification to the OTS
Regional Director for the Converted Association and the Chief
Counsel of the Corporate and Securities Division of the OTS,
however, the Holding Company may make open market repurchases of
outstanding Holding Company Stock, provided that (i) such Regional
Director and Chief Counsel do not object based on a determination
that (a) the repurchases would materially adversely affect the
financial condition of the Converted Association, (b) the
information submitted by the Converted Association is insufficient
upon which to base a conclusion as to whether the Converted
Association's financial condition would be materially adversely
affected, or (c) the Converted Association does not demonstrate a
valid purpose for the repurchases. Except as otherwise permitted by
the OTS, (i) no repurchases may occur in the first year following
the Conversion; (ii) any repurchases in the second and third years
following the Conversion must be part of an open-market stock
repurchase program that allows no more than five percent (5%) of
the outstanding Holding Company Stock to be purchased during any 12
month period; and (iii) any repurchases within the first three
years following the Conversion must not cause the Converted
Association to become "undercapitalized," as defined pursuant to 12
C.F.R. (S)565.4 or a successor regulation.
Present regulations also provide that the Converted
Association may not declare or pay a cash dividend on or repurchase
any of its Capital Stock if the result thereof would be to reduce
the regulatory capital of the Converted Association below the
amount required for the Liquidation Account. Further, any dividend
declared or paid on, or repurchase of, the Capital Stock shall be
in compliance with the Rules and Regulations of the OTS, or other
applicable regulations.
The above limitations shall not preclude payment of dividends
on, or repurchases of, Holding Company Stock in the event
applicable federal regulatory limitations are liberalized
subsequent to the Conversion.
3. Voting Rights.
-------------
After Conversion, holders of Savings Accounts and obligors on
loans will not have voting rights in the Converted Association.
Exclusive voting rights with respect to the Holding Company shall
be vested in the holders of Holding Company Stock, and the Holding
Company will have exclusive voting rights with respect to the
Capital Stock. Each stockholder of the Holding Company will be
entitled to vote on any matters coming before the stockholders of
the Holding Company for consideration and will be entitled to one
vote for each share of stock owned by said stockholder.
4. Purchases by Officers, Directors and Associates Following
---------------------------------------------------------
Conversion.
----------
Without the prior approval of the OTS, Officers and directors
of the Converted Association and Officers and directors of the
Holding Company, and their Associates, shall be prohibited for a
period of three years following completion of the Conversion from
purchasing outstanding shares of Holding Company Stock, except from
a broker or dealer registered with the SEC. Notwithstanding this
restriction, negotiated transactions involving more than 1% of the
total outstanding shares of Holding Company Stock and purchases
made and shares held by a Tax-
A-13
<PAGE>
Qualified Employee Stock Benefit Plan or Non-Tax-Qualified Employee
Stock Benefit Plan which may be attributable to Officers or
directors may be made without OTS permission or the use of a broker
or dealer.
H. Mailing of Offering Materials and Collation of Subscriptions.
------------------------------------------------------------
The sale of all shares of Conversion Stock offered pursuant to the
Plan must be completed within 24 months after approval of the Plan at the
Special Meeting. After approval of the Plan by the OTS and the
declaration of the effectiveness of the Subscription and Community
Prospectus by the SEC, the Holding Company shall distribute such
Subscription and Community Prospectus and Order Forms for the purchase of
shares in accordance with the terms of the Plan.
The recipient of an Order Form will be provided neither fewer than
20 days nor more than 45 days from the date of mailing, unless extended,
to complete, execute and return properly the Order Form to the Holding
Company or the Association. Self-addressed, postage paid return envelopes
will accompany these forms when mailed. The Association or Holding
Company will collate the returned executed Order Forms upon completion of
the Subscription Offering. Failure of any eligible subscriber to return a
properly completed and executed Order Form within the prescribed time
limits shall be deemed a waiver and a release by such person of any
rights to purchase shares of Conversion Stock hereunder.
The sale of all shares of Conversion Stock shall be completed
within 45 days after the last day of the Subscription Offering unless
extended by the Holding Company and the Association with the approval of
the OTS.
I. Method of Payment.
-----------------
Payment for all shares of Conversion Stock subscribed for in the
Subscription and Community Offerings must be received in full by the
Association or the Holding Company, together with properly completed and
executed Order Forms, indicating thereon the number of shares being
subscribed for and such other information as may be required thereon, on
or prior to the expiration date specified on the Order Form, unless such
date is extended by the Holding Company and the Association; provided,
however, that payments by Tax-Qualified Employee Stock Benefit Plans for
Conversion Stock may be made to the Association concurrently with the
completion of the Conversion.
Payment for all shares of Conversion Stock may be made in cash (if
delivered in person) or by check or money order, or, if the subscriber
has a Savings Account in the Association (including a certificate of
deposit), the subscriber may authorize the Association to charge the
subscriber's Savings Account for the purchase amount. The Association
shall pay interest at not less than the passbook rate on all amounts paid
in cash or by check or money order to purchase shares of Conversion Stock
in the Subscription and Community Offerings from the date payment is
received until the Conversion is completed or terminated. The Association
shall not knowingly loan funds or otherwise extend credit to any person
for the purpose of purchasing Conversion Stock.
If a subscriber authorizes the Association to charge its Savings
Account, the funds will remain in the subscriber's Savings Account and
will continue to earn interest, but may not be used by the subscriber
until all Conversion Stock has been sold or the Conversion is terminated,
whichever is earlier. The withdrawal will be given effect only
concurrently with the sale of all shares of Conversion Stock in the
Conversion and only to the extent necessary to satisfy the subscription
at a price equal to the Purchase Price. The Association will allow
subscribers to purchase shares of Conversion Stock by withdrawing funds
from certificate accounts without the assessment of early withdrawal
penalties. In the case of early withdrawal of only a portion of such
account, the certificate evidencing such account shall be cancelled if
the remaining balance of the account is less than the applicable minimum
balance requirement. In that event, the
A-14
<PAGE>
remaining balance will earn interest at the passbook rate. This waiver of
the early withdrawal penalty is applicable only to withdrawals made in
connection with the purchase of Conversion Stock under the Plan.
Tax-Qualified Employee Stock Benefit Plans may subscribe for shares
by submitting an Order From, and in the case of an employee stock
ownership plan, together with evidence of a loan commitment from the
Holding Company or an unrelated financial institution for the purchase of
the shares of Conversion Stock, during the Subscription Offering and by
making payment for the shares of Conversion Stock on the date of the
closing of the Conversion.
J. Undelivered, Defective or Late Order Forms; Insufficient Payment.
----------------------------------------------------------------
In the event an Order Form (i) is not delivered and is returned to
the Holding Company or the Association by the United States Postal
Service (or the Holding Company or the Association is unable to locate
the addressee); (ii) is not received by the Holding Company or the
Association, or is received by the Holding Company or the Association
after termination of the date specified thereon; (iii) is defectively
completed or executed; or (iv) is not accompanied by the total required
payment for the shares of Conversion Stock subscribed for (including
cases in which the subscribers' Savings Accounts are insufficient to
cover the authorized withdrawal for the required payment), the
Subscription Rights of the person to whom such rights have been granted
will not be honored and will be treated as though such person failed to
return the completed Order Form within the time period specified therein.
Alternatively, the Holding Company or the Association may, but will not
be required to, waive any irregularity relating to any Order Form or
require the submission of a corrected Order Form or the remittance of
full payment for subscribed shares of Conversion Stock by such date as
the Holding Company or the Association may specify. Subscription orders,
once tendered, cannot be revoked. The Holding Company's and the
Association's interpretation of the terms and conditions of this Plan and
acceptability of the Order Forms will be final and conclusive.
K. Members in Non-Qualified States or in Foreign Countries.
-------------------------------------------------------
The Holding Company will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons
entitled to subscribe for Conversion Stock pursuant to the Plan reside.
However, no such person will be offered or receive any Conversion Stock
under this Plan who resides in a foreign country or who resides in a
state of the United States with respect to which any or all of the
following apply: (i) a small number of persons otherwise eligible to
subscribe for shares of Conversion Stock under this Plan reside in such
state or foreign country; (ii) the granting of Subscription Rights or the
offer or sale of shares of Conversion Stock to such person would require
the Holding Company or the Association or their employees to register,
under the securities laws of such state, as a broker, dealer, salesman or
agent or to register or otherwise qualify its securities for sale in such
state or foreign country; and (iii) such registration qualification would
be impracticable for reasons of cost or otherwise. No payments will be
made in lieu of the granting of Subscription Rights to any such person.
L. Sales Commissions.
-----------------
Sales commissions may be paid as determined by the Boards of
Directors of the Association and the Holding Company or their designees
to securities dealers assisting subscribers in making purchases of
Conversion Stock in the Subscription Offering or in the Community
Offering, if the securities dealer is named by the subscriber on the
Order Form. In addition, a sales commission may be paid to a securities
dealer for advising and consulting with respect to, or for managing the
sale of Conversion Stock in, the Subscription Offering, the Community
Offering or any other offering.
A-15
<PAGE>
IX. Charter and Bylaws.
As part of the Conversion, a federal stock charter and bylaws will
be adopted to authorize the Converted Association to operate as a federal
capital stock savings and loan association. By approving the Plan, the
Members of the Association will thereby approve amending the
Association's existing federal mutual charter and bylaws to read in the
form of a federal stock charter and bylaws. Prior to completion of the
Conversion, the proposed federal stock charter and bylaws may be amended
in accordance with the provisions and limitations for amending the Plan
under Paragraph XIV. below. The effective date of the amendment of the
Association's federal mutual charter and bylaws to read in the form of a
federal stock charter and bylaws shall be the date of the issuance of the
Conversion Stock, which shall be the date of consummation of the
Conversion.
X. Registration and Market Making.
In connection and concurrently with the Conversion, the Holding
Company shall register the Holding Company Stock with the SEC pursuant to
the Securities Exchange Act of 1934, as amended, and shall undertake not
to deregister the Holding Company Stock for a period of three years
thereafter.
The Holding Company shall use its best efforts to encourage and
assist various Market Makers to establish and maintain a market for the
Holding Company Stock. The Holding Company shall also use its best
efforts to have the Holding Company Stock quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System or
listed on a national or regional securities exchange.
XI. Status of Savings Accounts and Loans Subsequent to Conversion.
All Savings Accounts in the Association will retain the same status
after Conversion as these accounts had prior to Conversion. Subject to
Paragraph VIII.I. hereof, each holder of a Savings Account in the
Association shall retain, without payment, a withdrawable Savings Account
or Savings Accounts in the Converted Association, equal in dollar amount
and on the same terms and conditions as in effect prior to Conversion.
All Savings Accounts will continue to be insured by the Savings
Association Insurance Fund of the Federal Deposit Insurance Corporation
up to the applicable limits of insurance coverage. All loans shall retain
the same status after Conversion as these loans had prior to Conversion.
After Conversion, holders of Savings Accounts and obligors on loans of
the Association will not have voting rights in the Converted Association.
Exclusive voting rights with respect to the Holding Company shall be
vested in the holders of the Conversion Stock issued by the Holding
Company, and the Holding Company will have exclusive voting rights with
respect to the Converted Association's Capital Stock.
XII. Liquidation Account.
After the Conversion, holders of Savings Accounts will not be
entitled to share in the residual assets after liquidation of the
Converted Association. However, pursuant to applicable regulations, the
Association shall, at the time of the Conversion, establish a Liquidation
Account in an amount equal to its regulatory capital as of the date of
the latest statement of financial condition contained in the final
prospectus to be used in connection with the Conversion. The function of
the Liquidation Account is to establish a priority on liquidation, and,
except as provided in Paragraph VIII.G.2. above, the existence of the
Liquidation Account shall not operate to restrict the use or application
of any of the net worth accounts of the Converted Association.
The Liquidation Account shall be maintained by the Converted
Association subsequent to Conversion for the benefit of Eligible Account
Holders and Supplemental Eligible Account Holders who retain their
Savings Accounts in the Converted Association. Each Eligible Account
Holder and Supplemental Eligible Account Holder shall, with respect to
each Savings Account held, have a related inchoate interest in a portion
of the Liquidation Account ("subaccount balance").
A-16
<PAGE>
The initial subaccount balance for a Savings Account held by an Eligible
Account Holder and/or a Supplemental Eligible Account Holder shall be determined
by multiplying the opening balance in the Liquidation Account by a fraction of
which the numerator is the amount of the qualifying deposit in the related
Savings Account and the denominator is the total amount of the qualifying
deposits of all Eligible Account Holders and Supplemental Eligible Account
Holders in the Association. Such initial subaccount balance shall not be
increased but shall be subject to downward adjustment as provided below.
If the deposit balance in any Savings Account of an Eligible Account Holder
or Supplemental Eligible Account Holder to which the subaccount relates at the
close of business on any annual closing date subsequent to the Eligibility
Record Date or Supplemental Eligibility Record Date is less than the lesser of
(i) the deposit balance in such Savings Account at the close of business on any
annual closing date subsequent to the Eligibility Record Date or the
Supplemental Eligibility Record Date, or (ii) the amount of the Qualifying
Deposit in such Savings Account on the Eligibility Record Date or the
Supplemental Eligibility Record Date, then the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
a downward adjustment, the subaccount balance shall not be subsequently
increased, notwithstanding any increase in the deposit balance of the related
Savings Account. If any such Savings Account is closed, the related subaccount
balance shall be reduced to zero.
In the event of a complete liquidation of the Converted Association (and
only in such event), each Eligible Account Holder and Supplemental Eligible
Account Holder shall be entitled to receive a liquidation distribution from the
Liquidation Account in the amount of the then-current adjusted subaccount
balances for Savings Accounts then held before any liquidation distribution may
be made to stockholders. No merger, consolidation, sale of bulk assets or
similar combination or transaction with another institution insured by the
Federal Deposit Insurance Corporation shall be considered to be a complete
liquidation for these purposes. In such transactions, the Liquidation Account
shall be assumed by the surviving institution.
XIII. Restrictions on Acquisition of Holding Company.
A. Present regulations provide that for a period of three years following
completion of the Conversion, no person (i.e., an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock company, a
trust or any unincorporated organization or similar company, a syndicate or any
other group formed for the purpose of acquiring, holding or disposing of
securities of an insured institution or its holding company) shall directly, or
indirectly, offer to purchase or actually acquire the beneficial ownership of
more than 10% of any class of Holding Company Stock without the prior approval
of the OTS. However, approval is not required for purchases directly from the
Holding Company or underwriters or a selling group acting on its behalf with a
view towards public resale, or for purchases not exceeding 1% per annum of the
shares outstanding, or for the acquisition of securities by one or more Tax-
Qualified Employee Stock Benefit Plans of the Holding Company or the Converted
Association, provided that the plan or plans do not have beneficial ownership in
the aggregate of more than 25% of any class of Holding Company Stock. Civil
penalties may be imposed by the OTS for willful violation or assistance of any
violation. Where any person, directly or indirectly, acquires beneficial
ownership of more than 10% of any class of Holding Company Stock within such
three-year period, without the prior approval of the OTS, Holding Company Stock
beneficially owned by such person in excess of 10% shall not be counted as
shares entitled to vote and shall not be voted by any person or counted as
voting shares in connection with any matter submitted to the stockholders for a
vote.
B. The Holding Company may provide in its Articles of Incorporation a
provision that, for a period of five years following the date of the completion
of the Conversion, no person shall directly or indirectly offer to acquire or
actually acquire the beneficial ownership of more than 10% of any class of
Holding Company Stock except with respect to purchases by one or more Tax-
Qualified Employee Stock Benefit Plans of the Holding Company or Converted
Association. The Holding Company may provide in its Articles of Incorporation
for such other provisions affecting the acquisition of Holding Company Stock as
shall be determined by its Board of Directors.
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<PAGE>
XIV. Interpretation and Amendment or Termination of the Plan.
The Association's Board of Directors shall have the sole discretion to
interpret and apply the provisions of the Plan to particular facts and
circumstances and to make all determinations necessary or desirable to implement
such provisions, including but not limited to matters with respect to giving
preference to natural persons and trusts of natural persons who are permanent
Residents of the Association's Local Community, and any and all interpretations,
applications and determinations made by the Board of Directors in good faith and
on the basis of such information and assistance as was then reasonably available
for such purpose shall be conclusive and binding upon the Association and its
members and subscribers in the Subscription and Community Offerings, subject to
the authority of the OTS.
If deemed necessary or desirable, the Plan may be substantively amended at
any time prior to submission of the Plan and proxy materials to the Members by a
two-thirds vote of the Association's Board of Directors. After submission of
the Plan and proxy materials to the Members, the Plan may be amended by a two-
thirds vote of the Association's Board of Directors at any time prior to the
Special Meeting and at any time following such Special Meeting with the
concurrence of the OTS. In its discretion, the Board of Directors may modify or
terminate the Plan upon the order of the regulatory authorities without a
resolicitation of proxies or another Special Meeting.
In the event that mandatory new regulations pertaining to conversions are
adopted by the OTS or any successor agency prior to the completion of the
Conversion, the Plan will be amended to conform to the new mandatory regulations
without a resolicitation of proxies or another Special Meeting. In the event
that new conversion regulations adopted by the OTS or any successor agency prior
to completion of the Conversion contain optional provisions, the Plan may be
amended to utilize such optional provisions at the discretion of the Board of
Directors without a resolicitation of proxies or another Special Meeting.
By adoption of the Plan, the Association's Members authorize the Board of
Directors to amend and/or terminate the Plan under the circumstances set forth
above.
XV. Expenses of the Conversion.
The Holding Company and the Association will use their best efforts to
assure that expenses incurred in connection with the Conversion shall be
reasonable.
XVI. Contributions to Tax-Qualified Employee Stock Benefit Plans.
The Holding Company and the Converted Association may make scheduled
discretionary contributions to their Tax-Qualified Employee Stock Benefit Plans,
provided such contributions do not cause the Converted Association to fail to
meet its then-applicable regulatory capital requirements.
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EXHIBIT B
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
FEDERAL STOCK CHARTER
Section 1. Corporate Title. The full corporate title of the association is
Rocky Ford Federal Savings and Loan Association (the "association").
Section 2. Office. The home office shall be located at 801 Swink Avenue, in
the City of Rocky Ford, in the State of Colorado.
Section 3. Duration. The duration of the association is perpetual.
Section 4. Purpose and Powers. The purpose of the association is to pursue any
or all of the lawful objectives of a Federal association chartered under Section
5 of the Home Owners' Loan Act and to exercise all of the express, implied, and
incidental powers conferred thereby and by all acts amendatory thereof and
supplemental thereto, subject to the Constitution and laws of the United States
as they are now in effect, or as they may hereafter be amended, and subject to
all lawful and applicable rules, regulations, and orders of the Office of Thrift
Supervision ("Office").
Section 5. Capital Stock. The total number of shares of all classes of the
capital stock which the association has authority to issue is 4,000,000 of which
3,000,000 shares shall be common stock, of par value of $1.00 per share and of
which 1,000,000 shares shall be serial preferred stock of par value of $1.00 per
share. The shares may be issued from time to time as authorized by the board of
directors without approval of its stockholders except as otherwise provided in
this Section 5 or to the extent that such approval is required by governing law,
rule, or regulation. The consideration for the issuance of the shares shall be
paid in full before their issuance and shall not be less than the par value.
Neither promissory notes nor future services shall constitute payment or part
payment for the issuance of shares of the association. The consideration for
the shares shall be cash, tangible or intangible property (to the extent direct
investment in such property would be permitted), labor, or services actually
performed for the association, or any combination of the foregoing. In the
absence of actual fraud in the transaction, the value of such property, labor,
or services, as determined by the board of directors of the association, shall
be conclusive. Upon payment of such consideration, such shares shall be deemed
to be fully paid and nonassessable. In the case of a stock dividend, that part
of the surplus of the association which is transferred to stated capital upon
the issuance of shares as a share dividend shall be deemed to be the
consideration for their issuance.
Except for shares issuable in connection with the conversion of the
association from the mutual to the stock form of capitalization, no shares of
capital stock (including shares issuable upon conversion, exchange, or exercise
of other securities) shall be issued, directly or indirectly, to officers,
directors, or controlling persons of the association other than as part of a
general public offering or as qualifying shares to a director, unless their
issuance or the plan under which they would be issued has been approved by a
majority of the total votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, provided,
that this restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the holders of preferred stock,
voting as a class or series, to elect some members of the board of directors,
less than a majority thereof, in the event of default in the payment of
dividends on any class or series of preferred stock;
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(ii) To any provision which would require the holders of preferred stock,
voting as a class or series, to approve the merger or consolidation of the
association with another corporation or the sale, lease, or conveyance (other
than by mortgage or pledge) of properties or business in exchange for securities
of a corporation other than the association if the preferred stock is exchanged
for securities of such other corporation: Provided, That no provision may
require such approval for transactions undertaken with the assistance or
pursuant to the direction of the Office, the Federal Deposit Insurance
Corporation, or the Resolution Trust Corporation;
(iii) To any amendment which would adversely change the specific terms of
any class or series of capital stock as set forth in this Section 5 (or in any
supplementary sections hereto), including any amendment which would create or
enlarge any class or series ranking prior thereto in rights and preferences. An
amendment which increases the number of authorized shares of any class or series
of capital stock, or substitutes the surviving association in a merger or
consolidation for the association, shall not be considered to be such an adverse
change.
A description of the different classes and series (if any) of the
association's capital stock and a statement of the designations, and the
relative rights, preferences, and limitations of the shares of each class of and
series (if any) of capital stock are as follows:
A. Common Stock. Except as provided in this Section 5 (or in any
supplementary sections thereto), the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder.
Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the common stock as to the payment of dividends, the full amount of
dividends and of sinking fund, retirement fund, or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock and on any class or series
of stock entitled to participate therewith as to dividends out of any assets
legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
association, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the association available for distribution remaining after: (i)
payment or provision for payment of the association's debts and liabilities;
(ii) distributions or provisions for distributions in settlement of its
liquidation account; and (iii) distributions or provisions for distributions to
holders of any class or series of stock having preference over the common stock
in the liquidation, dissolution, or winding up of the association. Each share
of common stock shall have the same relative rights as and be identical in all
respects with all the other shares of common stock.
B. Preferred Stock. The association may provide in supplementary sections
to its charter for one or more classes of preferred stock, which shall be
separately identified. The shares of any class may be divided into and issued
in series, with each series separately designated so as to distinguish the
shares thereof from the shares of all other series and classes. The terms of
each series shall be set forth in a supplementary section to the charter. All
shares of the same class shall be identical except as to the following relative
rights and preferences, as to which there may be variations between different
series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the shares
of such series, whether dividends shall be cumulative and, if so, from which
date(s) the payment date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
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(c) The voting powers, full or limited, if any, of shares of such series;
(d) Whether the shares of such series shall be redeemable and, if so, the
price(s) at which, and the terms and conditions on which, such shares may be
redeemed;
(e) The amount(s) payable upon the shares of such series in the event of
voluntary or involuntary liquidation, dissolution, or winding up of the
association;
(f) Whether the shares of such series shall be entitled to the benefit of
a sinking or retirement fund to be applied to the purchase or redemption of such
shares, and if so entitled, the amount of such fund and the manner of its
application, including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the
association and, if so, the conversion price(s) or the rate(s) of exchange, and
the adjustments thereof, if any, at which such conversion or exchange may be
made, and any other terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such series
shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption of
supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established by a
supplementary charter section adopted by the board of directors, the association
shall file with the Secretary to the Office a dated copy of that supplementary
section of this charter establishing and designating the series and fixing and
determining the relative rights and preferences thereof.
Section 6. Preemptive Rights. Holders of the capital stock of the association
shall not be entitled to preemptive rights with respect to any shares of the
association which may be issued.
Section 7. Liquidation Account. Pursuant to the requirements of the Office's
regulations (12 C.F.R. Subchapter D), the association shall establish and
maintain a liquidation account for the benefit of its savings account holders as
of December 31, 1995 and March 31, 1997 ("eligible savers"). In the event of a
complete liquidation of the association, it shall comply with such regulations
with respect to the amount and the priorities on liquidation of each of the
association's eligible savers' inchoate interest in the liquidation account, to
the extent it is still in existence; provided, that an eligible savers'
--------
inchoate interest in the liquidation account shall not entitle such eligible
saver to any voting rights at meetings of the association's stockholders.
Section 8. Certain provisions applicable for five years. Notwithstanding
anything contained in the association's charter or bylaws to the contrary, for a
period of five years from the date of completion of the conversion of the
association from a mutual savings and loan association to a stock association,
the following provisions shall apply:
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A. Beneficial ownership limitation. No person shall directly or
indirectly offer to acquire or acquire the beneficial ownership of more than 10
percent of any class of an equity security of the association. This limitation
shall not apply to a transaction in which the association forms a holding
company without change in the respective beneficial ownership interests of its
stockholders other than pursuant to the exercise of any dissenter and appraisal
rights, the purchase of shares by underwriters in connection with a public
offering, or the purchase of shares by a tax-qualified employee stock benefit
plan which is exempt from the approval requirements under (S)574.3(c)(1)(vi) of
the Office's regulations.
In the event shares are acquired in violation of this Section 8, all shares
beneficially owned by any person in excess of 10 percent shall be considered
"excess shares" and shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matters submitted to the stockholders for a vote.
For purposes of this Section 8, the following definitions apply:
(1) The term "person" includes an individual, a group acting in concert, a
corporation, a partnership, an association, a joint stock company, a trust, an
unincorporated organization or similar company, a syndicate or any other group
formed for the purpose of acquiring, holding or disposing of the equity
securities of the association.
(2) The term "offer" includes every offer to buy or otherwise acquire,
solicitation of an offer to sell, tender offer for, or request or invitation for
tenders of, a security or interest in a security for value.
(3) The term "acquire" includes every type of acquisition, whether effected by
purchase, exchange, operation of law or otherwise.
(4) The term "acting in concert" means (a) knowing participation in a joint
activity or conscious parallel action towards a common goal whether or not
pursuant to an express agreement, or (b) a combination or pooling of voting or
other interests in the securities of an issuer for a common purpose pursuant to
any contract, understanding, relationship, agreement or other arrangements,
whether written or otherwise.
B. Cumulative voting limitation. Stockholders shall not be permitted to
cumulate their votes for election of directors.
C. Call for special meetings. Special meetings of stockholders relating
to changes in control of the association or amendments to its charter shall be
called only upon direction of the board of directors.
Section 9. Directors. The association shall be under the direction of a board
of directors. The authorized number of directors, as stated in the
association's bylaws, shall not be fewer than five or more than fifteen except
when a greater number is approved by the Director of the Office.
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Section 10. Amendment of Charter. Except as provided in Section 5, no
amendment, addition, alteration, change, or repeal of this charter shall be
made, unless such is first proposed by the board of directors of the
association, then preliminarily approved by the Office, which preliminary
approval may be granted by the Office pursuant to regulations specifying
preapproved charter amendments, and thereafter approved by the stockholders by a
majority of the total votes eligible to be cast at a legal meeting. Any
amendment, addition, alteration, change, or repeal so acted upon shall be
effective upon filing with the Office in accordance with regulatory procedures
or on such other date as the Office may specify in its preliminary approval.
Attest: ____________________________ By:____________________________
Francis E. Clute Keith E. Waggoner
Secretary President and Chief
Executive Officer
Rocky Ford Federal Savings Rocky Ford Federal Savings
and Loan Association and Loan Association
Attest: ____________________________ By:____________________________
Secretary Director of the Office of
Office of Thrift Supervision Thrift Supervision
Declared effective as of _________________.
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Exhibit C
BYLAWS
ROCKY FORD FEDERAL SAVING AND LOAN ASSOCIATION
ARTICLE I - HOME OFFICES
The home office of the association shall be 801 Swink Avenue, in the County
of Rocky Ford in the State of Colorado.
ARTICLE II - SHAREHOLDERS
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the association or at such
other place in the State of Colorado in which the principal place of business of
the association is located as the board of directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the association
for the election of directors and for the transaction of any other business of
the association shall be held annually within 120 days after the end of the
association's fiscal year on the Third Thursday in January if not a legal
holiday, and, if a legal holiday, then on the next day following which is not a
legal holiday, at 10:00 a.m., or at such other date and time within such 120-day
period as the board of directors may determine.
Section 3. Special Meetings. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office"), may be called at any time by the
chairman of the board, the president, or a majority of the board of directors,
and shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the association entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the
meeting and shall be delivered to the home office of the association addressed
to the chairman of the board, the president, or the secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert's Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws. The
board of directors shall designate, when present, either the chairman of the
board or the president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place, day, and
hour of the meeting and the purpose(s) for which the meeting is called shall be
delivered not fewer than 10 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the chairman of
the board, the president, or the secretary, or the directors calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the association as of the record date prescribed in Section
6 of this Article II with postage prepaid. When any shareholders' meeting,
either annual or special, is adjourned for 30 days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. It
shall not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment is
taken.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the board of directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not
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more than 60 days and, in case of a meeting of shareholders, not fewer than 10
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment.
Section 7. Voting Lists. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the association shall make a complete list of the shareholders
entitled to vote at such meeting, or any adjournment, arranged in alphabetical
order, with the address and the number of shares held by each. This list of
shareholders shall be kept on file at the home office of the association and
shall be subject to inspection by any shareholder at any time during usual
business hours for a period of 20 days prior to such meeting. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any shareholder during the entire time of the meeting.
The original stock transfer book shall constitute prima facie evidence of the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
In lieu of making the shareholder list available for inspection by
shareholders as provided in the preceding paragraph, the board of directors may
elect to follow the procedures prescribed in (S)552.6(d) of the Office's
regulations as now or hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the association
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
is represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to constitute less than a quorum.
Section 9. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his or her duly authorized
attorney in fact. Proxies solicited on behalf of the management shall be voted
as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid more
than eleven months from the date of its execution except for a proxy coupled
with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the association to the contrary, at any meeting of the
shareholders of the association, any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such stock and present in person or by proxy at such meeting, but
no votes shall be cast for such stock if a majority cannot agree.
Section 11. Voting of Shares of Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares standing in the name of a trustee may be voted by him or her,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him or her, without a transfer of such shares into his or her name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer into his or her name if authority to do so is contained in
an appropriate order of the court or other public authority by which such
receiver was appointed.
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A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the association nor shares
held by another corporation, if a majority of the shares entitled to vote for
the election of directors of such other corporation are held by the association,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
Section 12. Cumulative Voting. Unless otherwise provided in the
association's charter, every shareholder entitled to vote at an election for
directors shall have the right to vote, in person or by proxy, the number of
shares owned by the shareholder for as many persons as there are directors to be
elected and for whose election the shareholder has a right to vote, or to
cumulate the votes by giving one candidate as many votes as the number of such
directors to be elected multiplied by the number of shares shall equal or by
distributing such votes on the same principle among any number of candidates.
Section 13. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails
or refuses to act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the chairman of the
board or the president.
Unless otherwise prescribed by regulations of the Office, the duties of such
inspectors shall include: determining the number of shares and the voting power
of each share, the shares represented at the meeting, the existence of a quorum,
and the authenticity, validity, and effect of proxies; receiving votes, ballots,
or consents; hearing and determining all challenges and questions in any way
arising in connection with the rights to vote; counting and tabulating all votes
or consents; determining the result; and such acts as may be proper to conduct
the election or vote with fairness to all shareholders.
Section 14. Nominating Committee. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the association. No nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by shareholders are made in writing
and delivered to the secretary of the association at least five days prior to
the date of the annual meeting. Upon delivery, such nominations shall be posted
in a conspicuous place in each office of the association. Ballots bearing the
names of all persons nominated by the nominating committee and by shareholders
shall be provided for use at the annual meeting. However, if the nominating
committee shall fail or refuse to act at least 20 days prior to the annual
meeting, nominations for directors may be made at the annual meeting by any
shareholder entitled to vote and shall be voted upon.
Section 15. New Business. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary of the
association at least five days before the date of the annual meeting, and all
business so stated, proposed, and filed shall be considered at the annual
meeting; but no other proposal shall be acted upon at the annual meeting. Any
shareholder may make any other proposal at the annual meeting and the same may
be discussed and considered, but unless stated in writing and filed with the
secretary at least five days before the meeting, such proposal shall be laid
over for action at an adjourned, special, or annual meeting of the shareholders
taking place 30 days or more thereafter. This provision shall not prevent the
consideration and approval or
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disapproval at the annual meeting of reports of officers, directors, and
committees; but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated and filed as herein provided.
Section 16. Informal Action by Shareholders. Any action required to be taken
at a meeting of the shareholders, or any other action which may be taken at a
meeting of shareholders, may be taken without a meeting if consent in writing,
setting forth the action so taken, shall be given by all of the shareholders
entitled to vote with respect to the subject matter.
ARTICLE III - BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the association shall
be under the direction of its board of directors. The board of directors shall
annually elect a chairman of the board and a president from among its members
and shall designate, when present, either the chairman of the board or the
president to preside at its meetings.
Section 2. Number and Term. The board of directors shall consist of eight
(8) members and shall be divided into three classes as nearly equal in number as
possible. The members of each class shall be elected for a term of three years
and until their successors are elected and qualified. One class shall be
elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the board of directors
shall be held without other notice than this bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The board of directors may
provide, by resolution, the time and place, within the association's normal
lending territory, for the holding of additional regular meetings without other
notice than such resolution.
Section 4. Qualification. Each director shall at all times be the beneficial
owner of not less than 100 shares of capital stock of the association unless the
association is a wholly owned subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the board of directors may
be called by or at the request of the chairman of the board, the president, or
one-third of the directors. The persons authorized to call special meetings of
the board of directors may fix any place, within the association's normal
lending territory, as the place for holding any special meeting of the board of
directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participation
shall constitute presence in person but shall not constitute attendance for the
purpose of compensation pursuant to Section 12 of this Article III.
Section 6. Notice. Written notice of any special meeting shall be given to
each director at least two days prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall
be deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed or when delivered to the telegraph company if sent by
telegram. Any director may waive notice of any meeting by a writing filed with
the secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the board of directors need be
specified in the notice of waiver or notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by Section 2
of this Article III shall constitute a quorum for the transaction of business at
any meeting of the board of directors; but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time. Notice of any adjourned meeting shall be given in the same manner
as prescribed by Section 6 of this Article III.
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Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted to be
taken by the board of directors at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the directors.
Section 10. Resignation. Any director may resign at any time by sending a
written notice of such resignation to the home office of the association
addressed to the chairman of the board or the president. Unless otherwise
specified, such resignation shall take effect upon receipt by the chairman of
the board or the president. More than three consecutive absences from regular
meetings of the board of directors, unless excused by resolution of the board of
directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the board of directors.
Section 11. Vacancies. Any vacancy occurring on the board of directors may
be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors by
the shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the board of directors for a
term of office continuing only until the next election of directors by the
shareholders.
Section 12. Compensation. Directors, as such, may receive a stated salary
for their services. By resolution of the board of directors, a reasonable fixed
sum, and reasonable expenses of attendance, if any, may be allowed for actual
attendance at each regular or special meeting of the board of directors.
Members of either standing or special committees may be allowed such
compensation for actual attendance at committee meetings as the board of
directors may determine.
Section 13. Presumption of Assent. A director of the association who is
present at a meeting of the board of directors at which action on any
association matter is taken shall be presumed to have assented to the action
taken unless his or her dissent or abstention shall be entered in the minutes of
the meeting or unless he or she shall file a written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
association within five days after the date a copy of the minutes of the meeting
is received. Such right to dissent shall not apply to a director who voted in
favor of such action.
Section 14. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director may be removed for cause by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors. If less than the entire board is to be removed, no one of the
directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. Whenever the holders of
the shares of any class are entitled to elect one or more directors by the
provisions of the charter or supplemental sections thereto, the provisions of
this section shall apply, in respect to the removal of a director or directors
so elected, to the vote of the holders of the outstanding shares of that class
and not to the vote of the outstanding shares as a whole.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors, by resolution adopted by a
majority of the full board, may designate the chief executive officer and two or
more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
C-5
<PAGE>
Section 2. Authority. The executive committee, when the board of directors
is not in session, shall have and may exercise all of the authority of the board
of directors except to the extent, if any, that such authority shall be limited
by the resolution appointing the executive committee; and except also that the
executive committee shall not have the authority of the board of directors with
reference to: the declaration of dividends; the amendment of the charter or
bylaws of the association, or recommending to the stockholders a plan of merger,
consolidation, or conversion; the sale, lease, or other disposition of all or
substantially all of the property and assets of the association otherwise than
in the usual and regular course of its business; a voluntary dissolution of the
association; a revocation of any of the foregoing; or the approval of a
transaction in which any member of the executive committee, directly or
indirectly, has any material beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this Article
IV, each member of the executive committee shall hold office until the next
regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee may be held
without notice at such times and places as the executive committee may fix from
time to time by resolution. Special meetings of the executive committee may be
called by any member thereof upon not less than one day's notice stating the
place, date, and hour of the meeting, which notice may be written or oral. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted to be
taken by the executive committee at a meeting may be taken without a meeting if
a consent in writing, setting forth the action so taken, shall be signed by all
of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be filled
by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive committee
may be removed at any time with or without cause by resolution adopted by a
majority of the full board of directors. Any member of the executive committee
may resign from the executive committee at any time by giving written notice to
the president or secretary of the association. Unless otherwise specified, such
resignation shall take effect upon its receipt; the acceptance of such
resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The board of directors may by resolution
establish an audit, loan, or other committee composed of directors as it may
determine to be necessary or appropriate for the conduct of the business of the
association and may prescribe the duties, constitution, and procedures thereof.
C-6
<PAGE>
ARTICLE V - OFFICERS
Section 1. Positions. The officers of the association shall be a president,
one or more vice presidents, a secretary, and a treasurer, each of whom shall be
elected by the board of directors. The board of directors may also designate the
chairman of the board as an officer. The president shall be the chief executive
officer, unless the board of directors designates the chairman of the board as
chief executive officer. The president shall be a director of the association.
The offices of the secretary and treasurer may be held by the same person and a
vice president may also be either the secretary or the treasurer. The board of
directors may designate one or more vice presidents as executive vice president
or senior vice president. The board of directors may also elect or authorize the
appointment of such other officers as the business of the association may
require. The officers shall have such authority and perform such duties as the
board of directors may from time to time authorize or determine. In the absence
of action by the board of directors, the officers shall have such powers and
duties as generally pertain to their respective offices.
Section 2. Election and Term of Office. The officers of the association
shall be elected annually at the first meeting of the board of directors held
after each annual meeting of the stockholders. If the election of officers is
not held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly
elected and qualified or until the officer's death, resignation, or removal in
the manner hereinafter provided. Election or appointment of an officer,
employee, or agent shall not of itself create contractual rights. The board of
directors may authorize the association to enter into an employment contract
with any officer in accordance with regulations of the Office, but no such
contract shall impair the right of the board of directors to remove any officer
at any time in accordance with Section 3 of this Article V.
Section 3. Removal. Any officer may be removed by the board of directors
whenever in its judgment the best interests of the association will be served
thereby, but such removal, other than for cause, shall be without prejudice to
the contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification, or otherwise may be filled by the board of directors
for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be fixed
from time to time by the board of directors.
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 1. Contracts. To the extent permitted by regulations of the Office,
and except as otherwise prescribed by these bylaws with respect to certificates
for shares, the board of directors may authorize any officer, employee, or agent
of the association to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the association. Such authority may
be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the association
and no evidence of indebtedness shall be issued in its name unless authorized by
the board of directors. Such authority may be general or confined to specific
instances.
Section 3. Checks, Drafts, etc. All checks, drafts, or other orders for the
payment of money, notes, or other evidences of indebtedness issued in the name
of the association shall be signed by one or more officers, employees, or agents
of the association in such manner as shall from time to time be determined by
the board of directors.
Section 4. Deposits. All funds of the association not otherwise employed
shall be deposited from time to time to the credit of the association in any
duly authorized depositories as the board of directors may select.
C-7
<PAGE>
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the association shall be in such form as shall be determined by
the board of directors and approved by the Office. Such certificates shall be
signed by the chief executive officer or by any other officer of the association
authorized by the board of directors, attested by the secretary or an assistant
secretary, and sealed with the corporate seal or a facsimile thereof. The
signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the association itself or one of its employees. Each certificate for
shares of capital stock shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares are issued, with the
number of shares and date of issue, shall be entered on the stock transfer books
of the association. All certificates surrendered to the association for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares has been surrendered and
cancelled, except that in the case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the association as
the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of the
association shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by his
or her attorney authorized by a duly executed power of attorney and filed with
the association. Such transfer shall be made only on surrender for cancellation
of the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the association shall be deemed by the association
to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the association shall end on the 30th day of September of
each year. The association shall be subject to an annual audit as of the end of
its fiscal year by independent public accountants appointed by and responsible
to the board of directors. The appointment of such independent accountants
shall be subject to annual ratification by the shareholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the association's charter and the regulations and
orders of the Office, the board of directors may, from time to time, declare,
and the association may pay, dividends on its outstanding shares of capital
stock.
ARTICLE X - CORPORATE SEAL
The board of directors shall provide a association seal which shall be two
concentric circles between which shall be the name of the association. The year
of incorporation or an emblem may appear in the center.
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with regulations of the
Office at any time by a majority of the full board of directors or by a majority
of the votes cast by the stockholders of the association at any legal meeting.
C-8
<PAGE>
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON ____________, 1997)
The undersigned member of Rocky Ford Federal Savings and Loan Association
(the "Association") hereby appoints _______________, _______________ and
_______________ or any one of them, with full powers of substitution, as
attorneys-in-fact and agents for and in the name of the undersigned, to vote
such votes as the undersigned may be entitled to cast at the Special Meeting of
Members (the "Meeting") of Rocky Ford Federal Savings and Loan Association to be
held at the Association's office located at 801 Swink Avenue, Rocky Ford,
Colorado, on _________, ____________, 1997, at __:__ _.m., local time, and at
any adjournments thereof. They are authorized to cast all votes to which the
undersigned is entitled, as follows:
FOR AGAINST
--- -------
Adoption of the Plan of Conversion dated
January 14, 1997, providing for the conversion
of the Association from a federally chartered
mutual savings and loan association to a
federally chartered stock savings and loan
association (the "Converted Association"), as
a wholly owned subsidiary of Rocky Ford
Financial, Inc., and the related transactions
provided for in such plan, including the
adoption of an amended Charter and Bylaws for
the Converted Association.
[_] [_]
In their discretion, on any other matters that may lawfully come
before the meeting.
NOTE: The Board of Directors is not aware of any other matter that may come
before the Meeting.
C-9
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PLAN IF
NO CHOICE IS MADE HEREON
Should the undersigned be present and elect to vote at said Meeting or at
any adjournment thereof and, after notification to the Secretary of Rocky Ford
Federal Savings and Loan Association at said Meeting of the member's decision to
terminate this Proxy, then the power of said attorneys-in-fact or agents shall
be deemed terminated and of no further force and effect. The undersigned hereby
revokes any and all proxies heretofore given.
The undersigned acknowledges receipt of a Notice of Special Meeting of the
Members of Rocky Ford Federal Savings and Loan Association to be held on
____________, 1997 and a Proxy Statement dated ___________, 1997 and a
Prospectus dated ___________, 1997 prior to the execution of this Proxy.
-----------------------------
Date
-----------------------------
Signature
Note: Only one signature is required in the
case of a joint account.
<PAGE>
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON ____________, 1997)
The undersigned member of Rocky Ford Federal Savings and Loan Association
(the "Association") hereby appoints _______________, _______________ and
_______________ or any one of them, with full powers of substitution, as
attorneys-in-fact and agents for and in the name of the undersigned, to vote
such votes as the undersigned may be entitled to cast at the Special Meeting of
Members (the "Meeting") of Rocky Ford Federal Savings and Loan Association to be
held at the Association's office located at 801 Swink Avenue, Rocky Ford,
Colorado, on _________, ____________, 1997, at __:__ _.m., local time, and at
any adjournments thereof. They are authorized to cast all votes to which the
undersigned is entitled, as follows:
FOR AGAINST
--- -------
Adoption of the Plan of Conversion dated January 14, 1997,
providing for the conversion of the Association from a
federally chartered mutual savings and loan association to
a federally chartered stock savings and loan association
(the "Converted Association"), as a wholly owned subsidiary
of Rocky Ford Financial, Inc., and the related transactions
provided for in such plan, including the adoption of an
amended Charter and Bylaws for the Converted Association.
[_] [_]
In their discretion, on any other matters that may lawfully come before the
meeting.
NOTE: The Board of Directors is not aware of any other matter that may come
before the Meeting.
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PLAN IF
NO CHOICE IS MADE HEREON
Should the undersigned be present and elect to vote at said Meeting or at
any adjournment thereof and, after notification to the Secretary of Rocky Ford
Federal Savings and Loan Association at said Meeting of the member's decision to
terminate this Proxy, then the power of said attorneys-in-fact or agents shall
be deemed terminated and of no further force and effect. The undersigned hereby
revokes any and all proxies heretofore given.
The undersigned acknowledges receipt of a Notice of Special Meeting of the
Members of Rocky Ford Federal Savings and Loan Association to be held on
____________, 1997 and a Proxy Statement dated ___________, 1997 and a
Prospectus dated ___________, 1997 prior to the execution of this Proxy.
-------------------------------------------
Date
-------------------------------------------
Signature
Note: Only one signature is required in the
case of a joint account.
<PAGE>
Exhibit 99.3
Rocky Ford Federal Savings and Loan Association
Rocky Ford, Colorado
[MAP SHOWING OTERO COUNTY APPEARS HERE]
<PAGE>
Rocky Ford Financial, Inc.
Proposed Holding Company for
Rocky Ford Federal Savings and Loan Association
Rocky Ford, Colorado
Proposed Marketing Materials
1-20-97
[DRAFT]
<PAGE>
Marketing Materials
Rocky Ford Financial, Inc.
Rocky Ford, Colorado
Table of Contents
-----------------
I. Press Releases
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Schedule
C. Advertisement Examples
III. Question and Answer Brochure
A. Explanation
B. Method of Distribution
A. Example
III. Cover Letters
D. Explanation
E. Examples
V. IRA Mailing
A. Explanation
B. Quantity
C. IRA Mailing Example
VI. Individual Letters and Community Meeting Invitation
A. Explanation
B. Method of Distribution
C. Examples
VII. Counter Cards and Lobby Posters
A. Explanation
B. Quantity
VIII. Proxy Reminder
A. Explanation
B. Example
1
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers receive prompt accurate
information in a simultaneous manner, Trident advises the Association to
forward press releases to area newspapers, radio stations, etc. at various
points during the conversion process.
Only press releases approved by Conversion Counsel and the OTS will be
forwarded for publication in any manner.
B. Schedule
1. OTS Approval of Conversion
2. Close of Stock Offering
2
<PAGE>
C. Distribution List
National Distribution List
--------------------------
National Thrift News Wall Street Journal
- -------------------- -------------------
212 West 35th Street World Financial Center
13th Floor 200 Liberty
New York, New York 10001 New York, NY 10004
Richard Chang
American Banker SNL Securities
- --------------- --------------
One State Street Plaza Post Office Box 2124
New York, New York 10004 Charlottesville, Virginia 22902
Michael Weinstein
Barrons Investors Business Daily
- ------- ------------------------
Dow Jones & Company 12655 Beatrice Street
Barrons Statistical Information Post Office Box 661750
200 Burnett Road Los Angeles, California 90066
Chicopee, Massachusetts 01020
New York Times
- --------------
229 West 43rd Street
New York, NY 10036
3
<PAGE>
Local Media List
----------------
(To be provided)
Newspaper
- ---------
Radio
- -----
4
<PAGE>
D. Press Release Examples
PRESS RELEASE FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Keith E. Waggoner
(719) 254-7642
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
-----------------------------------------------
CONVERSION TO STOCK FORM APPROVED
---------------------------------
Rocky Ford, Colorado (__________ __, 1997) - Keith E. Waggoner, Executive
Vice President and CEO of Rocky Ford Federal Savings and Loan Association
("Rocky Ford Federal Savings and Loan " or the "Association"), Rocky Ford,
Colorado, announced that Rocky Ford Federal Savings and Loan has received
approval from the Office of Thrift Supervision to convert from a federally-
chartered mutual savings and loan association to a federally-chartered stock
savings and loan association. In connection with the Conversion, Rocky Ford
Federal Savings and Loan has formed a holding company, Rocky Ford Financial,
Inc., to hold all of the outstanding capital stock of Rocky Ford Federal Savings
and Loan.
Rocky Ford Financial, Inc. is offering up to 368,000 shares of its common
stock, subject to adjustment, at a price of $10.00 per share. Certain account
holders and borrowers of the Association will have an opportunity to subscribe
for stock through a Subscription Offering that closes on ___________, 1997.
Shares that are not subscribed for during the Subscription Offering may be
offered to certain members of the general public in a Community Offering, with
first preference given to natural persons and trusts of natural persons who are
residents of Otero County. The Subscription Offering and Community Offering, if
conducted, will be managed by Trident Securities, Inc. of Raleigh, North
Carolina. Copies of the Prospectus relating to the offerings and describing the
Plan of Conversion will be mailed to customers on or about __________ __, 1997.
As a result of the Conversion, Rocky Ford Federal Savings and Loan will be
structured in
5
<PAGE>
the stock form as are all commercial banks and an increasing
number of savings institutions and will be a wholly-owned subsidiary of Rocky
Ford Financial, Inc. According to Mr. Waggoner, "Our day to day operations
will not change as a result of the Conversion and deposits will continue to be
insured by the FDIC up to the applicable legal limits."
Customers with questions concerning the stock offering should call Rocky
Ford Federal Savings and Loan's Stock Information Center at (719) ________, or
visit Rocky Ford Federal Savings and Loan's office.
6
<PAGE>
PRESS RELEASE FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Keith E. Waggoner
(719) 254-7642
ROCKY FORD FEDERAL SAVINGS AND LOAN COMPLETES INITIAL STOCK
-------------------------------------------------------------
OFFERING
--------
Rocky Ford, Colorado - (____________, 1997) Keith E. Waggoner, Executive
Vice President and CEO of Rocky Ford Federal Savings and Loan Association
("Rocky Ford Federal Savings and Loan" or the "Association"), announced today
that Rocky Ford Financial, Inc., the proposed holding company for Rocky Ford
Federal Savings and Loan , has completed its initial stock offering in
connection with the Association's conversion from mutual to stock form. A total
of ____________ shares were sold at the price of $10.00 per share.
On ____________, 1997, Rocky Ford Federal Savings and Loan's Plan of
Conversion was approved by the Association's voting members at a special meeting
of members.
Mr. Waggoner said that the officers and boards of directors of Rocky Ford
Financial, Inc. and Rocky Ford Federal Savings and Loan wished to express
their thanks for the response to the stock offering and that Rocky Ford Federal
Savings and Loan looks forward to serving the needs of its customers and new
stockholders as a community-based stock institution. The stock is anticipated
to commence trading on ____________, 1997 on the National Daily Quotation System
("Pink Sheets"). Trident Securities, Inc. of Raleigh, North Carolina managed
the stock offering.
7
<PAGE>
II. Advertisements
A. Explanation
The intended use of the attached advertisement "A" is to notify Rocky Ford
Federal Savings and Loan's customers and members of the local community
that the conversion offering is underway.
The intended use of advertisement "B" is to remind Rocky Ford Federal
Savings and Loan's customers of the closing date of the Subscription
Offering.
B. Media Schedule
1. Advertisement A - To be run immediately following OTS approval and
possibly run weekly for the first three weeks.
2. Advertisement B - To be run during the last week of the subscription
offering.
Trident may feel it is necessary to run more ads in order to remind
customers of the close of the Subscription Offering and the Community
Offering, if conducted.
Alternatively, Trident may, depending upon the response from the customer
base, choose to run fewer ads or no ads at all.
These ads will run in the local newspapers.
The ad size will be as shown or smaller.
8
<PAGE>
This announcement is neither an offer to sell nor a solicitation of an offer to
buy these securities. The offer is made only by the prospectus. These shares
have not been approved or disapproved by the Securities and Exchange Commission,
the Office of Thrift Supervision or the Federal Deposit Insurance Corporation,
nor has such commission, office or corporation passed upon the accuracy or
adequacy of the prospectus. Any representation to the contrary is unlawful.
New Issue , 1997
----------
368,000 Shares
These shares are being offered pursuant
to a Plan of Conversion whereby
Rocky Ford Federal
Savings And Loan Association
Rocky Ford, Colorado, will
convert from a federal mutual savings and loan association to a
federal capital stock savings and loan association
and become a wholly owned subsidiary of
Rocky Ford Financial, Inc.
Common Stock
---------------
Price $10.00 Per Share
---------------
Trident Securities, Inc.
For a copy of the prospectus call (719) .
--------
Copies of the prospectus may be obtained in any State in which this
announcement is circulated from Trident Securities, Inc. or such other
brokers and dealers as may legally offer these securities in such state.
The stock will not be insured by the FDIC or any other government agency.
9
<PAGE>
ROCKY FORD FEDERAL
SAVINGS AND LOAN ASSOCIATION
__________ __, 1997 IS THE DEADLINE TO
ORDER STOCK OF ROCKY FORD FINANCIAL, INC.
Customers of Rocky Ford Federal Savings and Loan Association
have the opportunity
to invest in Rocky Ford Federal Savings and Loan Association
by subscribing
for common stock in its proposed holding company
ROCKY FORD FINANCIAL, INC.
A Prospectus relating to these securities is
available at our office or by calling our
Stock Information Center at (719) ________.
This announcement is neither an offer to sell nor a
solicitation of an offer to buy the stock of
Rocky Ford Financial, Inc. The offer is made only by the
Prospectus. The shares of common stock are not
deposits or savings accounts and will not be insured
by the Federal Deposit Insurance Corporation
or any other government agency.
Copies of the Prospectus may be obtained in any State in which this announcement
is circulated from Trident Securities, Inc. or such other brokers and dealers
as may legally offer these securities in such state.
10
<PAGE>
III. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
conversion. It serves two purposes: a) to answer some of the most commonly
asked questions in "plain, everyday language"; and b) to highlight in
brochure form the purchase commitments of the Association's officers and
directors shown in the Prospectus. Although most of the answers are taken
verbatim from the Prospectus, it saves the individual from searching for
the answer to a simple question.
B. Method of Distribution
There are four primary methods of distribution of the Question and Answer
brochure. However, regardless of the method the brochures are always
accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing to
all members of the Association.
2. Question and Answer brochures are available in Rocky Ford Federal
Savings and Loan's office.
3. Question and Answer brochures are sent out in a standard information
packet to all interested investors who phone the Stock Information
Center requesting information.
11
<PAGE>
PROPOSED OFFICER AND DIRECTOR PURCHASES
<TABLE>
<CAPTION>
Name and Position Total Shares Amount of Purchase
- ----------------- ------------ ------------------
<S> <C> <C>
Donald F. Gause, President and Director
Keith E. Waggoner, Executive Vice President
and Chief Executive Officer
Norman L. Bailey, Director
William E. Burrell, Director
Francis E. Clute, Director
Brian H. Hancock, Director
R. Dean Jones, Director
Wayne W. Whittaker, Director ------------ ------------------
</TABLE>
All directors and executive officers,
as a group (8 persons) and their
associates *
* Represents ___% of the total shares to be issued based upon the issuance of
320,000 shares. Excludes amounts associated with the Association's proposed
ESOP and MRP.
12
<PAGE>
QUESTIONS AND ANSWERS
REGARDING
THE PLAN OF CONVERSION
On January 14, 1997, the Board of Directors of Rocky Ford Federal Savings and
Loan Association ("Rocky Ford Federal Savings and Loan " or the "Association")
unanimously adopted the Plan of Conversion (which was amended on
______________), pursuant to which Rocky Ford Federal Savings and Loan will
convert from a federally-chartered mutual savings and loan association to a
federally-chartered stock savings and loan association. In addition, all of
Rocky Ford Federal Savings and Loan's outstanding capital stock will be issued
Rocky Ford Financial, Inc. (the "Holding Company"), which was organized by
Rocky Ford Federal Savings and Loan to own Rocky Ford Federal Savings and Loan
as a subsidiary.
This brochure is provided to answer general questions you might have about the
Conversion. Following the Conversion, Rocky Ford Federal Savings and Loan will
continue to provide financial services to its depositors, borrowers and other
customers as it has in the past and will operate with its existing management
and employees. The Conversion will not affect the terms, balances, interest
rates or existing federal insurance coverage on Rocky Ford Federal Savings and
Loan 's deposits or the terms or conditions of any loans to existing borrowers
under their individual contract arrangements with Rocky Ford Federal Savings and
Loan.
For complete information regarding the Conversion, see the Prospectus and the
Proxy Statement dated __________ __, 1997. Copies of each of the Prospectus and
the Proxy Statement may be obtained by calling the Stock Information Center at
(719) ________.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ROCKY FORD FINANCIAL, INC. COMMON STOCK. OFFERS TO BUY OR TO SELL
MAY BE MADE ONLY BY THE PROSPECTUS. PLEASE READ THE PROSPECTUS PRIOR TO MAKING
AN INVESTMENT DECISION. THE SHARES OF ROCKY FORD FINANCIAL, INC. COMMON STOCK
BEING OFFERED IN THE SUBSCRIPTION AND COMMUNITY OFFERINGS ARE NOT SAVINGS OR
DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND
OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
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QUESTIONS AND ANSWERS
Rocky Ford Financial, Inc.
(the proposed holding company for
Rocky Ford Federal Savings and Loan Association)
Questions and Answers Regarding the Subscription and Community Offerings
MUTUAL TO STOCK CONVERSION
--------------------------
1. Q. What is a "Conversion"?
A. Conversion is a change in the legal form of organization. Rocky Ford
Federal Savings and Loan currently operates as a federally-chartered
mutual savings and loan association with no stockholders. Through the
Conversion, Rocky Ford Federal Savings and Loan will become a
federally-chartered stock savings and loan association, and the stock
of its holding company, Rocky Ford Financial, Inc. will be held by
stockholders who purchase stock in the Subscription and Community
Offerings or in the open market following the Offerings.
2. Q. Why is Rocky Ford Federal Savings and Loan converting?
A. Rocky Ford Federal Savings and Loan , as a mutual savings and loan
association, does not have stockholders and has no authority to issue
capital stock. By converting to the stock form of organization, the
Association will be structured in the form used by commercial banks,
most business entities and a growing number of savings institutions.
The Conversion will be important to the future growth and performance
of the Rocky Ford Federal Savings and Loan by providing a larger
capital base from which the Association may operate, the ability to
attract and retain qualified management through stock-based employee
benefit plans, enhanced ability to diversify into other financial
services related activities and expanded ability to render services to
the public.
The Board of Directors and management of Rocky Ford Federal Savings
and Loan believe that the stock form of organization is preferable to
the mutual form of organization for a financial institution. The
Board and management recognize the decline in the number of mutual
thrifts from over 12,500 mutual institutions in 1929 to under 800
mutual thrifts today.
Rocky Ford Federal Savings and Loan believes that converting to the
stock form of organization will allow Rocky Ford Federal Savings and
Loan to more effectively compete with local community banks, thrifts,
and with statewide and regional banks, which are in stock form. Rocky
Ford Federal Savings and Loan believes that by combining its existing
quality service and products with a local ownership base the
Association's customers and community members who become stockholders
will be inclined to do more business with Rocky Ford Federal Savings
and Loan.
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Furthermore, because Rocky Ford Federal Savings and Loan competes
with local and regional banks not only for customers, but also for
employees, Rocky Ford Federal Savings and Loan believes that the
stock form of organization will better afford Rocky Ford Federal
Savings and Loan the opportunity to attract and retain employees,
management and directors through various stock benefit plans which are
not available to mutual savings institutions.
3. Q. Is Rocky Ford Federal Savings and Loan's mutual to stock
conversion beneficial to the communities that the Association serves?
A. Management believes that the structure of the Subscription and
Community Offerings is in the best interest of the communities that
Rocky Ford Federal Savings and Loan serves because following the
Conversion it is anticipated that a significant portion of the Common
Stock will be owned by local residents desiring to share in the
ownership of a local community financial institution. Management
desires that a significant portion of the shares of common stock sold
in the Offerings will be sold to residents of the Association's Local
Community (Otero County, Colorado).
4. Q. What effect will the Conversion have on deposit accounts and
loans?
A. Terms and balances of accounts in Rocky Ford Federal Savings and Loan
and interest rates paid on such accounts will not be affected by the
Conversion. Insurable accounts will continue to be insured by the
Federal Deposit Insurance Corporation ("FDIC") up to the maximum
amount permitted by law. The Conversion also will not affect the
terms or conditions of any loans to existing borrowers or the rights
and obligations of these borrowers under their individual contractual
arrangements with Rocky Ford Federal Savings and Loan.
5. Q. Will the Conversion cause any changes in Rocky Ford Federal
Savings and Loan 's personnel?
A. No. Both before and after the Conversion, Rocky Ford Federal Savings
and Loan 's business of accepting deposits, making loans and providing
financial services will continue without interruption with the same
board of directors, management and staff.
6. Q. What approvals must be received before the Conversion becomes
effective?
A. First, the Board of Directors of Rocky Ford Federal Savings and Loan
must adopt the Plan of Conversion, which occurred on January 14, 1997.
The Plan of Conversion was then amended on _______________. Second,
the Office of Thrift Supervision must approve the applications
required to effect the Conversion. These approvals have been
obtained. Third, the Plan of Conversion must be approved by a
majority of all votes eligible to be cast by Rocky Ford Federal
Savings and Loan 's voting members. A Special Meeting of voting
members will be held on __________ __, 1997, to consider and vote upon
the Plan of Conversion.
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<PAGE>
THE HOLDING COMPANY
-------------------
7. Q. What is a holding company?
A. A holding company is a company that owns another entity. Concurrent
with the Conversion, Rocky Ford Federal Savings and Loan will become
a subsidiary of Rocky Ford Financial, Inc., a company organized by
Rocky Ford Federal Savings and Loan to acquire all of the capital
stock of Rocky Ford Federal Savings and Loan to be outstanding after
the Conversion.
8. Q. If I decide to buy stock in this offering, will I own stock in the
Holding Company or Rocky Ford Federal Savings and Loan?
A. You will own stock in Rocky Ford Financial, Inc. However, Rocky Ford
Financial, Inc., as a holding company, will own all of the outstanding
capital stock of Rocky Ford Federal Savings and Loan.
9. Q. Why did the Board of Directors form the Holding Company?
A. The Board of Directors believes that the Conversion of Rocky Ford
Federal Savings and Loan and the formation of the Holding Company will
result in a stronger financial institution with the ability to provide
additional flexibility to diversify the Association's business
activities. The Holding Company will also be able to use stock-based
incentive programs to attract and retain executive and other
personnel.
ABOUT BECOMING A STOCKHOLDER
----------------------------
10. Q. What are the Subscription and Community Offerings?
A. Under the Plan of Conversion adopted by Rocky Ford Federal Savings and
Loan , the Holding Company is offering shares of stock in the
Subscription Offering, to certain current and former customers of the
Association and to the Association's Employee Stock Ownership Plan
("ESOP"). Shares which are not subscribed for in the Subscription
Offering, if any, may be offered to the general public in a Community
Offering with preference given to natural persons who are residents of
the Association's Local Community (Otero County). These Offerings are
consistent with the board's objective of Rocky Ford Financial, Inc.
being a locally owned financial institution. The Subscription
Offering and Community Offering, if conducted, are being managed by
Trident Securities, Inc. It is anticipated that any shares not
subscribed for in either the Subscription or Community Offerings may
be offered for sale in a Syndicated Community Offering, which is an
offering on a best efforts basis by a selling group of broker-dealers.
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<PAGE>
11. Q. Must I pay a commission to buy stock in conjunction with the
Subscription, Community or Syndicated Community Offerings?
A. No. You will not pay a commission to buy the stock if the stock is
purchased in the Subscription Offering or Community Offering, if
conducted.
12. Q. How many shares of Rocky Ford Financial, Inc. stock will be issued in
the Conversion?
A. It is currently expected that between 272,000 shares and 368,000
shares of common stock will be sold at a price of $10.00 per share.
Under certain circumstances the number of shares may be increased to
423,200.
13. Q. How was the price determined?
A. The aggregate price of the common stock was determined by Ferguson &
Company, LLC, an independent appraisal firm specializing in the thrift
industry, and was approved by the Office of Thrift Supervision. The
price is based on the pro forma market value of Rocky Ford Federal
Savings and Loan and the Holding Company as determined by the
independent evaluation.
14. Q. Who is entitled to buy stock in the Conversion?
A. The shares of Rocky Ford Financial, Inc. to be issued in the
Conversion are being offered in the Subscription Offering in the
following order of priority to: (i) depositors with $50.00 or more on
deposit at the Association as of December 31, 1995 ("Eligible Account
Holders"), (ii) the Association's ESOP, (iii) depositors with $50.00
or more on deposit at the Association as of March 31, 1997, other than
Eligible Account Holders, ("Supplemental Eligible Account Holders"),
(iv) depositors and borrowers of the Association as of _____________,
1997, other than Eligible Account Holders and Supplemental Eligible
Account Holders ("Other Members"), subject to the priorities and
purchase limitations set forth in the Plan of Conversion. Subject to
the prior rights of holders of subscription rights, Common Stock not
subscribed for in the Subscription Offering may be offered in the
Community Offering to certain members of the general public, with
preference given to natural persons and trusts of natural persons
residing in the Association's Local Community (Otero County). Shares,
if any, not subscribed for in the Subscription or Community Offerings
may be offered to the general public in a Syndicated Community
Offering.
15. Q. Are the subscription rights transferable?
A. No. Subscription rights granted to Rocky Ford Federal Savings and
Loan 's Eligible Account Holders, Supplemental Eligible Account
Holders and Other Members in the Conversion are not transferable.
Persons violating such prohibition, directly or indirectly, may lose
their right to purchase stock in the Conversion and be subject to
other possible sanctions. IT IS THE RESPONSIBILITY OF EACH SUBSCRIBER
QUALIFYING AS AN ELIGIBLE ACCOUNT HOLDER, SUPPLEMENTAL ELIGIBLE
ACCOUNT HOLDER OR OTHER MEMBER TO LIST COMPLETELY ALL ACCOUNT NUMBERS
FOR QUALIFYING SAVINGS ACCOUNTS OR LOANS AS OF THE QUALIFYING DATE ON
THE STOCK ORDER FORM.
17
<PAGE>
16. Q. What are the minimum and maximum numbers of shares that I can purchase
in the Conversion?
A. The minimum number of shares is 25. The maximum number of shares that
may be purchased in aggregate in the Conversion by any person or
entity other than the ESOP, together with any associate or persons or
entities acting in concert with such person, currently is the lesser
of 5% or $150,000 of common stock issued in the conversion.
17. Q. Are the Board of Directors and management of Rocky Ford Federal
Savings and Loan buying a significant amount of the stock of the
Holding Company?
A. Directors and executive officers of the Association are expected to
subscribe for __________ shares. The purchase price paid by directors
and executive officers will be the same $10.00 per share price as that
paid by all other persons who order stock in the Subscription or
Community Offerings.
18. Q. How do I subscribe for shares of stock?
A. To subscribe for shares of stock in the Subscription Offering, you
should send or deliver a stock order form together with full payment
(or appropriate instructions for withdrawal from permitted deposit
accounts as described below) to Rocky Ford Federal Savings and Loan
in the postage-paid envelope provided. The stock order form and
payment or withdrawal authorization instructions must be received
prior to the close of the Subscription Offering, which will terminate
at 12:00 p.m., Local Time, on __________ __, 1997, unless extended.
Payment for shares may be made in cash (if made in person) or by check
or money order. Subscribers who have deposit accounts with Rocky Ford
Federal Savings and Loan may include instructions on the stock order
form requesting withdrawal from such deposit account(s) to purchase
shares of Rocky Ford Financial, Inc. Withdrawals from certificates of
deposit may be made without incurring an early withdrawal penalty.
If shares remain available for sale after the expiration of the
Subscription Offering, they may be offered in the Community Offering,
which may commence at any time after the commencement of the
Subscription Offering and may terminate at any time without notice,
but may not terminate later than ______________, 1997. Persons who
wish to order stock in the Community Offering should return their
stock order form as soon as possible after the Community Offering
begins. Members of the general public should contact the Stock
Information Center at (719) ________ for additional information.
19. Q. May I use funds in a retirement account to purchase stock?
A. Yes. If you are interested in using funds held in your retirement
account at Rocky Ford Federal Savings and Loan , the Stock Information
Center can assist you in transferring those funds to a self-directed
IRA, if necessary, and directing the trustee to purchase the stock.
This process may be done without an early withdrawal penalty and
generally without a negative tax consequence to your retirement
account. Due to the additional paperwork involved, IRA transfers must
be
18
<PAGE>
completed by _________. For additional information, call the Stock
Information Center at (719) __________.
20. Q. Will I receive interest on funds I submit for a stock purchase?
A. Yes. Rocky Ford Federal Savings and Loan will pay interest at its
passbook rate from the date the funds are received until completion of
the stock offering or termination of the Conversion. All funds
authorized for withdrawal from deposit accounts with Rocky Ford
Federal Savings and Loan will continue to earn interest at the
contractual rate until the date of the completion of the Conversion.
21. Q. May I obtain a loan from Rocky Ford Federal Savings and Loan to pay
for shares purchased in the Conversion?
A. No. Federal regulations prohibit Rocky Ford Federal Savings and Loan
from making loans for this purpose. However, federal regulations do
not prohibit you from obtaining a loan from another source for the
purpose of purchasing stock in the Conversion.
22. Q. If I buy stock in the Conversion, how would I go about buying
additional shares or selling shares in the aftermarket?
A. Rocky Ford Financial, Inc., as a newly organized company, has never
issued capital stock, and consequently there is no established market
for its Common Stock at this time. Rocky Ford Financial, Inc. has
requested that Trident Securities, Inc. make a market for the Common
Stock through the National Daily Quotation System ("Pink Sheets").
However, it is unlikely that an active trading market for the Common
Stock will develop, and there can be no assurance that the shares of
Common Stock being offered in the Conversion can be resold at or above
the $10.00 purchase price.
23. Q. What is the Holding Company's dividend policy?
A. The Board of Directors of the Holding Company intends to adopt a
policy of paying regular semi-annual cash dividends at an annual rate
of $0.30 per share (3.0%) commencing in the first full quarter
following consummation of the Conversion. Dividends will be subject
to determination and declaration by the Board of Directors, which will
take into account a number of factors, including the operating results
and financial condition of the Holding Company, net worth and capital
requirements and regulatory restrictions on the payment of dividends
by the Association to the Holding Company upon which dividends paid by
the Holding Company eventually will be primarily dependent. There can
be no assurance that dividends will in fact be paid on the Common
Stock or that, if paid, such dividends will not be reduced or
eliminated in future periods.
24. Q. Will the FDIC insure the shares of the holding company?
A. No. The shares of Rocky Ford Financial, Inc. are not savings deposits
or savings accounts and are not insured by the FDIC or any other
government agency.
25. Q. If I subscribe for shares and later change my mind, will I be able to
get a refund or modify my order?
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<PAGE>
A. No. Your order cannot be canceled, withdrawn or modified once it has
been received by Rocky Ford Federal Savings and Loan without the
consent of Rocky Ford Federal Savings and Loan .
ABOUT VOTING "FOR" THE PLAN OF CONVERSION
-----------------------------------------
26. Q. Am I eligible to vote at the Special Meeting of Members to be held to
consider the Plan of Conversion?
A. You are eligible to vote at the Special Meeting of Members to be held
on __________ __, 1997 if you were a depositor or borrower of Rocky
Ford Federal Savings and Loan at the close of business on the Voting
Record Date (_______, 1997) and continue as such until the Special
Meeting. If you were a member on the Voting Record Date, you should
have received a proxy statement and a proxy card with which to vote.
27. Q. How many votes do I have?
A. Each account holder is entitled to one vote for each $100, or fraction
thereof, on deposit in such account(s). Each borrower member is
entitled to cast one vote in addition to the number of votes, if any,
he or she is entitled to cast as an account holder. No member may
cast more than 1,000 votes.
28. Q. If I vote "against" the Plan of Conversion and it is approved, will I
be prohibited from buying stock during the Subscription Offering?
A. No. Voting against the Plan of Conversion in no way restricts you
from purchasing Rocky Ford Financial, Inc. stock in the Subscription
Offering.
29. Q. Did the Board of Directors of Rocky Ford Federal Savings and Loan
unanimously adopt the Plan of Conversion?
A. Yes. Rocky Ford Federal Savings and Loan 's Board of Directors
unanimously adopted the Plan of Conversion and urges that all members
vote "FOR" approval of such Plan.
20
<PAGE>
30. Q. What happens if Rocky Ford Federal Savings and Loan does not get
enough votes to approve the Plan of Conversion?
A. The Conversion would not take place, and Rocky Ford Federal Savings
and Loan would remain a mutual savings institution.
31. Q. As a qualifying depositor or borrower of Rocky Ford Federal Savings
and Loan , am I required to vote?
A. No. However, failure to return your proxy card or otherwise vote will
have the same effect as a vote AGAINST the Plan of Conversion.
32. Q. What is a Proxy Card?
A. A proxy card gives you the ability to vote without attending the
Special Meeting in person. If you received more than one
informational packet, then you should vote the proxy cards in all
packets. Your proxy card(s) is (are) located in the window sleeve of
your informational packet(s).
You may attend the meeting and vote, even if you have returned your
proxy card, if you choose to do so. However, if you are unable to
attend, you still are represented by proxy. Previously executed
proxies, other than those proxies sent pursuant to the Conversion,
will not be used to vote for approval of the Plan of Conversion, even
if the respective members do not execute another proxy or attend the
Special Meeting and vote in person.
33. Q. How can I get further information concerning the stock offering?
A. You may call the Stock Information Center at (719) ________ for
further information or to request a copy of the Prospectus, a stock
order form, a proxy statement or a proxy card.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ROCKY FORD FINANCIAL, INC. COMMON STOCK. SUCH OFFERS AND
SOLICITATIONS MAY BE MADE ONLY BY MEANS OF THE PROSPECTUS. COPIES OF THE
PROSPECTUS MAY BE OBTAINED BY CALLING THE STOCK INFORMATION CENTER AT (719)
______________.
THE SHARES OF ROCKY FORD FINANCIAL, INC. COMMON STOCK BEING OFFERED ARE NOT
SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE SAVINGS ASSOCIATION
INSURANCE FUND OF THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
21
<PAGE>
IV. Cover Letters for Initial Mailing
A. Explanation
These cover letters are used as an introduction for the Offering and Proxy
materials mailed to potential investors.
B. Examples
22
<PAGE>
(Rocky Ford Federal Savings and Loan Letterhead)
____________, 1997
Dear Valued Customer:
Rocky Ford Federal Savings and Loan Association ("Rocky Ford Federal
Savings and Loan " or the "Association") is pleased to announce that it has
received regulatory approval to proceed with its plan to convert to a federally-
chartered stock savings and loan association. This stock conversion is the most
significant event in the history of Rocky Ford Federal Savings and Loan in that
it allows customers, community members, directors and employees an opportunity
to own stock in Rocky Ford Financial, Inc., the proposed holding company for the
Association.
For over 63 years, the Association has successfully operated as a
mutual company. We want to assure you that the Conversion will not affect the
terms, balances, interest rates or existing FDIC insurance coverage deposits at
the Association, or the terms or conditions of any loans to existing borrowers
under their individual contract arrangements with the Association. Let us also
assure you that the Conversion will not result in any changes in the management,
personnel or the Board of Directors of the Association.
As one of our valued members, you have the opportunity to invest in
the Association's future by purchasing stock in Rocky Ford Financial, Inc.
during the Subscription Offering, without paying a sales commission.
If you decide to exercise your subscription rights to purchase shares,
you must return the properly completed stock order form together with full
payment for the subscribed shares so that it is received by the Association not
later than 12:00 p.m. Local Time on __________, 1997.
Enclosed is a proxy card. Your Board of Directors solicits your vote
"FOR" the Association's Plan of Conversion. A vote in favor of the Plan does
not obligate you to purchase stock. Please sign and return your proxy card
promptly; your vote is important to us.
We have also enclosed a Prospectus and Proxy Statement which fully
describes the Association, its management, board and financial strength and the
Plan of Conversion. Please review it carefully before you vote or invest. For
your convenience we have established a Stock Information Center. If you have
any questions, please call the Stock Information Center collect at (719) _____.
We look forward to continuing to provide quality financial services to
you in the future.
Sincerely,
Keith E. Waggoner
Executive Vice President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Rocky Ford Financial, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and Proxy Statement. There shall be no sale of stock in
any state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
23
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(Rocky Ford Federal Savings and Loan Letterhead)
, 1997
-----------
Dear Interested Investor:
Rocky Ford Federal Savings and Loan Association ("Rocky Ford Federal
Savings and Loan " or the "Association") is pleased to announce that it has
received regulatory approval to proceed with its plan to convert to a federally-
chartered stock savings and loan association. This stock conversion is the most
significant event in the history of the Association in that it allows customers,
community members, directors and employees an opportunity to own stock in Rocky
Ford Financial, Inc., the proposed holding company for the Association.
For over 63 years, the Association has successfully operated as a
mutual company. We want to assure you that the Conversion will not affect the
terms, balances, interest rates or existing FDIC insurance coverage on the
Association deposits, or the terms or conditions of any loans to existing
borrowers under their individual contract arrangements with the Association.
Let us also assure you that the Conversion will not result in any
changes in the management, personnel or the Board of Directors of the
Association.
Enclosed is a Prospectus which fully describes the Association, its
management, board and financial strength. Please review it carefully before you
make an investment decision. If you decide to invest, please return to the
Association a properly completed stock order form together with full payment for
shares at your earliest convenience but not later than 12:00 p.m. Local Time on
_________, 1997. For your convenience we have established a Stock Information
Center. If you have any questions, please call the Stock Information Center
collect at (719) ________.
We look forward to continuing to provide quality financial services to
you in the future.
Sincerely,
Keith E. Waggoner
Executive Vice President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Rocky Ford Financial, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and Proxy Statement. There shall be no sale of stock in
any state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
24
<PAGE>
(Rocky Ford Federal Savings and Loan Letterhead)
, 1997
-----------
Dear Friend:
Rocky Ford Federal Savings and Loan Association ("Rocky Ford Federal
Savings and Loan " or the "Association") is pleased to announce that we have
received regulatory approval to proceed with its plan to convert to a federally-
chartered stock savings and loan association. This stock conversion is the most
significant event in the history of Rocky Ford Federal Savings and Loan in that
it allows customers, community members, directors and employees an opportunity
to own stock in Rocky Ford Financial, Inc., the proposed holding company for the
Association.
For over 63 years, the Association has successfully operated as a
mutual company. We want to assure you that the Conversion will not affect the
terms, balances, interest rates or existing FDIC insurance coverage on the
Association deposits, or the terms or conditions of any loans to existing
borrowers under their individual contract arrangements with the Association.
Let us also assure you that the Conversion will not result in any
changes in the management, personnel or the Board of Directors of the
Association.
Our records indicate that you were a depositor of the Association on
__________, but that you were not a member on _____________, 1997. Therefore,
under applicable law, you are entitled to subscribe for Common Stock in Rocky
Ford Financial, Inc.'s Subscription Offering. Orders submitted by you and
others in the Subscription Offering are contingent upon the current members'
approval of the Plan of Conversion at a special meeting of members to be held on
_________, 1997 and upon receipt of all required regulatory approvals.
If you decide to exercise your subscription rights to purchase shares,
you must return the properly completed stock order form together with full
payment for the subscribed shares so that it is received at the Association not
later than 12:00 p.m. Local Time on _________, 1997.
Enclosed is a Prospectus which fully describes the Association, its
management, board and financial strength. Please review it carefully before you
invest. For your convenience we have established a Stock Information Center.
If you have any questions, please call the Stock Information Center collect at
(719) ________.
We look forward to continuing to provide quality financial services to
you in the future.
Sincerely,
Keith E. Waggoner
Executive Vice President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Rocky Ford Financial, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and Proxy Statement. There shall be no sale of stock in
any state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
25
<PAGE>
(Rocky Ford Federal Savings and Loan Letterhead)
, 1997
-----------
Dear Member:
As a qualified member of Rocky Ford Federal Savings and Loan Association
("Rocky Ford Federal Savings and Loan " or the "Association"), you have the
right to vote upon the Association's proposed Plan of Holding Company Conversion
and also generally have the right to subscribe for shares of common stock of
Rocky Ford Financial, Inc., the proposed holding company for Rocky Ford Federal
Savings and Loan through the mutual to stock conversion of Rocky Ford Federal
Savings and Loan . However, the proposed plan of Holding Company Conversion
provides that Rocky Ford Financial, Inc. will not offer stock in any state in
which compliance with the securities laws would be impracticable for reasons of
cost or otherwise. Unfortunately, the securities laws of your state would
require Rocky Ford Financial, Inc. to register its common stock and /or its
employees in order to sell the common stock to you. Such registration would be
prohibitively expensive or otherwise impracticable in light of the few members
residing in your state.
You may vote on the proposed Plan of Holding Company Conversion and we urge
you to read the enclosed Summary Proxy Statement and execute the enclosed
Revocable Proxy. Questions regarding the execution of the Revocable Proxy
should be directed to Rocky Ford Federal Savings and Loan's Stock Information
Center at (719)______________.
Sincerely,
Keith E. Waggoner
Executive Vice President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Rocky Ford Financial, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and Proxy Statement. There shall be no sale of stock
in any state in which any offer, solicitation of an offer or sale of stock would
be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
26
<PAGE>
V. IRA Mailing
A. Explanation
A special IRA mailing is proposed to be sent to all IRA customers of the
Association in order to alert the customers that funds held in an IRA can
be used to purchase stock. Since this transaction is not as simple as
designating funds from a certificate of deposit like a normal stock
purchase, this letter informs the customer that this process is slightly
more detailed and involves a personal visit to the Association.
B. Quantity
One IRA letter is proposed to be mailed to each IRA customer of the
Association. These letters would be mailed following OTS approval for the
conversion and after each customer has received the initial mailing
containing a Proxy Statement and a Prospectus.
C. Example - See following page.
27
<PAGE>
(Rocky Ford Federal Savings and Loan Letterhead)
__________ __, 1997
Dear Individual Retirement Account Participant:
As you know, Rocky Ford Federal Savings and Loan is in the process of
converting from a federally-chartered mutual savings and loan association to a
federally-chartered stock savings and loan association and has formed Rocky Ford
Financial, Inc. to hold all of the stock of Rocky Ford Federal Savings and Loan
(the "Conversion"). Through the Conversion, certain current and former
depositors and borrowers of Rocky Ford Federal Savings and have the opportunity
to purchase shares of common stock of Rocky Ford Financial, Inc. in a
Subscription Offering. Rocky Ford Financial, Inc. currently is offering up to
368,000 shares, subject to adjustment, of Rocky Ford Financial, Inc. at a price
of $10.00 per share.
As the holder of an individual retirement account ("IRA") at Rocky
Ford Federal Savings and Loan, you have an opportunity to become a shareholder
in Rocky Ford Financial, Inc. using funds being held in your IRA. If you
desire to purchase shares of common stock of Rocky Ford Financial, Inc. through
your IRA, Rocky Ford Federal Savings and Loan can assist you in self-directing
those funds. This process can be done without an early withdrawal penalty and
generally without a negative tax consequence to your retirement account.
If you are interested in ordering Rocky Ford Financial, Inc. Common
stock utilizing IRA funds, you must contact our Conversion Center at (719)
__________.
Sincerely,
Keith E. Waggoner
Executive Vice President and CEO
This letter is neither an offer to sell nor a solicitation of an offer to buy
Rocky Ford Financial, Inc. common stock. The offer is made only by the
Prospectus, which was recently mailed to you.
THE SHARES OF ROCKY FORD FINANCIAL, INC. COMMON STOCK ARE NOT DEPOSITS AND WILL
NOT BE INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
- ---
GOVERNMENT AGENCY.
28
<PAGE>
VI. Individual Letters and Community Meeting Invitations
A. Explanation
In order to educate the public about the stock offering, Trident suggests
holding Community meetings in various locations. In an effort to target a
group of interested investors, Trident requests that each Director of the
Association submit a list of acquaintances that he or she would like to
invite to a community meeting.
A. Method of Distribution of Invitations and Prospect Letters
Each Director submits his list of prospects.
Invitations are sent to each Director's prospects through the mail. All
invitations are preceded by a Prospectus and all attendees are given a
Prospectus at the meeting. Letters will be sent to prospects to thank them
for their attendance and to remind them of closing dates.
C. Examples enclosed.
29
<PAGE>
- --------------------------------------------------------------------------------
The Directors and Officers
of
Rocky Ford Federal Savings and Loan Association
cordially invite you to attend a brief
presentation regarding the stock offering of
Rocky Ford Financial, Inc., our proposed holding company
Please join us at the
--------------
---------------------
---------------------
------------
------------
for refreshments
YOU MUST RESPOND BY ____________ TO RESERVE A SEAT
R.S.V.P. (719) _____________
- --------------------------------------------------------------------------------
30
<PAGE>
Sent to prospects who are customers*
_______________, 1997
&salutation& &firstname& &last name&
&address&
&city&, &state& &zip&
Dear &prefername&
Recently you may have read in the newspaper that Rocky Ford Federal Savings
and Loan Association ("The Association") will convert from a federally-chartered
mutual savings and loan association to a federally-chartered stock savings and
loan association. This is the most significant event in the history of the
Association in that it allows customers, employees and directors the opportunity
to share in Rocky Ford Federal Savings and Loan 's future by becoming charter
stockholders of the Association's newly-formed holding company, Rocky Ford
Financial, Inc.
As a customer of Rocky Ford Federal Savings and Loan, you should have
received a packet of information regarding the conversion, including a
Prospectus and a Proxy Statement. In addition, we are holding several
presentations for friends of the officers and directors to discuss the stock
offering in more detail. You will receive an invitation in the near future.
Please feel free to call me or the Rocky Ford Federal Savings and Loan
Stock Information Center at (719) ________ if you have any questions. I look
forward to seeing you at one of our informational presentations.
Sincerely,
Keith E. Waggoner
Executive Vice President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Rocky Ford Financial, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
31
<PAGE>
*Sent to prospects who are not customers*
____________, 1997
&salutation& &firstname& &lastname&
&address&
&city&, &state& &zip&
Dear &prefername&:
Recently you may have read in the newspaper that Rocky Ford Federal Savings
and Loan Association ("The Association") will be converting from a federally-
chartered mutual savings and loan association to a federally-chartered stock
savings and loan association. This is the most significant event in the history
of the Association in that it allows customers, employees and directors the
opportunity to share in Rocky Ford Federal Savings and Loan 's future by
becoming charter stockholders of the Association's holding company, Rocky Ford
Financial, Inc.
[Director] has asked that you be sent a Prospectus and stock order form
which will allow you to become a charter stockholder, should you desire. In
addition, we are holding several presentations for friends of the officers and
directors of Rocky Ford Federal Savings and Loan to discuss the stock offering
in more detail. You will receive an invitation in the near future.
Please feel free to call me or the Rocky Ford Federal Savings and Loan
Stock Information Center at (719) _______ if you have any questions. I look
forward to seeing you at one of our information presentations.
Sincerely,
Keith E. Waggoner
Executive Vice President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Rocky Ford Financial, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
32
<PAGE>
*Sent to those attending a community meeting*
____________, 1997
&salutation& &firstname& &lastname&
&address&
&City&, &state& &zip&
Dear &prefername&:
Thank you for attending our informational presentation relating to
Rocky Ford Federal Savings and Loan Association 's conversion to a stock
company. The information presented at the meeting and the Prospectus you
recently received should assist you in making an informed investment decision.
Obviously, we are excited about this stock offering and the
opportunity to share in the future of Rocky Ford Federal Savings and Loan .
This conversion is the most important event in our history and it gives the
Association the strength to compete in the future and will provide the
Association additional corporate flexibility.
We may contact you in the near future to get an indication of your
interest in our offering. If you make a decision to invest, please return your
order form no later than ___________, 1997. If you have any questions, please
call the Stock Information Center at (719) ________.
Sincerely,
Keith E. Waggoner
Executive Vice President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Rocky Ford Financial, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
33
<PAGE>
* Sent to those not attending a community meeting *
_________, 1997
&salutation& &firstname& &lastname&
&address&
&city&, &state& &zip&
Dear &prefername&:
I am sorry you were unable to attend our recent presentation regarding
Rocky Ford Federal Savings and Loan Association's mutual to stock conversion.
The Board of Directors and management team of Rocky Ford Federal Savings and
Loan are committed to contributing to long term shareholder value and as a
group we are personally investing approximately $__________ of our own funds.
We are enthusiastic about the stock offering and the opportunity to share in the
future of Rocky Ford Federal Savings and Loan.
We have established a Stock Information Center to assist you with any
questions regarding the stock offering. Should you require any assistance
between now and ___________, 1997, I encourage you to either stop by our Stock
Information Center or call (719) __________.
I hope you will join me as a charter stockholder in Rocky Ford
Financial, Inc.
Sincerely,
Keith E. Waggoner
Executive Vice President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Rocky Ford Financial, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
34
<PAGE>
* Final Reminder Letter *
_________, 1997
&salutation&firstname&lastname&
&address&
&city&, &state& &zip&
Dear &prefername&:
I am writing to remind you that the deadline for purchasing stock in
Rocky Ford Financial, Inc. is quickly approaching. I hope you will join me in
becoming a charter stockholder in one of Colorado's newest publicly owned
financial institutions.
The deadline for becoming a charter stockholder is ____________, 1997.
If you have any questions, please call our Stock Information Center at (719)
__________.
Once again, I look forward to having you join me as a charter
stockholder in Rocky Ford Financial, Inc.
Sincerely,
Keith E. Waggoner
Executive Vice President and CEO
This does not constitute an offer to sell, or the solicitation of an offer to
buy, shares of Rocky Ford Financial, Inc. common stock offered in the
conversion, nor does it constitute the solicitation of a proxy in connection
with the conversion. Such offers and solicitations of proxies are made only by
means of the Prospectus and the Summary Proxy Statement, respectively. There
shall be no sale of stock in any state in which any offer, solicitation of an
offer or sale of stock would be unlawful.
THE STOCK WILL NOT BE INSURED BY THE FDIC OR ANY GOVERNMENTAL AGENCY.
35
<PAGE>
VII. Counter Cards and Lobby Posters
A. Explanation
Counter cards and lobby posters serve two purposes: (1) As a notice to
Rocky Ford Federal Savings and Loan's customers and members of the local
community that the stock sale is underway and (2) to remind the customers
of the end of the Subscription Offering. Trident has learned in the past
that many people forget the deadline for subscribing and therefore we
suggest the use of these simple reminders.
B. Quantity
Approximately 2 - 3 Counter cards will be used at teller windows and on
customer service representatives' desk.
Approximately 1 - 2 Lobby posters will be used at Rocky Ford Federal
Savings and Loan's office.
C. Example
D. Size
The counter card will be approximately 8 1/2" x 11".
The lobby poster will be approximately 16" x 20".
36
<PAGE>
C.
POSTER OR COUNTER CARD
================================================================================
"TAKE STOCK IN OUR FUTURE"
"ROCKY FORD FINANCIAL, INC.
STOCK OFFERING MATERIALS
AVAILABLE HERE"
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
================================================================================
37
<PAGE>
VIII. Proxy Reminder
A. Explanation
A proxy reminder is used when the majority of votes needed to adopt the
Plan of Conversion is still outstanding. The proxy reminder is mailed to
those "target vote" depositors who have not previously returned their
signed proxy.
The target vote depositors are determined by the conversion agent.
B. Example
C. Size
Proxy reminder is approximately 8 1/2" x 11".
38
<PAGE>
B. Example
- --------------------------------------------------------------------------------
P R O X Y R E M I N D E R
Rocky Ford Federal Savings and Loan Association
YOUR VOTE ON OUR STOCK CONVERSION PLAN HAS NOT BEEN RECEIVED.
- --------- ---------------------
YOUR VOTE IS VERY IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE IS EQUIVALENT TO
- ---------------------------
VOTING AGAINST THE PLAN.
VOTING FOR THE CONVERSION WILL NOT AFFECT THE INSURANCE OF YOUR ACCOUNTS.
DEPOSIT ACCOUNTS WILL CONTINUE TO BE FEDERALLY INSURED UP TO THE APPLICABLE
LIMITS.
YOU MAY PURCHASE STOCK IF YOU WISH, BUT VOTING DOES NOT OBLIGATE YOU TO BUY
STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL, OR DELIVER, THE
----------------------------
PROXY CARD TO ROCKY FORD FEDERAL SAVINGS AND LOAN TODAY.
PLEASE VOTE ALL PROXY CARDS RECEIVED.
---
WE RECOMMEND THAT YOU VOTE TO APPROVE THE PLAN OF CONVERSION. THANK YOU.
THE BOARD OF DIRECTORS AND MANAGEMENT OF
ROCKY FORD FEDERAL SAVINGS AND LOAN
ASSOCIATION
_________________________________________________________________
IF YOU RECENTLY MAILED THE PROXY,
PLEASE ACCEPT OUR THANKS AND DISREGARD THIS REQUEST.
FOR FURTHER INFORMATION CALL (719) _______.
39
<PAGE>
CONVERSION VALUATION REPORT
_______________________________
Valued as of December 13, 1996
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
OF COLORADO
Rocky Ford, Colorado
Prepared By:
Ferguson & Co., LLP
Suite 550
122 W. John Carpenter Freeway
Irving, TX 75039
972/869-1177
<PAGE>
[LETTERHEAD OF FERGUSON & CO., LLP]
STATEMENT OF APPRAISER'S INDEPENDENCE
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION OF COLORADO
-----------------------------------------------------------
ROCKY FORD, COLORADO
--------------------
We are the appraiser for Rocky Ford Federal Savings and Loan Association of
Colorado in connection with its mutual to stock conversion. We are submitting
our independent estimate of the pro forma market value of the Association's
stock to be issued in the conversion. In connection with our appraisal of the
Association's to-be-issued stock, we have received a fee which was not related
to the estimated final value. The estimated pro forma market value is solely
the opinion of our company and it was not unduly influenced by the Association,
its conversion counsel, its selling agent, or any other party connected with the
conversion. We also received a fixed fee for assisting the Association in
connection with the preparation of its business plan to be submitted with the
conversion application.
Rocky Ford Federal has agreed to indemnify Ferguson & Co., LLP under
certain circumstances against liabilities arising out of our services.
Specifically, we are indemnified against liabilities arising from our appraisal
except to the extent such liabilities are determined to have arisen because of
our negligence or willful conduct.
Ferguson & Co., LLP
/s/ Robin L. Fussell
Robin L. Fussell
Principal
December 31, 1996
<PAGE>
[LETTERHEAD OF FERGUSON & CO., LLP]
DECEMBER 31, 1996
BOARD OF DIRECTORS
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
OF COLORADO
801 SWINK AVENUE
ROCKY FORD, COLORADO 81067
DEAR DIRECTORS:
We have completed and hereby provide, as of December 13, 1996, an
independent appraisal of the estimated pro forma market value of Rocky Ford
Federal Savings and Loan Association of Colorado ("Rocky Ford Federal" or the
"Association"), Rocky Ford, Colorado, in connection with the conversion of Rocky
Ford Federal from the mutual to stock form of organization ("Conversion"). This
appraisal report is furnished pursuant to the regulatory filing of the
Association's Application for Conversion ("Form AC") with the Office of Thrift
Supervision ("OTS").
Ferguson & Co., LLP ("F&C") is a consulting firm that specializes in
providing financial, economic, and regulatory services to financial
institutions. The background and experience of F&C is presented in Exhibit I.
We believe that, except for the fees we will receive for preparing the appraisal
and assisting with Rocky Ford Federal's business plan, we are independent. F&C
personnel are prohibited from owning stock in conversion clients for a period of
at least one year after conversion.
In preparing our appraisal, we have reviewed Rocky Ford Federal's
Application for Approval of Conversion, including the Proxy Statement as filed
with the OTS. We conducted an analysis of Rocky Ford Federal that included
discussions with Grimsley, White & Company, CPA's, the Association's independent
auditors, and with Housley Kantarian and Bronstein, P.C., the Association's
conversion counsel. In addition, where appropriate, we considered information
based on other available published sources that we believe is reliable; however,
we cannot guarantee the accuracy or completeness of such information.
We also reviewed the economy in Rocky Ford Federal's primary market area
and compared the Association's financial condition and operating results with
that of selected publicly traded thrift institutions. We reviewed conditions in
the securities markets in general and in the market for thrifts stocks in
particular.
Our appraisal is based on Rocky Ford Federal's representation that the
information contained in the Form AC and additional evidence furnished to us by
the Association and its independent auditors are truthful, accurate, and
complete. We did not independently verify the financial statements and other
information provided by Rocky Ford Federal and its auditors, nor
<PAGE>
BOARD OF DIRECTORS
DECEMBER 31, 1996
PAGE 2
did we independently value the Association's assets or liabilities. The
valuation considers Rocky Ford Federal only as a going concern and should not be
considered an indication of its liquidation value.
It is our opinion that, as of December 13, 1996, the estimated pro forma
market value of Rocky Ford Federal was $3,200,000, or 320,000 shares at $10.00
per share. The resultant valuation range was $2,720,000 at the minimum (272,000
shares at $10.00 per share) to $3,680,000 at the maximum (368,000 shares at
$10.00 per share), based on a range of 15 percent below and above the midpoint
valuation. The supermaximum was $4,232,000 (423,200 shares at $10.00 per
share).
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of common
stock in the conversion. Moreover, because such valuation is necessarily based
upon estimates and projections of a number of matters, all of which are subject
to change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to sell such
shares at prices related to the foregoing estimate of the Association's pro
forma market value. F&C is not a seller of securities within the meaning of any
federal or state securities laws and any report prepared by F&C shall not be
used as an offer or solicitation with respect to the purchase or sale of any
securities.
Our opinion is based on circumstances as of the date hereof, including
current conditions in the United States securities markets. Events occurring
after the date hereof, including, but not limited to, changes affecting the
United States securities markets and subsequent results of operations of Rocky
Ford Federal, could materially affect the assumptions used in preparing this
appraisal.
The valuation reported herein will be updated as provided in the OTS
conversion regulations and guidelines. Any updates will consider, among other
things, any developments or changes in Rocky Ford Federal's financial
performance and condition, management policies, and current conditions in the
equity markets for thrift shares. Should any such new developments or changes be
material, in our opinion, to the valuation of the shares, appropriate
adjustments will be made to the estimated pro forma market value. The reasons
for any such adjustments will be explained in detail at the time.
Respectfully,
FERGUSON & CO., LLP
/s/ ROBIN L. FUSSELL
Robin L. Fussell
Principal
<PAGE>
FERGUSON & CO., LLP
- -------------------
TABLE OF CONTENTS
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
ROCKY FORD, COLORADO
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION 1
SECTION I. - FINANCIAL CHARACTERISTICS 2
PAST & PROJECTED ECONOMIC CONDITIONS 2
FINANCIAL CONDITION OF INSTITUTION 2
BALANCE SHEET TRENDS 2
ASSET/LIABILITY MANAGEMENT 2
INCOME AND EXPENSE TRENDS 3
REGULATORY CAPITAL REQUIREMENTS 3
LENDING 3
NONPERFORMING ASSETS 3
CLASSIFIED ASSETS 3
LOAN LOSS ALLOWANCE 3
MORTGAGE-BACKED SECURITIES AND INVESTMENTS 4
SAVINGS DEPOSITS 4
BORROWINGS 4
SUBSIDIARIES 4
LEGAL PROCEEDINGS 4
EARNINGS CAPACITY OF THE INSTITUTION 4
ASSET-SIZE-EFFICIENCY OF ASSET UTILIZATION 5
INTANGIBLE VALUES 5
EFFECT OF GOVERNMENT REGULATIONS 5
OFFICE FACILITIES 5
SECTION II - MARKET AREA 1
DEMOGRAPHICS 1
</TABLE>
i
<PAGE>
FERGUSON & CO., LLP
- -------------------
TABLE OF CONTENTS - CONTINUED
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
ROCKY FORD, COLORADO
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION III - COMPARISON WITH PUBLICLY TRADED THRIFTS 1
COMPARATIVE DISCUSSION 1
SELECTION CRITERIA 1
PROFITABILITY 2
BALANCE SHEET CHARACTERISTICS 2
RISK FACTORS 2
SUMMARY OF FINANCIAL COMPARISON 3
FUTURE PLANS 3
SECTION IV - CORRELATION OF MARKET VALUE 1
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED 1
FINANCIAL ASPECTS 1
MARKET AREA 2
MANAGEMENT 2
DIVIDENDS 2
LIQUIDITY 2
THRIFT EQUITY MARKET CONDITIONS 2
COLORADO ACQUISITIONS 3
EFFECT OF INTEREST RATES ON THRIFT STOCK 3
ADJUSTMENTS CONCLUSION 4
VALUATION APPROACH 5
VALUATION CONCLUSION 6
</TABLE>
ii
<PAGE>
FERGUSON & CO., LLP
- -------------------
TABLE OF CONTENTS - CONTINUED
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
ROCKY FORD, COLORADO
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
- ------ ----------- ----
<C> <S> <C>
SECTION I - FINANCIAL CHARACTERISTICS
1 Selected Financial Data 6
2 Selected Financial Ratios and Other Data 7
3 GAP Analysis 8
4 Interest Rate Shock 9
5 Capital Compliance 10
6 Loan Portfolio Composition 11
7 Loan Maturities 12
8 Loan Origination, Purchase, and Repayment Activity 13
9 Average Balances, Rates, and Yields 14
10 Rate/Volume Analysis 15
11 Loan Delinquencies at September 30, 1996 16
12 Non-Performing Assets 17
13 Classified Assets 18
14 Analysis of the Allowance for Loan Losses 19
15 Analysis of the Allowance for Real Estate Losses 20
16 Allocation of the Allowance for Loan Losses 21
17 Investments at September 30, 1996 22
18 Investment Securities 23
19 Deposit Portfolio 24
20 Savings Deposit Detail 25
21 Certificates of Deposit Maturities 26
22 Jumbo CD Maturities 27
23 Savings Flows 28
24 Offices 29
SECTION II - MARKET AREA
1 Demographic Trends 3
2 Percent Employment by Industry 4
3 Market Area Deposits 5
4 Building Permits 6
SECTION III - COMPARISON WITH PUBLICLY TRADED THRIFTS
1 Comparatives 4
2 Key Financial Indicators 5
3 Pro Forma Comparisons 6
</TABLE>
iii
<PAGE>
FERGUSON & CO., LLP
- -------------------
TABLE OF CONTENTS - CONTINUED
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
ROCKY FORD, COLORADO
<TABLE>
<CAPTION>
TABLE
NUMBER TABLE TITLE PAGE
- ------ ----------- ----
<S> <C> <C>
SECTION IV - CORRELATION OF MARKET VALUE
1 Appraisal Earnings Adjustments 1
2 Colorado Acquisitions 7
3 Recent Conversions 9
4 Recent Pink Sheet Conversions 12
5 Comparison of Pricing Ratios 14
FIGURE
NUMBER LIST OF FIGURES
- ------ ---------------
PAGE
SECTION IV - CORRELATION OF MARKET VALUE ----
1 SNL Index 15
2 Selected Interest Rates 16
</TABLE>
EXHIBIT TITLE
--------------
Exhibit I - Ferguson & Co., LLP Qualifications
Exhibit II - Selected Region, State, and Comparatives Information
Exhibit III - Rocky Ford Federal Savings and Loan Association TAFS Report
Exhibit IV - Comparative Group TAFS and BankSource Reports
Exhibit V - Selected Publicly Traded Thrifts
Exhibit VI - Comparative Group Selection
Exhibit VII - Pro Forma Calculations
Pro Forma Assumptions
Pro Forma Effect of Conversion Proceeds At the Minimum of the Range
Pro Forma Effect of Conversion Proceeds At the Midpoint of the Range
Pro Forma Effect of Conversion Proceeds At the Maximum of the Range
Pro Forma Effect of Conversion Proceeds At the SuperMax of the Range
Pro Forma Analysis Sheet
iv
<PAGE>
SECTION I - FINANCIAL CHARACTERISTICS
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
INTRODUCTION
Rocky Ford Federal Savings and Loan Association of Colorado ("Rocky Ford
Federal" or "Association") is a federally chartered, federally insured mutual
savings and loan association located in Rocky Ford (Otero County), Colorado. It
was chartered in 1934 under its current name. It joined the FHLB system and
obtained federal insurance of accounts in 1934. In January 1997, it adopted a
plan to convert to a stock savings and loan association, via a standard mutual
to stock conversion.
At September 30, 1996, Rocky Ford Federal had total assets of $20.4
million, loans of $12.3 million, mortgage-backed securities of $2.6 million,
interest-bearing deposits in other banks of $3.9 million, deposits of $17.1
million, and net worth of $2.8 million, or 13.6% of assets.
The Association has one office, which is located in Rocky Ford. Colorado
is in the southwestern portion of the United States. Rocky Ford is located in
the southeastern portion of Colorado. It is approximately 100 miles southeast
of Colorado Springs and 60 miles east of Pueblo.
Rocky Ford Federal is a traditional thrift with a moderate orientation to
passive investments. It invests primarily in (1) 1-4 family loans, (2) mortgage
backed securities, and (3) temporary cash investments. It is funded principally
by savings deposits and existing net worth. It has not utilized borrowings
recently.
The Association offers a limited variety of loan products to accommodate
its customer base and single family loans dominate the Association's loan
portfolio. In recent years, Rocky Ford Federal has concentrated its lending in
15 year fixed rate single family loans. At September 30, 1996, loans on 1-4
family dwellings made up 59.51% of total assets and 98.74% of the loan
portfolio. Mortgage backed securities made up 12.84% of total assets. Cash and
investment securities made up 24.44% of Rocky Ford Federal's assets at September
30, 1996.
Rocky Ford Federal had no non-performing assets at September 30, 1996, as
compared to none at September 30, 1995, and $30 thousand at September 30, 1994
(0.15% of total assets).
Savings deposits decreased slightly during the period from September 30,
1992, to September 30, 1996 ($713 thousand), a compound annual rate of decline
of 1.24%. Savings decreased $283 thousand (1.63%) in 1994, decreased $435
thousand (2.54%) in 1995, and increased $443 thousand (2.65%) in 1996. Rocky
Ford Federal has not relied extensively on borrowings during recent years. It
had no borrowings during the period from September 30, 1992, to September 30,
1996.
The Association's capital to assets ratio has shown steady growth. Equity
capital, as a percentage of assets, has increased from 8.5% at September 30,
1992, to 13.6% at September 30, 1996. This capital growth was a result of
consistent earnings combined with only minor growth in assets. Rocky Ford
Federal's assets increased $583 thousand during the four years ended September
30, 1996.
Rocky Ford Federal's profitability, as measured by return on average assets
("ROAA"), has consistently exceeded its peer group average of thrifts filing
TFR's with the OTS, consisting of OTS supervised thrifts with assets under $25
million. For the years ending December 31, 1993, 1994, and 1995, and the six
months ended June 30, 1996, Rocky Ford Federal ranked in the 89th, 87th, 89th,
and 73rd percentile, respectively, in ROAA, based on information derived from
the TAFS thrift database published by Sheshunoff Information Services Inc. (See
Exhibit III, page 2). In return on equity for the same periods, Rocky Ford
Federal ranked in the 79th, 87th, 81st, and 62nd percentile, respectively.
1
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
I. FINANCIAL CHARACTERISTICS
PAST & PROJECTED ECONOMIC CONDITIONS
Fluctuations in thrift earnings in recent years have occurred within the
time frames as a result of changing temporary trends in interest rates and other
economic factors. However, the year-to-year results have been upward while the
general trends in the thrift industry have been improving as interest rates
declined. Interest rates began a general upward movement during late 1993,
followed by a decline in interest margins and profitability. Rates began a
general decline in mid 1995 and then leveled off on the short end and increased
on the long end.
The thrift industry generally is better equipped to cope with changing
interest rates than it was in the past, and investors have recognized the
demonstrated ability of the thrift industry to maintain interest margins in
spite of rising interest rates. However, rate increases and the shortening of
the time elapsed between increases during 1994 placed pressure on portfolio
managers to shorten maturities, which negatively impacts the future earnings of
financial institutions.
FINANCIAL CONDITION OF INSTITUTION
BALANCE SHEET TRENDS
As Table I.1 shows, Rocky Ford Federal experienced a modest increase in
assets during the period of two years ending September 30, 1996. Assets
increased $767 thousand, or 3.91% during the period. Loans increased $1.926
million, or 18.59%; interest-bearing cash deposits increased $517 thousand, or
15.29%; investment securities decreased $2.783 million, or 71.95%; and mortgage-
backed securities increased $1.049 million, or 66.90%. Savings deposits
increased by $8 thousand, or 0.05%. Equity increased $586 thousand, or 26.73%.
ASSET/LIABILITY MANAGEMENT
Managing interest rate risk is a major component of the strategy used in
operating a thrift. Most of a thrift's interest earning assets are long-term,
while most of the interest bearing liabilities have short to intermediate terms
to contractual maturity. To compensate, asset/liability management techniques
include (1) making long term loans with interest rates that adjust to market
periodically, (2) investing in assets with shorter terms to maturity, (3)
lengthening the terms to maturities of savings deposits, and (4) seeking to
employ any combination of the aforementioned techniques artificially through the
use of synthetic hedge instruments. Table I.3 shows the gap analysis of Rocky
Ford Federal's interest earning assets and interest bearing liabilities at
September 30, 1996. It shows that, within one year of September 30, 1996,
Rocky Ford Federal has a negative gap to interest bearing liabilities of 62.35%
and a negative gap to total assets of 43.13%. Rocky Ford Federal has a negative
cumulative gap to assets at the end of three years of 42.81% and a negative gap
of 30.99% at the end of five years. Table I.4 provides rate shock information at
varying levels of interest rate change. The Association has significant
exposure to interest rate increases, but such exposure will be mitigated through
the Association's post conversion equity position.
Rocky Ford Federal's basic approach to interest rate risk management has
been to emphasize shorter term mortgage loans, increase investments in short and
intermediate term investment securities, and build equity capital. Rocky Ford
Federal currently is not utilizing synthetic hedge instruments and has not used
borrowings in recent years. Rocky Ford Federal's business plan calls for a
continuation of these strategies.
2
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
INCOME AND EXPENSE TRENDS
Rocky Ford Federal was profitable for the two fiscal years ending September
30, 1996. Fluctuations in income over the period have resulted principally from
(1) changes in non-interest expense, principally the SAIF assessment of
approximately $106,000 in 1996; and (2) adjustments in loan loss provisions as
the general economy in the area has improved. There was a negative loan loss
provision of $69,000 in 1995 and no loan loss provision in 1996.
Net interest income declined in 1995 and 1996 as a result of declining
spreads.
REGULATORY CAPITAL REQUIREMENTS
As Table I.5 demonstrates, Rocky Ford Federal meets all regulatory capital
requirements, and meets the regulatory definition of a "Well Capitalized"
institution. Moreover, the additional capital raised in the stock conversion
will add to the existing capital cushion.
LENDING
Table I.6 provides an analysis of the Association's loan portfolio by type
of loan and security. This analysis shows that, from September 30, 1994,
through September 30, 1996, Rocky Ford Federal's loan composition has been
dominated by 1-4 family dwelling loans. Table I.7 provides information on loan
maturities at September 30, 1996.
Table I.8 provides information with respect to loan originations and
repayments. It indicates the year ended September 30, 1996, was a good growth
year.
Table I.9 provides rates, yields, and average balances for the three years
ended September 30, 1996. Interest rates earned on interest-earning assets
increased from 7.47% in 1994 to 7.81% in 1995 and decreased to 7.73% in 1996.
Interest rates paid on interest-bearing liabilities increased from 3.87% in 1994
to 4.47% in 1995 and increased to 4.83% in 1996. Rocky Ford Federal's spread
decreased from 3.60% in 1994 to 3.33% in 1995 and decreased to 2.90% in 1996.
Table I.10 provides a rate volume analysis, measuring differences in
interest earning assets and interest costing liabilities and the interest rates
thereon during the years ended September 30, 1994 versus 1995, and September 30,
1995, versus 1996.
NON-PERFORMING ASSETS
As shown in Table I.11, the Association had only $57,000 in 1-4 family
loans that were over 60 days delinquent at September 30, 1996, and no loans over
90 days delinquent. As shown in Table I.12, Rocky Ford Federal had no
nonperforming assets at September 30, 1996 and 1995. It had $30,000 in non-
performing assets at September 30, 1994.
CLASSIFIED ASSETS
Rocky Ford Federal had $57 thousand in classified assets at September 30,
1996 (Table I.13). The classified assets were all in the special mention
category. They were 1-4 family loans between 60 and 89 days delinquent. The
Association had a loan loss allowance of $60 thousand, or 105.3% of classified
assets at September 30, 1996.
LOAN LOSS ALLOWANCE
Table I.14 provides an analysis of Rocky Ford Federal's loan loss allowance
and Table I.15 shows an analysis of Rocky Ford Federal's allowance for real
estate losses.
Table I.16 shows the allocation of the loan loss allowance among the
various loan categories as of September 30, 1994, 1995, and 1996.
3
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
MORTGAGE-BACKED SECURITIES AND INVESTMENTS
Table I.17 provides a breakdown of mortgage-backed securities, interest
bearing deposits, and investment securities with maturity and yield information
as of September 30, 1996. Table I.18 provides breakdowns for mortgage-backed
securities, interest bearing deposits, and investment securities at September
30, 1994, 1995, and 1996.
SAVINGS DEPOSITS
At September 30, 1996, Rocky Ford Federal's deposit portfolio was composed
as follows: Passbook accounts--$1.078 million or 6.3%; Money market accounts--
$3.271 million or 19.1%; and certificate accounts--$12.796 million or 74.6% (see
Table I.17). Table I.20 shows the composition of deposits at September 30,
1994, 1995, and 1996, with certificates in rate range. Table I.21 shows the
totals of certificate deposits and the maturities by year with rate ranges at
September 30, 1996. At September 30, 1996, 76.23% of Rocky Ford Federal's
certificates matured within one year and 93.46% matured within two years.
Rocky Ford Federal is not overly dependent on jumbo certificates of
deposit. At September 30, 1996, the Association had $1.512 million in
certificates that were issued for $100 thousand or more, or 8.82% of its total
deposits (see Table I.22).
Table I.23 presents information on deposit flows for the years ending
September 30, 1994, 1995, and 1996.
BORROWINGS
Rocky Ford Federal's has had no borrowings in recent years.
SUBSIDIARIES
Rocky Ford Federal has no subsidiaries.
LEGAL PROCEEDINGS
From time to time, Rocky Ford Federal becomes involved in legal proceedings
principally related to the enforcement of its security interest in real estate
loans. In the opinion of Management of the Association, no legal proceedings
are in process or pending that would have a material effect on Rocky Ford
Federal's financial position, results of operations, or liquidity.
EARNINGS CAPACITY OF THE INSTITUTION
As in any interest sensitive industry, the future earnings capacity of
Rocky Ford Federal will be affected by the interest rate environment.
Historically, the thrift industry has performed at less profitable levels in
periods of rising interest rates. This performance is due principally to the
general composition of the assets and the limited repricing opportunities
afforded even the adjustable rate loans. The converse earnings situation
(falling rates) does not afford the same degree of profitability potential for
thrifts due to the tendency of borrowers to refinance both high rate fixed rate
loans and adjustable loans as rates decline.
Rocky Ford Federal is no exception to the aforementioned phenomenon. With
its current asset and liability structure, however, it has significant exposure
to rising interest rates.
The addition of capital through the conversion will allow Rocky Ford
Federal to grow. As growth is attained, the leverage of that new capital
should, from a ratio of expenses to total assets standpoint, reduce the
operating expense ratio. However, growth and additional leverage will likely be
moderate and well controlled to maintain the current low risk levels inherent in
the Association's asset base.
4
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
ASSET-SIZE-EFFICIENCY OF ASSET UTILIZATION
At its current size and in its current asset configuration, Rocky Ford
Federal is a moderately efficient operation. With total assets of approximately
$20.4 million, Rocky Ford Federal has 5.5 full time equivalent employees.
INTANGIBLE VALUES
Rocky Ford Federal's greatest intangible value lies in its loyal deposit
base. Rocky Ford Federal has a 62 year history of sound operations, controlled
growth, and consistent earnings. The Association currently has 7.1% of the
deposit market in its area, and it has the ability to increase market share.
Rocky Ford Federal has no significant intangible values that could be
attributed to unrecognized asset gains on investments and real estate.
EFFECT OF GOVERNMENT REGULATIONS
Although still considered a traditional thrift, Rocky Ford Federal has
emphasized more passive investments during the recent years. With its efforts
to increase loans as a percentage of deposits, the Association's loan mix is
expected to continue to change. Government regulations will have the greatest
impact in the area of cost of compliance and reporting. The conversion will
create an additional layer of regulations and reporting and thereby increase the
cost to the Association. Moreover, no future plans currently exist to make
acquisitions or purchase branches or complicate operations with matters that
would add to reporting and regulatory compliance.
OFFICE FACILITIES
Rocky Ford Federal's main office is a well maintained facility that was
acquired by the Association in 1975. Table I.24 provides information on Rocky
Ford Federal's office. The Association's facilities are adequate for the
convenience and needs of the Association's customer base.
5
<PAGE>
FURGUSON & CO., LLP SECTION I
- ------------------- ---------
TABLE I.1 - SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Compound
At September 30 Growth
--------------------------------------------------------
1996 1995 1994 1993 1992 Rate
---- ---- ---- ---- ---- ----
($000'S)
<S> <C> <C> <C> <C> <C> <C>
SELECTED FINANCIAL CONDITION DATA:
- ----------------------------------
Total assets 20,388 19,653 19,621 19,667 19,805 0.73%
Interest-bearing deposits 3,897 3,683 3,380 4,170 3,937 -0.26%
Equity securities available for sale 585 445 295 295 295 18.67%
U.S. government and agency
securities - held to maturity 500 2,700 3,573 2,004 500 NM
Mortgage-backed securities - held
to maturity 2,617 1,373 1,568 2,049 2,884 -2.46%
Loans receivable, net 12,287 10,984 10,361 10,491 10,751 3.39%
Savings deposits 17,145 16,702 17,137 17,420 17,858 -1.24%
Equity - substantially restricted 2,778 2,573 2,192 1,962 1,689 13.25%
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
($000'S)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATIONS DATA:
- -------------------------
Interest income 1,525 1,471 1,479 1,583 1,796
Interest expense 820 734 684 763 1,042
----------------------------------------------------------
NET INTEREST INCOME 705 737 795 820 754
Provision for loan losses (recovery) - (69) 18 24 40
----------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 705 806 777 796 714
----------------------------------------------------------
Noninterest income 21 26 18 33 10
----------------------------------------------------------
SUB-TOTAL 726 832 795 829 724
----------------------------------------------------------
Noninterest expense:
Compensation and benefits 232 230 217 203 174
Other 307 197 191 210 189
----------------------------------------------------------
Total noninterest expense 539 427 408 413 363
----------------------------------------------------------
INCOME BEFORE TAXES 187 405 387 416 361
Income tax expense 58 118 157 143 142
----------------------------------------------------------
NET INCOME 129 287 230 273 219
==========================================================
</TABLE>
SOURCE: OFFERING CIRCULAR, F&C CALCULATIONS
6
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.2 - SELECTED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION>
AT OF FOR THE YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
- -------------------
Return on assets (ratio of net earnings
to average total assets) 0.64% 1.50% 1.14% 1.38% 1.08%
Return on equity (ratio of net earnings
to average equity) 4.81% 12.24% 10.69% 14.45% 13.79%
Ratio of average interest-earning assets to
average interest-bearing liabilities 116.14% 114.83% 111.93% 110.39% 107.85%
Ratio of net interest income, after provision
for loan losses, to noninterest 130.85% 188.60% 190.25% 192.74% 197.02%
expense
Net interest rate spread 2.90% 3.33% 3.60% 3.81% 3.38%
Net yield on average interest-earning assets 3.57% 3.91% 4.02% 4.23% 3.78%
QUALITY RATIOS:
- ---------------
Non-performing loans to total loans
at end of period 0.00% 0.00% 0.05% 0.00% 0.63%
Non-performing loans to total assets 0.00% 0.00% 0.03% 0.00% 0.34%
Non-performing assets to total assets
at end of period 0.00% 0.00% 0.15% 0.41% 1.00%
Allowance for loan losses to non-performing
loans at end of period 0.00% 0.00% 2560.00% 0.01% 155.88%
Allowance for loan losses to total loans, net 0.49% 0.55% 1.24% 1.12% 0.99%
CAPITAL RATIOS:
- ---------------
Equity to total assets at end of period 13.63% 13.09% 11.17% 9.98% 8.53%
Average equity to average assets 13.27% 12.24% 10.70% 9.56% 7.82%
OTHER DATA:
- ----------
Number of full service offices 1 1 1 1 1
</TABLE>
SOURCE: OFFERING CIRCULAR
7
<PAGE>
FERGUSON & CO., LLP Section I.
- ------------------- ----------
TABLE I.3 - GAP ANALYSIS
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
----------------------------------------------------------------------------------
Three Three One Three Five
Months Months to to Three to Five to Ten Over Ten
or Less One Year Years Years Years Years Total
----------------------------------------------------------------------------------
($000'S)
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
- ------------------------
Mortgage loans 145 1,041 2,261 2,130 4,592 2,137 12,306
Share loans 8 55 39 - - - 102
Interest-bearing deposits 2,499 1,398 - - - - 3,897
U.S. government agency securities - - 500 - - - 500
Mortgage-backed securities 8 156 306 281 609 1,257 2,617
Equity securities - - - - - 585 585
----------------------------------------------------------------------------------
Total interest-earning assets 2,660 2,650 3,106 2,411 5,201 3,979 20,007
==================================================================================
INTEREST-BEARING LIABILITIES:
- -----------------------------
Certificate accounts 3,180 6,575 3,041 - - - 12,796
Money market deposit accounts 3,271 - - - - - 3,271
Passbook accounts 1,078 - - - - - 1,078
----------------------------------------------------------------------------------
Total interest-bearing liabilities 7,529 6,575 3,041 - - - 17,145
==================================================================================
Interest-earning assets less
interest-bearing liabilities (4,869) (3,925) 65 2,411 5,201 3,979 2,862
==================================================================================
Cumulative interest-rate sensitivity gap (4,869) (8,794) (8,729) (6,318) (1,117) 2,862
========================================================================
Cumulative interest-rate sensitivity gap
as a percentage of interest-earning assets -24.34% -43.95% -43.63% -31.58% -5.58% 14.30%
========================================================================
Cumulative interest-rate sensitivity gap
as a percentage of assets -23.88% -43.13% -42.81% -30.99% -5.48% 14.04%
========================================================================
Cumulative ratio of interest earning
assets to interest-bearing liabilities 35.33% 37.65% 49.09% 63.15% 93.48% 116.69%
========================================================================
</TABLE>
Share loans, interest-bearing deposits, and U.S. government agency securities
are included in the period in which they mature. Equity securities, which have
no specified maturity, are included in the over ten years period. Mortgage loans
and mortgage-backed securities, all of which are fixed rate, are based on normal
amortization plus estimated annual prepayments of 5%. Deposit certificate
accounts are scheduled according to contractual maturities. Money market and
passbook deposit accounts are included in the earliest period.
SOURCE: OFFERING CIRCULAR, F & C CALCULATIONS
8
<PAGE>
FERGUSON & CO., LLP SECTION 1.
- ------------------- ----------
TABLE I.4 - INTEREST RATE SHOCK
<TABLE>
<CAPTION>
Net Portfolio Value
September 30, 1996
----------------------------------------------------------------------------
Estimated
NPV as a
Change Estimated Percent
in Rates NPV of Assets $ Change % Change
- ---------------------- -------------------- --------------- --------- ---------------
($000's)
<S> <C> <C> <C> <C>
+400 bp $ 1,882 9.95% (1,702) -47%
+300 bp 2,309 11.88% (1,275) -36%
+200 bp 2,753 13.79% (831) -23%
+100 bp 3,195 15.58% (389) -11%
0 bp 3,584 17.08% - -
- --100 bp 3,833 17.97% 249 7%
- --200 bp 3,892 18.11% 308 9%
- --300 bp 3,930 18.17% 346 10%
- --400 bp 4,036 18.48% 452 13%
</TABLE>
SOURCE: REPORT FROM OTS RISK MANAGEMENT DIVISION.
9
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.5 - CAPITAL COMPLIANCE
<TABLE>
<CAPTION>
September 30, 1996
--------------------
Amount Percent
($000's) of Assets
-------- ----------
<S> <C> <C>
Capital under generally accepted accounting principals 2,778 13.63%
======== ==========
Tangible capital 2,607 12.90%
Tangible capital requirement 303 1.50%
-------- ----------
Excess 2,304 11.40%
======== ==========
Core capital 2,607 12.90%
Core capital requirement 607 3.00%
-------- ----------
Excess 2,000 9.90%
======== ==========
Total regulatory capital 2,667 34.17%
Risk-based capital requirement 624 8.00%
-------- ----------
Excess 2,043 26.17%
======== =========
</TABLE>
SOURCE: OFFERING CIRCULAR
10
<PAGE>
FURGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.6 - LOAN PORTFOLIO COMPOSITION
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
------------------------------------------------------
1996 1995 1994
------------------ ----------------- ----------------
Amount Percent Amount Percent Amount Percent
------ -------- ------ ------- ------ --------
($000'S)
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE LOANS:
1-4 family 12,132 98.74% 10,915 99.37% 10,313 99.54%
Non-residential 174 1.42% 123 1.12% 141 1.36%
------------------ ---------------- ----------------
Total real estate loans 12,306 100.15% 11,038 100.49% 10,454 100.90%
------------------ ---------------- ----------------
Consumer loans on savings accounts 102 0.83% 79 0.72% 96 0.93%
------------------ ---------------- ----------------
TOTAL LOANS 12,408 100.98% 11,117 101.21% 10,550 101.82%
------------------ ---------------- ----------------
Less:
Deferred fees and discounts 61 0.50% 73 0.66% 60 0.58%
Allowance for losses 60 0.49% 60 0.55% 129 1.25%
------------------ ---------------- ----------------
LOAN PORTFOLIO, NET 12,287 100.00% 10,984 100.00% 10,361 100.00%
================== ================ ================
</TABLE>
SOURCE: OFFERING CIRCULAR
11
<PAGE>
FURGUSON & CO., LLP SECTION 1.
- ------------------- ----------
TABLE I.7 - LOAN MATURITIES
The following table sets forth certain information at September 30, 1996,
regarding the amount of loans maturing in the loan portfolio, based on
contractual terms to maturity. All the loans are at a predetermined rate.
<TABLE>
<CAPTION>
Under One to Three to Five to Ten to Over
One Year Three Years Five Years Ten years Twenty Years Twenty Years Total
-------- ----------- ---------- --------- ------------ ------------ -----
($000,s)
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage loans
1-4 family 64 118 797 2,904 7,339 910 12,132
Non-residential - 4 37 133 - - 174
Share 63 39 - - - - 102
------- ------- ---------- --------- ------------ ------------ --------
Total 127 161 834 3,037 7,339 910 12,408
======= ======= ========== ========= ============ ============ ========
</TABLE>
SOURCE: OFFERING CIRCULAR
12
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.8 - LOAN ORIGINATION, PURCHASE, AND REPAYMENT ACTIVITY
<TABLE>
<CAPTION>
For the Year Ended September 30,
-----------------------------------------------
1996 1995 1994
---- ---- ----
($000'S)
<S> <C> <C> <C>
NET LOANS, BEGINNING OF PERIOD 10,984 10,361 10,491
ORIGINATIONS BY TYPE:
- ---------------------
One- to four-family 3,636 2,457 2,951
Non-residential 80 - -
Share loans 37 178 171
------------ -------------- --------------
Total loans originated 3,753 2,635 3,122
------------ -------------- --------------
PURCHASES: - - -
- ----------
------------ -------------- --------------
Total loans originated and purchases 3,753 2,635 3,122
------------ -------------- --------------
REPAYMENTS: 2,461 2,068 3,223
- -----------
------------ -------------- --------------
DECREASE (INCREASE) IN OTHER ITEMS, NET: 11 56 (29)
- ----------------------------------------
------------ -------------- --------------
NET INCREASE (DECREASE) IN LOANS RECEIVABLE, NET 1,303 623 (130)
------------ -------------- --------------
NET LOANS, END OF PERIOD 12,287 10,984 10,361
============ ============== ==============
</TABLE>
SOURCE: OFFERING CIRCULAR
13
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.9 - AVERAGE BALANCES, RATES, AND YIELDS
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------------- ---------------------------------- -------------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Average Outstanding Earned/ Average Outstanding Earned/ Average
Balance Paid Yield/Rate Balance Paid Yield/Rate Balance Paid Yield/Rate
---------------------------------- ---------------------------------- -------------------------------
($000'S)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
- ------------------------
Interest-bearing deposits 4,330 247 5.70% 3,347 191 5.71% 3,854 165 4.28%
Investments 3,676 248 6.75% 4,659 297 6.37% 5,420 322 5.94%
Loans 11,730 1,030 8.78% 10,838 983 9.07% 10,515 992 9.43%
------------------------------ ---------------------------------- -------------------------------
Total interest-earning
assets 19,736 1,525 7.73% 18,844 1,471 7.81% 19,789 1,479 7.47%
=================== ======================= ===================
Non-interest earning assets 405 316 348
-------- -------- --------
Total assets 20,141 19,160 20,137
======== ======== ========
INTEREST-BEARING LIABILITIES:
- ------------------------------
Savings deposits 16,993 820 4.83% 16,411 734 4.47% 17,679 684 3.87%
------------------------------ ---------------------------------- -------------------------------
Total interest-bearing
liabilities 16,993 820 4.83% 16,411 734 4.47% 17,679 684 3.87%
=================== ======================= ===================
Non-interest bearing
liabilities 476 403 304
--------- --------- ---------
Total liabilities 17,469 16,814 17,983
--------- --------- ---------
Equity 2,672 2,346 2,154
--------- --------- ---------
Total liabilities and
equity 20,141 19,160 20,137
========= ========= =========
Net interest income 705 737 795
========== ========== ==========
Net interest rate spread (1) 2.90% 3.33% 3.60%
========= =========== ========
Net interest earnings
assets 2,743 2,433 2,110
========= ========= =========
Net interest margin (2) 3.57% 3.91% 4.02%
========= ============ ========
Average interest-earning assets to
average interest-bearing liabilities 116.14% 114.83% 111.94%
========== ========== ==========
</TABLE>
(1) Net interest rate spread represents the difference between the average
yield on interest-earning assets and the average rate on interest-bearing
liabilities.
(2) Net interest margin represents net interest income divided by average
interest-earning assets.
SOURCE: OFFERING CIRCULAR
14
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
Table I.10 - Rate/Volume Analysis
The following schedule presents the dollar amount of changes in interest income
and interest expense for major components of interest-earning assets and
interest-bearing liabilities. It distinguishes between the changes due to
changes in outstanding balances and those due to changes in interest rates. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (i) changes in volume
(changes in volume multiplied by prior interest rate), (ii) changes in rate
(changes in rate multiplied by prior volume), and (iii) changes in rate/volume
(changes in volume multiplied by changes in rates).
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------------------
1996 vs. 1995 1995 vs. 1994
-------------------------------- --------------------------------
Increase Increase
(Decrease) (Decrease)
Due to Due to
------------------------ Total ------------------------ Total
Rate/ Increase Rate/ Increase
Volume Rate Volume (Decrease) Volume Rate Volume (Decrease)
($000's)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-bearing deposits 56 - - 56 (22) 55 (7) 26
Investments (62) 18 (4) (48) (46) 23 (4) (27)
Loans 81 (31) (3) 47 (30) (38) 1 (7)
-------------------------------- --------------------------------
Total interest-earning assets 75 (13) (7) 55 (38) 40 (10) (8)
-------------------------------- --------------------------------
Interest-bearing liabilities:
Deposits 26 59 2 87 (49) 106 (8) 49
------------------------------- --------------------------------
Increase (decrease) in
net interest income 49 (72) (9) (32) 11 (66) (2) (57)
=============================== ================================
</TABLE>
SOURCE: OFFERING CIRCULAR
15
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.11 - LOAN DELINQUENCIES AT SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
60-89 Days 90 Days and Over Total
------------------------- ------------------------ ---------------------------
Percent Percent
of Gross of Gross
Amount Loans Amount Loans Amount Percent
------ ----- ------ ----- ------ -------
($000's)
<S> <C> <C> <C> <C> <C> <C>
Real Estate:
1-4 family 57 0.05% - 0.00% 57 0.05%
Non-residential - 0.00% - - - 0.00%
Consumer - - - - - -
------------------------ ------------------------ --------------------------
Total 57 0.05% - 0.00% 57 0.05%
======================== ======================== ==========================
</TABLE>
SOURCE: OFFERING CIRCULAR
16
<PAGE>
FERGUSON & CO., LLP Section I.
- ------------------- ----------
TABLE I.12 - NON-PERFORMING ASSETS
The table below sets forth the amounts and categories of non-performing assets.
Loans are placed on non-accrual status when the collection of principal or
interest becomes doubtful.
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------------
1996 1995 1994
---- ---- ----
($000's)
<S> <C> <C> <C>
Non-accruing loans:
Real estate:
One- to four-family - - 5
Multi-family - - -
Non-residential - - -
Construction - - -
Consumer - - -
----------------------------------------
Total - - 5
----------------------------------------
Accruing loans delinquent 90 days or more:
Real estate:
One- to four-family - - -
Multi-family - - -
Non-residential - - -
Construction - - -
Consumer - - -
----------------------------------------
Total - - -
----------------------------------------
Total non-performing loans - - 5
----------------------------------------
Foreclosed real estate - - 25
----------------------------------------
Total non-performing assets - - 30
========================================
Total non-performing loans as a
percentage of total net loans 0.00% 0.00% 0.05%
========================================
Total non-performing assets as a
percentage of total assets 0.00% 0.00% 0.15%
========================================
</TABLE>
SOURCE OFFERING CIRCULAR
17
<PAGE>
FURGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.13 - CLASSIFIED ASSETS
The table below sets forth the amounts of the Association's classified assets
at September 30, 1996:
<TABLE>
<CAPTION>
($000'S)
<S> <C>
CLASSIFICATION:
Special mention 57
Substandard -
Doubtful -
Loss -
--------
TOTAL 57
========
Ratio of Loss Allowance to Classified Assets 105.26%
========
</TABLE>
SOURCE: OFFERING CIRCULAR
18
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.14 - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------------
1996 1995 1994
---- ---- ----
($000'S)
<S> <C> <C> <C>
Balance at beginning of period 60 128 118
-------- ------- -------
Charge-offs:
One- to four-family - - 8
Multi-family - - -
Non-residential - - -
Construction - - -
Consumer - - -
------- ------- -------
- - 8
------- ------- -------
Recoveries: - - -
------- ------- -------
Net charge-offs - - 8
------- ------- -------
Additions charged (credited) to operations - (68) 18
------- ------- -------
Balance at end of period 60 60 128
======= ======= =======
Allowance for loan losses to total
non-performing loans at end of period 0.00% 0.00% 2560.00%
======= ======= =======
Allowance for loan losses to net
loans at end of period 0.49% 0.55% 1.24%
======= ======= =======
</TABLE>
SOURCE: OFFERING CIRCULAR
19
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.15 - ANALYSIS OF THE ALLOWANCE FOR REAL ESTATE LOSSES
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------
1996 1995 1994
---- ---- ----
($000'S)
<S> <C> <C> <C>
Real estate owned, end of period - 17 73
======= ======= =======
Allowance for losses, beginning of period - 4 19
Provision charged (credited) to operations - (4) -
Net charge-offs - - (15)
------- ------- -------
Allowance for losses, end of period - - 4
======= ======= =======
</TABLE>
SOURCE: OFFERING CIRCULAR
20
<PAGE>
FERGUSON & CO., LLP Section I.
- ------------------- ----------
TABLE I.16 - ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
At September 30,
-----------------------------------------------------------------
1996 1995 1994
---------------------- ------------------- -------------------
Percent Percent Percent
of Loans of Loans of Loans
in Each in Each in Each
Amount of Category Amount of Category Amount of Category
Loan Loss to Gross Loan Loss to Gross Loan Loss to Gross
Allowance Loans Allowance Loans Allowance Loans
--------- --------- --------- --------- --------- --------
($000'S)
<S> <C> <C> <C> <C> <C> <C>
1-4 family 60 97.78% 60 98.18% 128 97.75%
Non-residential - 1.40% - 1.11% - 1.34%
Savings acount loans - 0.82% - 0.71% - 0.91%
---------------------- -------------------- -------------------
60 100.00% 60 100.00% 128 100.00%
====================== ==================== ===================
</TABLE>
SOURCE: OFFERING CIRCULAR
21
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.17 - INVESTMENTS AT SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
MATURITY PERIOD AT SEPTEMBER 30, 1996 TOTAL INVESTMENT SECURITIES
-------------------------------------------- ---------------------------
One Year or Less Over One Year Total
--------------------- --------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Book Value Yield Book Value Yield Book Value Yield
---------- --------- ---------- --------- ------------- ------------
($000's)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities - - 500 4.75% 500 4.75%
Interest-bearing deposits 3,897 5.70% - - 3,897 5.70%
Mortgage-backed securities 30 7.00% 2,587 7.00% 2,617 7.00%
FHLB stock - - 302 6.60% 302 6.60%
FHLMC stock - - 282 2.15% 282 2.15%
---------- --------- ---------- --------- ------------- ------------
Total 3,927 5.70% 3,671 6.29% 7,598 5.99%
========== ========= ========== ========= ============= ============
</TABLE>
SOURCE: OFFERING CIRCULAR
22
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.18 - INVESTMENT SECURITIES
<TABLE>
<CAPTION>
At September 30,
---------------------------------------
1996 1995 1994
-------- ---------- ---------
($000'S))
<S> <C> <C> <C>
U.S. Treasury securities 500 2,700 3,573
Interest-bearing deposits 3,897 3,683 3,380
Mortgage-backed securities 2,617 1,374 1,568
FHLB stock 302 284 284
FHLMC stock 282 161 11
-------- ---------- ---------
TOTAL 7,598 8,202 8,816
======== ========== =========
</TABLE>
SOURCE: OFFERING CIRCULAR
23
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.19 - DEPOSIT PORTFOLIO
<TABLE>
<CAPTION>
Balance Percent
Interest September 30, of
Category Term Rate (1) 1996 Deposits
- -------- ---- -------- ------------- --------
($000'S)
--------
<S> <C> <C> <C> <C>
SAVINGS AND TRANSACTIONS ACCOUNTS
- ---------------------------------
Passbook accounts None 3.30% 1,078 6.29%
Money market accounts None 4.15% 3,271 19.08%
------------- -----------
4,349 25.37%
------------- -----------
CERTIFICATES OF DEPOSIT
- ---------------------------------
Fixed term, fixed rate 6 months 4.70% 1,757 10.25%
Fixed term, fixed rate 12 months 5.18% 5,213 30.41%
Fixed term, fixed rate 18 months 3.65% 8 0.05%
Fixed term, fixed rate 24 months 5.58% 1,572 9.17%
Fixed term, fixed rate 30 months 3.75% 35 0.20%
Fixed term, fixed rate 36 months 5.40% 3,769 21.98%
Fixed term, fixed rate 48 months 7.15% 25 0.15%
Fixed term, fixed rate 72 months 7.75% 36 0.21%
Other 381 2.22%
------------- -----------
TOTAL CERTIFICATES OF DEPOSIT 12,796 74.63%
------------- -----------
TOTAL SAVINGS DEPOSITS 17,145 100.00%
============= ===========
</TABLE>
(1) Indicates weighted average interest rate at September 30, 1996.
SOURCE: OFFERING CIRCULAR
24
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.20 - SAVINGS DEPOSITS DETAIL
<TABLE>
<CAPTION>
At September 30,
-----------------------------------------------------------------------------------
1996 1995 1994
------------------------- -------------------------- -----------------------
Percent of Percent of Percent of
Amount Total Amount Total Amount Total
------ ----- ------ ----- ------ -----
($000'S)
<S> <C> <C> <C> <C> <C> <C>
Transactions and Savings Deposits:
- ----------------------------------
Money market accounts 3,271 19.08% 2,557 15.31% 2,865 16.72%
Passbook accounts 1,078 6.29% 1,079 6.46% 1,027 5.99%
------------------------- ------------------------- -----------------------
Total transaction accounts 4,349 25.37% 3,636 21.77% 3,892 22.71%
------------------------- ------------------------- -----------------------
Certificates:
- -------------
3.00 - 4.00 424 2.47% 967 5.79% 7,328 42.76%
4.01 - 5.00% 4,565 26.63% 3,468 20.76% 4,996 29.15%
5.01 - 6.00% 7,746 45.18% 7,888 47.23% 805 4.70%
6.01 - 7.00 - 0.00% 685 4.10% - 0.00%
Over 7.00% 61 0.36% 58 0.35% 116 0.68%
------------------------- ------------------------- -----------------------
Total certificates 12,796 74.63% 13,066 78.23% 13,245 77.29%
------------------------- ------------------------- -----------------------
Total deposits 17,145 100.00% 16,702 100.00% 17,137 100.00%
========================= ========================= =======================
</TABLE>
SOURCE: OFFERING CIRCULAR
25
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.21 - CERTIFICATES OF DEPOSIT MATURITIES
The table below provides CD maturities at September 30, 1996, by year in rate
ranges.
<TABLE>
<CAPTION>
3.00 - 4.01- 5.01- Over Percent
4.00% 5.00% 7.00% 7.00% Total of Total
------ ----- ----- ---- ------ --------
($000'S)
<S> <C> <C> <C> <C> <C> <C>
Certificates maturing in:
One year 413 4,566 4,751 25 9,755 76.23%
One to two years 10 - 2,195 - 2,205 17.23%
Two to three years - - 800 36 836 6.53%
Over three years - - - - - 0.00%
------------------------------------------------------------------------------------
Total 423 4,566 7,746 61 12,796 100.00%
====================================================================================
Percent of total 3.31% 35.68% 60.53% 0.48% 100.00%
=======================================================================
</TABLE>
SOURCE: OFFERING CIRCULAR
26
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.22 - JUMBO CD MATURITIES
<TABLE>
<CAPTION>
JUMBO CERTIFICATES OF DEPOSIT
MATURING IN PERIOD ENDING: Amount
- --------------------------------- ----------
($000's)
<S> <C>
Within three months 656
Three through six months 113
Six through twelve months 120
After September 30, 1997 623
----------
Total 1,512
==========
</TABLE>
SOURCE: OFFERING CIRCULAR
27
<PAGE>
FERGUSON & CO., LLP Section I.
- ------------------- ----------
TABLE I.23 - SAVINGS FLOWS
The following table sets forth the savings flows for the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------
1996 1995 1994
---- ---- ----
($000'S)
<S> <C> <C> <C>
Opening balance 16,702 17,137 17,420
Net increase (decrease)
before interest credited 295 (582) (367)
Interest credited 148 147 84
----------- ------------- ------------
Ending Balance 17,145 16,702 17,137
=========== ============= ============
Net increase (decrease) 443 (435) (283)
=========== ============= ============
Percent increase (decrease) 2.65% -2.54% -1.62%
=========== ============= ============
</TABLE>
SOURCE: OFFERING CIRCULAR
28
<PAGE>
FERGUSON & CO., LLP SECTION I.
- ------------------- ----------
TABLE I.24 - OFFICES
<TABLE>
<CAPTION>
Net Book Year Owned or Square
Physical address Value (1) Opened Leased Footage
- ---------------- --------- ------ -------- -------
($000's)
<S> <C> <C> <C> <C>
801 Swink Avenue $ 40 1975 Owned 3,000
Rocky Ford, CO 81067
Main Office
</TABLE>
(1) Cost less accumulated depreciation and amortization.
SOURCE: OFFERING CIRCULAR
29
<PAGE>
FERGUSON & CO., LLP
- -------------------
SECTION II.
-----------
II. MARKET AREA
DEMOGRAPHICS
Rocky Ford Federal conducts its operations through its only office located
in Rocky Ford, Otero County, Colorado. Colorado is in the southwestern region
of the United States. Rocky Ford is in the southeastern section of Colorado.
Rocky Ford is approximately 100 miles southeast of Colorado Springs, and 60
miles east of Pueblo.
Rocky Ford Federal has determined that its principal trade area is Otero
County. Table II.1 presents historical and projected trends for the United
States, Colorado, Otero County, and zip code 81067, which includes Rocky Ford.
The information addresses population, income, employment, and housing trends.
As indicated in Table II.1, population growth rates for Otero County and
Rocky Ford are well below both the United States rate and the rate for the State
of Colorado, which is well above that of the United States. Household income
growth for Otero County and Rocky Ford are projected to be below that of the
State of Colorado but above that of the United States for the period 1996 to
2001.
In the period from 1990 until 1996, the population of the State of Colorado
grew 16.49%. During the same period, the Otero County population increased
4.20% and the United States population increased 6.67%. Projections of
population growth from 1996 through 2001 indicate that the State of Colorado
will increase 11.33%, while Otero County is projected to increase by 3.22% and
the United States population is projected to increase by 5.09%. Rocky Ford's
population growth estimates are in line with those of the County.
Household income is projected to grow by 1.24% for Otero County from 1996
to 2001. For the same period, household income is projected to increase by
2.89% for the State of Colorado and decline by 3.88% for the United States. Per
capita and household income levels for the State of Colorado are slightly higher
than those of the United States, but per capita and household income levels for
Otero County are well below both the State of Colorado and the United States.
The 2001 estimate shows that, for Otero County, households with incomes
less than $15,000 are expected to be 34%; those with incomes between $15,000 and
$25,000 are estimated at 20%; those with incomes between $25,000 and $50,000 are
estimated at 31%; those with incomes between $50,000 and $100,000 are estimated
at 12%; and households with incomes in excess of $100,000 are projected to be
only 4%. The 2001 estimates for Colorado are 17%, 15%, 35%, 26%, and 7%,
respectively.
The number of households in Otero County is projected to grow by 3.15% from
1996 to 2001, well below the projected growth rate for the State of Colorado at
11.00% and also below that of the United States at 5.14%.
With projections of a modest growth in population and number of households,
combined with projections of a flat household income, the market for housing
units will be limited. Otero County has approximately 16,200 housing units, of
which 57.35% are owner occupied, and a vacancy rate of 16.37%. The Rocky ford
area (zip code 81067) has approximately 9,500 housing units, of which 57.41% are
owner occupied, and a vacancy rate of 14.16%.
The principal sources of employment in Otero County are trade--24.3%;
public administration--21.6%; and services--20.9%. The major employers in Rocky
Ford Federal's market area are engaged in health care, education, food
processing, and light manufacturing.
1
<PAGE>
FERGUSON & CO., LLP
- -------------------
SECTION II.
-----------
Analysis of the data presented above presents a picture of limited economic
opportunity, suggesting that Rocky Ford Federal's growth opportunities within
its current market area will continue to be slow.
Based on information publicly available on deposits as of June 30, 1995
(see Table II.3), Otero County had $232.2 million in deposits and Rocky Ford
Federal had 7.09% of the deposit market. Rocky Ford Federal's competition
consists of 16 commercial banks and four credit unions.
Table II.4 provides information on building permits in most of the Otero
County area for 1993 through 1996. Both residential and commercial permits have
increased each year, providing a positive trend. Rocky Ford Federal makes no
commercial real estate loans. It competes with 20 other financial institutions
for the residential loan opportunities, though many of the other financial
institutions are not interested in long term home loans.
Growth opportunities for Rocky Ford Federal can be assessed by reviewing
economic factors in its market area. The salient factors include growth trends,
economic trends, and competition from other financial institutions. We have
reviewed these factors to assess the potential for the market area. In
assessing the growth potential of Rocky Ford Federal, we must also assess the
willingness and flexibility of management to respond to the competitive factors
that exist in the market area. Our analysis of the economic potential and the
potential of management affects the valuation of the Association. Management
has demonstrated its intent to continue to emphasize only residential lending.
2
<PAGE>
FERGUSON & CO., LLP SECTION II.
- ------------------- -----------
TABLE II.1 - DEMOGRAPHIC TRENDS
KEY ECONOMIC INDICATORS
United States, Colorado, Otero County and Zip Code 81067
<TABLE>
<CAPTION>
================================================================================================
UNITED OTERO ZIP CODE
KEY ECONOMIC INDICATOR STATES COLORADO COUNTY 81067
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Population, 2001 Est. 278,802,003 4,272,336 21,711 6,425
1996 - 2001 Percent Change, Est. 5.09 11.33 3.22 3.40
Total Population, 1996 Est. 265,294,885 3,837,552 21,033 6,214
1990 - 96 Percent Change, Est. 6.67 16.49 4.20 4.51
Total Population, 1990 248,709,873 3,294,394 20,185 5,946
- ------------------------------------------------------------------------------------------------
Household Income, 2001 Est. 33,189 37,521 22,672 18,833
1996 - 2001 Percent Change, Est. (3.88) 2.89 1.24 0.95
Household Income, 1996 Est. 34,530 36,468 22,395 18,656
- ------------------------------------------------------------------------------------------------
Per Capita Income, 1990 16,738 18,076 11,763 10,815
- ------------------------------------------------------------------------------------------------
Household Income Distribution-2001 Est.
(%)
$15,000 and less 20 17 34 40
$15,000 - $25,000 16 15 20 20
$25,000 - $50,000 34 35 31 25
$50,000 - $100,000 24 26 12 11
$100,000 and over 6 7 4 4
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Unemployment rate, 1990 6.24 4.12 7.76 7.96
- ------------------------------------------------------------------------------------------------
Median Age of Population, 1996 Est. 34.3 34.1 35.4 36.0
Median Age of Population, 1990 32.9 32.5 34.9 35.5
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Average Housing Value, 1990 79,098 91,930 40,271 42,559
- ------------------------------------------------------------------------------------------------
Total Households, 2001 Est. 103,293,062 1,646,503 8,142 2,414
1996 - 2001 Percent Change, Est. 5.14 11.00 3.15 3.29
Total Households, 1996 98,239,161 1,483,326 7,893 2,337
1990 - 96 Percent Change, Est. 6.84 15.66 3.95 4.19
Total Households, 1990 91,947,410 1,282,489 7,593 2,243
- ------------------------------------------------------------------------------------------------
Total Housing Units, 1990 101,641,260 1,696,270 16,185 9,517
% Vacant 10.07 14.14 16.37 14.16
% Occupied 89.93 85.86 83.63 85.84
% By Owner 57.78 54.25 57.35 57.41
% By Renter 32.15 31.61 26.28 28.42
================================================================================================
</TABLE>
SOURCE: SCAN/US, INC.
3
<PAGE>
FERGUSON & CO., LLP Section II.
- ------------------- -----------
TABLE II.2 - PERCENT EMPLOYMENT BY INDUSTRY
UNITED STATES, COLORADO, AND OTERO COUNTY
<TABLE>
<CAPTION>
UNITED OTERO
INDUSTRY STATES COLORADO COUNTY
=================================== ========= ========== ========
<S> <C> <C> <C>
Construction/Agriculture/Mining 9.5 8.9 11.0
Manufacturing 17.7 13.3 11.1
Transportation/Utilities 7.1 7.8 5.0
Trade 21.2 6.7 24.3
Finance/Insurance 6.9 7.6 6.3
Services 32.7 35.4 20.9
Public Administration 4.8 20.4 21.6
</TABLE>
SOURCE: STATE OF COLORADO ESC.
4
<PAGE>
FERGUSON & CO., LLP SECTION II.
- ------------------- -----------
TABLE II.3 - MARKET AREA DEPOSITS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
1993 1994 1995
------------- ------------- ------------
(in Thousands)
<S> <C> <C> <C>
OTERO COUNTY
TOTAL ROCKY FORD FEDERAL $ 17,629 $ 17,956 $ 16,471
------------- ------------- ------------
Number 1 1 1
Number of Branches 1 1 1
TOTAL BANK DEPOSITS $ 265,399 $ 206,825 $ 212,439
------------- ------------- ------------
Number 17 16 16
Number of Branches 17 16 16
TOTAL CREDIT UNION DEPOSITS $ 3,739 $ 3,608 $ 3,362
------------- ------------- ------------
Number 4 4 4
Number of Branches 4 4 4
TOTAL OTERO COUNTY DEPOSITS $ 286,767 $ 228,389 $ 232,272
============= ============= ============
PERCENT OF DEPOSITS HELD BY
ROCKY FORD FEDERAL 6.15% 7.86% 7.09%
============= ============= ============
------------------------------------------------------------------------------------------------------------
</TABLE>
SOURCE: BRANCHSOURCE, A PRODUCT OF SHESHUNOFF INFORMATION SERVICES, INC.
5
<PAGE>
FERGUSON & CO., LLP SECTION II.
- ------------------- -----------
TABLE II.4 - BUILDING PERMITS
OTERO COUNTY AND THE CITIES IN OTERO COUNTY
<TABLE>
<CAPTION>
ROCKY OTERO
RESIDENTIAL PERMITS: LA JUNTA MANZANOLA FORD SWINK COUNTY TOTALS
- ------------------- -------- --------- ---- ----- ------ ------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
1993 $ 100 $ 12 $ 264 $ 89 $ 766 $1,231
-------- --------- ------ ----- ------ ------
1994 749 2 182 73 1,046 2,052
-------- --------- ------ ----- ------ ------
1995 843 17 447 243 1,563 3,113
-------- --------- ------ ----- ------ ------
1996 1,683 18 674 257 939 3,571
-------- --------- ------ ----- ------ ------
COMMERCIAL PERMITS:
- ------------------
1993 1,585 - 120 - 317 2,022
-------- --------- ------ ----- ------ ------
1994 2,532 - 115 4 540 3,191
-------- --------- ------ ----- ------ ------
1995 1,407 2 227 2 1,887 3,525
-------- --------- ------ ----- ------ ------
1996 2,652 - 716 14 635 4,017
-------- --------- ------ ----- ------ ------
TOTAL PERMITS:
- -------------
1993 $ 1,685 $ 12 $ 384 $ 89 $1,083 $3,253
======== ========= ====== ===== ====== ======
1994 $ 3,281 $ 2 $ 297 $ 77 $1,586 $5,243
======== ========= ====== ===== ====== ======
1995 $ 2,250 $ 19 $ 674 $ 245 $3,450 $6,638
======== ========= ====== ===== ====== ======
1996 $ 4,335 $ 18 $1,390 $ 271 $1,574 $7,588
======== ========= ====== ===== ====== ======
</TABLE>
SOURCE: OTERO COUNTY
6
<PAGE>
FERGUSON & CO., LLP SECTION III.
- ------------------- ------------
III. COMPARISON WITH PUBLICLY TRADED THRIFTS
COMPARATIVE DISCUSSION
This section presents an analysis of Rocky Ford Federal Savings and Loan
Association relative to a group of eleven publicly traded thrift institutions
("Comparative Group"). Such analysis is necessary to determine the adjustments
that must be made to the pro forma market value of Rocky Ford Federal's stock.
Table III.1 presents a listing of the comparative group with general information
about the group. Table III.2 presents key financial indicators relative to
profitability, balance sheet composition and strength, and risk factors. Table
III.3 presents a pro forma comparison of Rocky Ford Federal to the comparative
group. Exhibits III and IV contain selected financial information on Rocky Ford
Federal and the comparative group. This information is derived from quarterly
TFR's filed with the OTS and call reports filed with the FDIC. The selection
criteria and comparison with the Comparative Group are discussed below.
SELECTION CRITERIA
Ideally, the comparative group would consist of thrifts in the same
geographic region with identical local economies, asset size, capital level,
earnings performance, asset quality, etc. However, there are few comparably
sized institutions with stock that is liquid enough to provide timely,
meaningful market values. Therefore, we have selected a group of comparatives
that are either listed on the New York Stock Exchange ("NYSE"), the American
Stock Exchange ("AMEX"), or Nasdaq. We excluded companies that are apparent
takeover targets and companies with unusual characteristics that tend to distort
both mean and median calculations. For example, we have excluded all companies
with losses during the trailing twelve months. We have also excluded mutual
holding companies (see Exhibit VI).
Because of the limited number of similar size thrifts with sufficient
trading volume, we looked for members of the comparative group among thrifts
with assets up to $75 million. The Southwest Region, which includes Colorado,
had one thrift that met the aforementioned requirements. We found 24 thrifts
that met the requirements in the entire United States (we consider 10 to be the
minimum number), and we retained 11 and eliminated 13 for the following reasons:
(a) One was BIF insured; (b) Seven had no meaningful earnings or EPS data; (c)
Two had executed merger agreements; (d) One had excessive non-performing assets;
(e) Three had less than 50% of their assets in loans; (f) One had loans serviced
in excess of 40% of assets; and (g) One completed an acquisition, raising its
asset level well above our upper limit.
The principal source of data was SNL Securities, Charlottesville, Virginia.
There are approximately 430 publicly traded thrifts listed on NYSE, AMEX, or
Nasdaq. In developing statistics for the entire country, we eliminated certain
institutions that skewed the results, in order to make the data more meaningful:
. We eliminated companies with losses,
. We eliminated indicated acquisition targets,
. We eliminated companies with price/earnings ratios in excess of 25,
and
. We eliminated companies that had not reported as a stock institution
for one complete year.
The resulting group of 275 publicly traded thrifts is included in Exhibit V.
The selected group of comparatives has sufficient trading volume to provide
meaningful price data. Six of the comparative group members are located in the
Midwest, and there is one in each of the following regions: Southwest, Mid-
Atlantic, West, Northeast, and Southeast Regions. With total assets of
1
<PAGE>
FERGUSON & CO., LLP SECTION III.
- ------------------- ------------
approximately $20.4 million, Rocky Ford Federal is well below the group
selected, which has average assets of $57.0 million and median assets of $57.3
million.
PROFITABILITY
Using the comparison of profitability components as a percentage of average
assets, Rocky Ford Federal was below the comparative group in return on assets,
0.64% to 0.71%; net interest income, 3.52% to 3.73%; noninterest income, 0.10%
to 0.23%; operating expenses, 2.69% to 2.47%; and core income, 0.64% to 0.81%.
Rocky Ford Federal was above the comparative group in loss provisions, 0.00% to
0.07%. Rocky Ford Federal's operating expense minus other income was 2.59%
versus 2.24% for the comparative group. After conversion, deployment of the
proceeds will provide additional income, and Rocky Ford Federal will compare
more favorably with the comparative group in terms of return on average assets,
with a return of 1.13% at the midpoint of the appraisal range. Pro forma return
on average equity is 4.96% at the midpoint, versus a mean of 3.19% and median of
3.32% for the comparative group.
Rocky Ford Federal's operating expense and net income are calculated after
deducting the SAIF assessment. Its SAIF assessment was approximately $106,000,
or approximately $69,000 after taxes. The Emerging Issues Task Force ("EITF")
of the Financial Accounting Standards Board ("FASB") concluded that the SAIF
assessment is not an extraordinary charge. Therefore, it is included in normal
operations in the September 30, 1996, quarter, the time period in which it was
enacted. Some of the members of the comparative group have the September
operations included in their data and some do not. Therefore, it is not
surprising that Rocky Ford Federal's net income, operating expense, and core
income are below that of the comparative group on average. On balance, the
principal operating difference between Rocky Ford Federal and the comparative
group is the group's higher net interest income as a percent of average assets,
which arises because of the group's higher capital level.
BALANCE SHEET CHARACTERISTICS
The general asset composition of Rocky Ford Federal is similar to that of
the comparative group. Rocky Ford Federal has a higher level of passive
investments with 36.87% of its assets invested in cash, investments, and
mortgage-backed securities, versus 30.13% for the comparative group. Rocky Ford
Federal has a lower percentage of its assets in loans, at 60.27% versus 67.06%
for the comparative group. Rocky Ford Federal's percentage of earning assets to
interest costing liabilities is lower than that of the group. Rocky Ford
Federal has 116.69% and the comparative group averages 127.21%. After
conversion, Rocky Ford Federal's ratio will be in line with that of the group of
comparatives.
The liability side differs mainly in that Rocky Ford Federal has a lower
percentage of borrowings and equity and a higher percentage of deposits. Rocky
Ford Federal's capital level is 13.63% versus 21.17% for the comparative group.
Rocky Ford Federal's capital level will be in line with the comparative group
after conversion.
RISK FACTORS
Both Rocky Ford Federal and the comparative group have low levels of
nonperforming assets, with Rocky Ford Federal's being much lower than the
comparative group. Rocky Ford Federal's loan loss allowance is 0.49% of net
loans, which compares favorably with the comparative group. Rocky Ford
Federal's one year gap to assets is negative 43.13% versus negative 22.10% for
the comparative group. However, the group average is based on information
available for only two members of the comparative group. On balance, we believe
that Rocky Ford Federal's interest rate risk management is inferior to that of
the comparative group, as it does not make adjustable rate loans.
2
<PAGE>
FERGUSON & CO., LLP SECTION III.
- ------------------- ------------
SUMMARY OF FINANCIAL COMPARISON
Based on the above discussion of operational, balance sheet, and risk
characteristics of Rocky Ford Federal compared with the group, we believe that
Rocky Ford Federal's performance is level with that of the comparative group.
While Rocky Ford Federal's profitability and capital levels are below the
comparative group, the conversion proceeds will increase its income and capital
levels to comparable levels. And while its interest rate risk management is
generally below the comparative group, Rocky Ford Federal maintains higher
levels of liquidity and the capital added through stock conversion will add to
its ability to withstand interest rate increases.
FUTURE PLANS
Rocky Ford Federal's future plans are to remain a well capitalized,
profitable institution with good asset quality and a commitment to serving the
needs of its trade area, emphasizing residential lending and investing surplus
funds in safe government and agency obligations. The business plan projects no
change in direction for the Association. Management recognizes that it will
take time to invest the proceeds of its capital infusion in a manner consistent
with its historic performance and current policy. During that period of time,
management is willing to accept a lower return on assets as well as a lower
return on equity capital.
Rocky Ford Federal has always adhered to a controlled growth policy, and in
recent years, it has remained flat as it controlled its rates paid and overall
spreads. The additional capital raised by the sale of Common Stock will
initially be used to purchase short term investment securities. The Association
will continue to minimize the terms of its fixed rate loans. The Association's
business plan projects that it will experience growth in loans, savings
deposits, and liquidity.
Rocky Ford Federal has no current plans to open or acquire branches.
Management believes that projected lending goals can be met without additional
offices.
3
<PAGE>
FERGUSON & CO.LLP SECTION III.
- ----------------- ------------
TABLE III.1 - COMPARATIVES
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
Type of ($000) Price Value
Ticker Short Name City State Thrift(1) Offices MRQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY Traditional 2 59,860 07/26/93 17.500 4.38
ATSB AmTrust Capital Corp. Peru IN Traditional 2 72,108 03/28/95 10.125 5.34
CKFB CKF Bancorp, Inc. Danville KY Traditional 1 59,898 01/04/95 19.750 18.59
CRZY Crazy Woman Creek Bancorp Buffalo WY Traditional 1 51,517 03/29/96 11.750 12.43
CSBF CSB Financial Group, Inc. Centralia IL Traditional 1 41,524 10/09/95 10.563 10.93
GUPB GFSB Bancorp, Inc. Gallup NM Traditional 1 79,708 06/30/95 15.875 14.31
JOAC Joachim Bancorp, Inc. De Soto MO Traditional 1 36,127 12/28/95 14.375 10.93
MCBN Mid-Coast Bancorp, Inc. Waldoboro ME Traditional 2 55,956 11/02/89 18.750 4.31
MIVI Mississippi View Holding Co. Little Falls MN Traditional 1 69,322 03/24/95 11.750 10.31
NSLB NS&L Bancorp, Inc. Neosho MO Traditional 2 57,288 06/08/95 13.750 11.60
SCCB S. Carolina Community Bancshrs Winnsboro SC Traditional 3 43,232 07/07/94 15.000 11.03
Maximum 3 79,708 19.750 18.59
Minimum 1 36,127 10.125 4.31
Average 2 56,958 14.472 10.38
Median 1 57,288 14.375 10.93
</TABLE>
(1) Determined by reference to TAFS reports, which are derived from thrift TFR
reports, and from BankSource reports, which are derived from FDIC call reports.
TAFS and BankSource are published by Sheshunoff.
SOURCE: SNL & F&C CALCULATIONS
4
<PAGE>
FERGUSON & CO. LLP SECTION III.
- ------------------ ------------
TABLE III.2 - KEY FINANCIAL INDICATORS
<TABLE>
<CAPTION>
ROCKY FORD
FEDERAL SAVINGS
AND LOAN COMPARATIVE
ASSOCIATION GROUP
--------------- ------------
<S> <C> <C>
PROFITABILITY
(% of average assets)
Net income 0.64 0.71
Net interest income 3.52 3.73
Loss (recovery) provisions - 0.07
Other operating income 0.10 0.23
Operating expense 2.69 2.47
Core income ( excluding gains
and losses on asset sales) 0.64 0.81
BALANCE SHEET FACTORS
(% of assets)
Cash and investments 24.04 21.43
Mortgage-backed securities 12.83 8.70
Loans 60.27 67.06
Savings deposits 84.09 70.29
Borrowings - 7.31
Equity 13.63 21.17
Tangible equity 13.63 21.16
RISK FACTORS
(%)
Earning assets/costing liabilities 116.69 127.21
Non-performing assets/assets NM 0.68
Loss allowance/non performing assets NM 158.78
Loss allowance/loans 0.49 0.73
One year gap/assets (43.13) (22.10)
</TABLE>
SOURCE: SNL SECURITIES, F&C CALCULATIONS, AND OFFERING CIRCULAR
5
<PAGE>
FERGUSON & CO., LLP Section III.
- ------------------- ------------
TABLE III.3 - PRO FORMA COMPARISONS
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
AS OF DECEMBER 13, 1996
<TABLE>
<CAPTION>
Ticker Name Price Mk Value PE P/Book P/TBook P/Assets Div Yld Assets
($) ($Mil) (X) (%) (%) (%) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ROCKY FORD FEDERAL
------------------
Before Conversion N/A N/A N/A N/A N/A N/A N/A 20,388
Pro Forma Supermax 10.000 4.23 15.2 68.8 68.8 17.8 3.00 23,762
Pro Forma Maximum 10.000 3.68 13.9 64.9 64.9 15.8 3.00 23,276
Pro Forma Midpoint 10.000 3.20 12.5 61.0 61.0 14.0 3.00 22,854
Pro Forma Minimum 10.000 2.72 11.1 56.3 56.3 12.1 3.00 22,442
COMPARATIVE GROUP
-----------------
Averages 14.472 10.38 32.6 89.2 89.2 19.4 2.29 56,958
Medians 14.375 10.93 20.2 86.9 86.9 20.2 2.52 57,288
COLORADO PUBLIC THRIFTS
-----------------------
Averages 14.375 163.38 13.4 120.4 121.4 16.8 1.98 794,803
Medians 14.375 163.38 13.4 120.4 121.4 16.8 1.98 794,803
SOUTHWEST REGION THRIFTS
------------------------
Averages 18.514 42.34 15.5 107.0 111.3 12.8 2.18 531,484
Medians 16.250 19.87 15.8 102.4 105.6 12.4 2.13 231,058
ALL PUBLIC THRIFTS
------------------
Averages 20.004 185.32 14.8 126.0 132.6 12.4 2.18 1,732,077
Medians 18.375 48.45 14.2 120.3 124.0 11.5 2.15 399,721
COMPARATIVE GROUP
-----------------
ALBC AlbionBancCorp-NY 17.500 4.38 145.8 75.9 75.9 7.3 1.75 59,860
ATSB AmTrustCapCorp-IN 10.125 5.34 18.1 74.8 75.6 7.4 - 72,108
CKFB CKFBancorp-KY 19.750 18.59 22.4 117.6 117.6 31.0 2.23 59,898
CRZY CrazyWomanCreek-WY 11.750 12.43 17.3 80.4 80.4 24.1 3.40 51,517
CSBF CSBFinancialGrp-IL 10.563 10.93 24.0 85.2 85.2 26.3 - 41,524
GUPB GFSBBancorp-NM 15.875 14.31 18.0 97.0 97.0 18.0 2.52 79,708
JOAC JoachimBancorp-MO 14.375 10.93 44.9 102.3 102.3 30.3 3.48 36,127
MCBN Mid-Coast Bncp-ME 18.750 4.31 14.2 87.8 87.8 7.7 2.77 55,956
MIVI MissViewHoldCo-MN 11.750 10.31 12.2 83.8 83.8 15.4 1.36 69,322
NSLB NS&LBancorp-MO 13.750 11.60 20.2 86.9 86.9 20.2 3.64 57,288
SCCB SCCommunBancsh-SC 15.000 11.03 20.8 89.1 89.1 25.5 4.00 43,232
</TABLE>
6
<PAGE>
FERGUSON & CO., LLP SECTION III.
- ------------------- ------------
TABLE III.3 - PRO FORMA COMPARISONS
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION
<TABLE>
<CAPTION>
AS OF DECEMBER 13, 1996
Ticker Name Eq/A TEq/A EPS ROAA ROAE
(%) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C>
ROCKY FORD FEDERAL
------------------
Before Conversion 13.6 13.6 N/A 0.99 7.37
Pro Forma Supermax 25.9 25.9 0.66 1.19 4.60
Pro Forma Maximum 24.3 24.3 0.72 1.16 4.78
Pro Forma Midpoint 23.0 23.0 0.80 1.13 4.96
Pro Forma Minimum 21.5 21.5 0.90 1.11 5.18
COMPARATIVE GROUP
-----------------
Averages 21.2 21.2 0.69 0.71 3.19
Medians 23.3 23.3 0.68 0.80 3.32
COLORADO PUBLIC THRIFTS
------------------------
Averages 13.7 13.6 0.84 0.79 5.10
Medians 13.7 13.6 0.84 0.79 5.10
SOUTHWEST REGION THRIFTS
------------------------
Averages 12.5 12.4 1.28 0.63 4.89
Medians 13.8 13.8 0.98 0.74 4.30
ALL PUBLIC THRIFTS
------------------
Averages 10.4 10.1 1.46 0.78 7.93
Medians 9.0 8.3 1.29 0.74 6.79
COMPARATIVE GROUP
-----------------
ALBC AlbionBancCorp-NY 9.6 9.6 0.12 (0.10) (1.00)
ATSB AmTrustCapCorp-IN 9.9 9.8 0.56 0.26 2.45
CKFB CKFBancorp-KY 25.2 25.2 0.88 1.28 4.70
CRZY CrazyWomanCreek-WY 30.0 30.0 0.68 0.79 3.10
CSBF CSBFinancialGrp-IL 30.9 30.9 0.44 0.89 NA
GUPB GFSBBancorp-NM 18.5 18.5 0.88 0.80 3.53
JOAC JoachimBancorp-MO 29.6 29.6 0.32 0.41 1.49
MCBN Mid-Coast Bncp-ME 8.8 8.8 1.32 0.34 3.83
MIVI MissViewHoldCo-MN 18.4 18.4 0.96 1.31 6.73
NSLB NS&LBancorp-MO 23.3 23.3 0.68 0.97 4.08
SCCB SCCommunBancsh-SC 28.7 28.7 0.72 0.85 2.96
</TABLE>
Note: Stock prices are closing prices or last
trade. Pro forma calculations for Rocky Ford are
based on sales at $10 per share with a midpoint of
$3,200,000, minimum of $2,720,000, and maximum of
$3,680,000.
SOURCES: ROCKY FORD'S AUDITED AND UNAUDITED
FINANCIAL STATEMENTS, SNL SECURITIES, AND F&C
CALCULATIONS.
7
<PAGE>
SECTION IV
CORRELATION OF MARKET
VALUE
<PAGE>
FERGUSON & CO., LLP Section IV.
- ------------------- -----------
IV. CORRELATION OF MARKET VALUE
MARKETABILITY & LIQUIDITY OF STOCK TO BE ISSUED
Certain factors must be considered to determine whether adjustments are
required in correlating Rocky Ford Federal's market value to the comparative
group. Those factors include financial aspects, market area, management,
dividends, liquidity, thrift equity market conditions, and subscription
interest.
This section addresses the aforementioned factors and the estimated pro
forma market value of the to-be-issued common shares and compares the resulting
market value of the Association to the members of its comparative group and the
selected group of publicly held thrifts.
FINANCIAL ASPECTS
Section III includes a discussion regarding a comparison of Rocky Ford
Federal's earnings, balance sheet characteristics, and risk factors with its
comparative group. Table III.2 presents a comparison of certain key indicators,
and Table III.3 presents certain key indicators on a pro forma basis after
conversion.
As shown in Table III.2, from an earnings viewpoint, Rocky Ford Federal is
slightly below its comparative group in most areas of operations except for loss
provisions. However, as explained in Section III, Rocky Ford's numbers absorb
the SAIF assessment, while part of the comparative group have it included in
their numbers and part of them do not. On balance, the only real operational
difference is the comparative group's net interest income as a percent of assets
is 3.73% versus 3.52% for Rocky Ford Federal. The reason for the difference is
the comparative group's higher capital level. After conversion, Rocky Ford
Federal should be on par with the group.
Rocky Ford Federal's pro forma equity to assets ratio at the midpoint is
23.0%, versus a mean of 21.2% and median of 23.3% for the comparative group.
Rocky Ford Federal's pro forma return on equity is slightly above the
comparative group--4.96% at the midpoint versus a mean of 3.19% and median of
3.32% for the comparative group.
Rocky Ford Federal's recorded earnings have been adjusted for appraisal
purposes. The Association's operations for the year ended September 30, 1996,
include its SAIF assessment.
TABLE IV.1 - APPRAISAL EARNINGS ADJUSTMENTS
<TABLE>
<S> <C>
Net income, year ended September 30, 1996 $128,000
Add back SAIF assessment 106,000
Less applicable taxes on above adjustment at 35% -37,000
----------
Appraisal earnings, year ended September 30, 1996 $197,000
==========
</TABLE>
Rocky Ford Federal's asset composition is similar to that of its
comparative group--passive, with a high percentage of total assets in
investments and mortgage-backed securities. From the risk factor viewpoint,
Rocky Ford Federal is similar to the comparative group. Rocky Ford Federal has
a lower level of non performing assets. Rocky Ford Federal's loan loss
allowance is 0.49% of net loans, comparing favorably with the comparative group,
which is 0.73%. Its ratio of interest earning assets to interest bearing
liabilities (116.69%) is well below the comparative group (127.21%). Rocky Ford
Federal's ratio will be in line with the comparative group after conversion.
From an interest rate risk factor, Rocky Ford Federal is not well positioned to
withstand significant interest rate increases.
1
<PAGE>
FERGUSON & CO., LLP Section IV.
- ------------------- -----------
We believe that NO ADJUSTMENT is necessary relative to financial aspects of
-------------
Rocky Ford Federal.
MARKET AREA
Section II describes Rocky Ford Federal's market area.
We believe that a DOWNWARD ADJUSTMENT is required for Rocky Ford Federal's
-------------------
market area.
MANAGEMENT
The CEO has been with Rocky Ford Federal 20 years (on two different
occasions), serving as CEO continuously since 1985. Rocky Ford Federal's
results compare well with the comparative group. Therefore, Rocky Ford
Federal's management has done the same quality job as its selected comparatives.
The Association has no management succession plan in effect; however, that is
not unusual for this size institution. Moreover, the Association has no depth
in Management, since it has only one executive officer.
We believe that a DOWNWARD ADJUSTMENT is required for Rocky Ford Federal's
-------------------
management.
DIVIDENDS
Table III.3 provides dividend information relative to the comparative group
and the thrift industry as a whole. The comparative group is paying a mean
yield on price of 2.29% and a median of 2.52%, while all public thrifts are
paying a mean of 2.18% and median of 2.15%. Rocky Ford Federal intends to pay a
dividend at an initial annual rate of 3.0%.
We believe that NO ADJUSTMENT is required relative to Rocky Ford Federal's
-------------
intention to pay dividends.
LIQUIDITY
The Holding Company has never issued capital stock to the public, and as a
result, no existing market for the Common Stock exists. Although the Holding
Company has applied to list its Common Stock on Nasdaq as a Pink Sheet, there
can be no assurance that a liquid trading market will develop.
A public market having the desirable characteristics of depth, liquidity,
and orderliness depends upon the presence, in the market place, of both willing
buyers and sellers of the Common Stock. These characteristics are not within
the control of the Association or the market.
The peer group includes companies with sufficient trading volume to develop
meaningful pricing characteristics for the stock. The market value of the
comparative group ranges from $4.31 million to $18.59 million, with a mean value
of $10.38 million. The midpoint of Rocky Ford Federal's valuation range is $3.2
million at $10 a share, or 320,000 shares.
We believe a DOWNWARD ADJUSTMENT is required relative to the liquidity of
-------------------
Rocky Ford Federal's stock.
THRIFT EQUITY MARKET CONDITIONS
The SNL Thrift Index is summarized in Figure IV.1. As the table
demonstrates, the Thrift Index has performed well since the end of 1990. The
Index has grown as follows: Year ended December 31, 1991--increased 49.0% from
96.6 to 143.9; Year ended December 31, 1992--increased 39.7% to 201.1; Year
ended December 31, 1993--increased 25.6% to 252.5; Year ended December 31, 1994-
- -decreased 3.1% to 244.7; Year ended December 31, 1995--increased 53.9% to
376.5; and Period ended December 13, 1996--increased 25.8% to 473.6. It is
market value weighted with a base value of 100 as of March 31, 1984.
2
<PAGE>
FERGUSON & CO., LLP Section IV.
- ------------------- -----------
As shown in Figure IV.1, which is a graph of the SNL Thrift Index covering
from December 31, 1990 through December 13, 1996, the market, as depicted by the
index, has experienced fluctuations recently. It dipped in the latter part of
1994, but recovered during the first quarter of 1995. During 1995, the Index
continued a more robust increase and moved from 244.7 at year end 1994 to 376.5
by December 31, 1995, an increase of 53.9%. However, the Index has recently
remained flat with some minor up and down movement. It increased 1.5% from
December 31, 1995, to March 31, 1996; it decreased 1.3% from March 31, 1996 to
June 30, 1996; it increased 13.8% from June 30, 1996, to September 30, 1996; and
then it increased 10.3% from September 30, 1996, to December 13, 1996.
The increase in the SNL Index, in general, has been parallel with the
increases in other equity markets with some interim fluctuations caused by
changes or anticipated changes in interest rates. Another factor, however, is
also notable. In other markets, increased prices are responding to improved
profits, with price to earnings ratios increasing as earnings potentials are
anticipated. However, the thrift IPO market has been affected by speculation
that the majority of the institutions will become viable consolidation
candidates and sell at some expanded multiple of book value.
COLORADO ACQUISITIONS
Table IV.2 provides information relative to acquisitions of financial
institutions in Colorado between January 1, 1995 and December 13, 1996. There
were 16 bank acquisitions and 1 thrift acquisition announced during that time
frame. Currently, there are 2 publicly held thrifts in the State of Colorado.
There are 16 publicly held thrifts in the southwest region of the country. Bank
acquisitions in Colorado since January 1, 1995, have averaged 217.8% of tangible
book value and 12.1 times earnings. The median price has been 192.1% of
tangible book value and 12.4 times earnings. Thrifts generally sell at lower
price/book multiples than do banks. However, pricing ratios were not available
for the one thrift sale during the time period.
EFFECT OF INTEREST RATES ON THRIFT STOCK
The current interest rate environment and the anticipated rate environment
will affect the pricing of thrift stocks, and all other interest sensitive
stocks. As the economy continues to lose momentum, the fear of inflation can
and has to a degree been replaced by economic uncertainty. The Federal Reserve,
in its resolve to curb inflation, has increased rates in the past, but has more
recently relented to vagaries of the economy and decreased rates in an attempt
to stimulate what is currently perceived as a fragile and irresolute economy.
The most recent Federal Reserve action on interest rates occurred in January
1996, when it reduced the discount rate 25 basis points. Recent gains in thrift
stocks could reverse if the merger and consolidation activity continues to
abate, or if rates rise sharply.
What is likely to happen in the short to intermediate term is that rates
will float around current levels and trend upward. The yield curve will
continue to normalize. A slowly increasing yield curve will do little for the
financial services industry in general and thrifts specifically. The spreads
will narrow if the cost of funds rise.
As clearly illustrated, the SNL Thrift Index has performed well over the
last six years. It moved in tandem with all interest sensitive stocks and
reflected the weakness in the market as investors began to consider the
importance of increases in rates and their impact on the net interest margins of
thrifts. The clear implication is that rising interest rates will have a
negative impact on earnings.
Figure IV.2 graphically displays the rate environment since May 31, 1996.
In late May 1996, the yield curve was sloped more, with a 183 basis point ("BP")
difference between the federal funds rate and the 30 year treasury at May 31,
1996. Since that time, the yield curve has flattened, with a 131 BP spread
3
<PAGE>
FERGUSON & CO., LLP Section IV.
- ------------------- -----------
between the federal funds rate and the 30 year treasury rate at December 13,
1996. Mortgage rates follow closely the long term government obligations,
giving asset managers less opportunity to maintain their spreads.
At May 31, 1996, the spread between the 1 year T-Bill and the 5 year T-Note
was 85 bp, and the spread between the 5 year T-Note and the 30 year bond was 47
bp. On December 13, 1996, the spreads were 58 and 50 bp, respectively.
Clearly, the implications are that the yield curve is developing less slope at
the short to intermediate terms.
From May 1996 to December 1996,, the Fed Funds rate increased 3 basis
points and the Prime Rate did not change.
Increased cost of funds will serve to narrow the net interest margins of
thrifts. A thrift's ability to maintain net interest margins through business
cycles is important to investors, unless thrifts can offset the decline in net
interest income by other sources of revenue or reductions in noninterest
expense. The former is difficult and the latter is unlikely.
Rocky Ford Federal is more vulnerable to rising rates than most.
During 1993, conversion stocks often experienced first day 30% or more
increases in value. However, as Table IV.3 shows, recent price appreciation has
not been as robust. Table IV.3 provides information on 26 conversions completed
since May 31, 1996. The average change in price since conversion is a gain of
33.8% and the median change is a gain of 31.3%. Within that group, all have
increased in value with a range of a low of 15.0% to a high of 55.0%. The
average increase in value at one day, one week, and one month after conversion
has been 12.9%, 13.9%, and 13.0%, respectively. The median increase in value at
one day, one week, and one month after conversion has been 11.3%, 14.4%, and
10.6%, respectively.
Because of the lack of complete earnings information on recent conversions,
a meaningful comparison of the price earnings ratios is difficult to make.
However, there is sufficient information to review the price to book ratio. The
average price-to-book ratio, as of December 13, 1996, is 90.5% and the median is
87.6%. That compares to the offering price to pro forma book, where the average
was 67.8% and the median was 69.3%.
We believe a DOWNWARD ADJUSTMENT is required for the new issue discount.
-------------------
ADJUSTMENTS CONCLUSION
ADJUSTMENTS SUMMARY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
NO CHANGE UPWARD DOWN
<S> <C> <C> <C>
Financial Aspects X
Market Area X
Management X
Dividends X
Liquidity X
Thrift Equity Market Conditions X
- ----------------------------------------------------------------------------
</TABLE>
4
<PAGE>
FERGUSON & CO., LLP Section IV.
- ------------------- -----------
VALUATION APPROACH
Typically, investors rely on the price/earnings ratio as the most
appropriate indicator of value. We consider price/earnings to be one of the
important pricing methods in valuing a thrift stock. Price/book is a well
recognized yardstick for measuring the value of financial institution stocks in
general. Another method of viewing thrift values is price/assets, which is more
meaningful in situations where the subject is thinly capitalized. Given the
healthy condition of the thrift industry today, more emphasis is placed on
price/earnings and price/book. Generally, price/earnings and price/book should
be considered in tandem.
Table III.3 presents Rocky Ford Federal's pro forma ratios and compares
them to the ratios of its comparative group and the publicly held thrift
industry as a whole. Rocky Ford Federal's earnings for the twelve months ended
September 30, 1996, were approximately $128,000, with adjustments of $69,000
required to determine appraisal earnings of $197,000. Management has indicated
an intention to continue to concentrate on residential lending. The Association
is vulnerable interest rate increases and positioned to benefit from interest
rate decreases. The Association projects moderate growth.
The comparative group traded at an average of 32.6 times earnings at
December 13, 1996, and at 89.2% of book value. The comparative group traded at
a median of 20.2 times earnings and a median of 86.9% of book value. At the
midpoint of the valuation range, Rocky Ford Federal is priced at 12.5 times
earnings (ignoring the SAIF assessment) and 61.0% of book value. At the maximum
end of the range, Rocky Ford Federal is priced at 13.9 times earnings and 64.9%
of book value. At the supermaximum, Rocky Ford Federal is priced at 15.2 times
earnings and 68.8% of book value.
The midpoint valuation of $3,200,000 represents a discount of 31.6% from
the average and a discount of 29.8% from the median of the comparative group on
a price/book basis. The price/earnings ratio for Rocky Ford Federal at the
midpoint represents a discount of 61.7% from the comparative group's mean and
38.1% from the median price/earnings ratio.
The maximum valuation of $3,680,000 represents a discount of 27.2% from the
average and 25.3% from the median of the comparative group on a price/book
basis. The price/earnings ratio for Rocky Ford Federal at the maximum represents
a discount of 57.4% from the average and 31.2% from the median of the
comparative group.
As shown in Table IV.3, conversions closing since May 31, 1996, have closed
at an average price to book ratio of 67.8% and median of 69.3%. Rocky Ford
Federal's pro forma price to book ratio is 61.0% at the midpoint, 64.9% at the
maximum, and 68.8% at the supermaximum of the range. At the midpoint, Rocky
Ford Federal is 10.0% below the average and 12.0% below the median. At the
maximum of the range, Rocky Ford Federal is 4.3% below the average and 6.3%
below the median. At the supermaximum of the range, Rocky Ford Federal's pro
forma price to book ratio is 1.5% above the average and 0.7% below the median.
As shown in Table IV.4, pink sheet conversions closing since November 29,
1995, have closed at an average price to book ratio of 63.8% and median of
63.9%. At the midpoint, Rocky Ford Federal is 4.4% below the average and 4.5%
below the median. At the maximum of the range, Rocky Ford Federal is 1.7% above
the average and 1.6% above the median. At the supermaximum of the range, Rocky
Ford Federal's pro forma price to book ratio is 7.8% above the average and 7.7%
above the median.
5
<PAGE>
FERGUSON & CO., LLP Section IV.
- ------------------- -----------
VALUATION CONCLUSION
We believe that as of December 13, 1996, the estimated pro forma market
value of Rocky Ford Federal was $3,200,000. The resulting valuation range was
$2,720,000 at the minimum to $3,680,000 at the maximum, based on a range of 15%
below and 15% above the midpoint valuation. The supermaximum is $4,232,000,
based on 1.15 times the maximum. Pro forma comparisons with the comparative
group are presented in Table III.3 based on calculations shown in Exhibit VII.
6
<PAGE>
FERGUSON & CO.LLP SECTION IV.
- ----------------- -----------
TABLE IV.2 - COLORADO ACQUISITIONS
<TABLE>
<CAPTION>
Buyer: Seller:
1:Total 1:Total
Bank/ Bank/ Assets Assets Announce
Buyer ST Thrift Seller ST Thrift ($000) ($000) Date Status
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Zions Bancorp UT Bank Aspen Bancshares Inc CO Bank 6,783,341 450,944 11/19/96 Pending
Community First Bnks ND Bank Mountain Parks Fin'l CO Bank 2,293,703 462,892 06/25/96 Pending
Dickinson Fin'l Corp MO Bank Air Academy Nat Bncp CO Bank 1,394,400 61,078 06/04/96 Pending
First Nat'l of NE NE Bank Boulder Bancorp CO Bank 6,143,890 125,929 04/16/96 Completed
Mountain Parks Fin'l CO Bank High Plains Bank Crp CO Bank 421,239 39,611 03/18/96 Completed
Community First Bnks ND Bank Financial Bancorp CO Bank 2,326,787 66,719 03/11/96 Completed
Mountain Parks Fin'l CO Bank Charter Bancorp CO Bank 421,239 17,642 01/10/96 Completed
Southrn Colorado BHC CO Bank Mancos Bancorp CO Bank 18,663 15,281 01/01/96 Completed
Vectra Banking Corp CO Bank Bank Land Company CO Bank 382,243 109,529 12/27/95 Completed
Norwest Corporation MN Bank Regional Bank of CO CO Bank 71,411,900 58,249 12/20/95 Completed
FirstBank Hold Co. CO Bank Bank of Douglas Cnty CO Bank 2,245,845 96,359 11/22/95 Completed
ColoEast Bankshares CO Bank Baca State Bank CO Bank 48,120 43,348 11/01/95 Completed
Mountain Parks Fin'l CO Bank Midway Investment CO Bank 274,304 42,544 04/20/95 Completed
Rice Insurance Agncy CO Bank Collegiate Peaks Bcp CO Bank 95,973 18,766 04/15/95 Completed
First Mountain Co. CO Bank First Mountain St Bk CO Bank NA 22,201 03/10/95 Completed
Aspen Bancshares CO Bank Val Cor Bancorp CO Bank 345,573 67,843 01/13/95 Completed
Bank of Colorado HC CO Bank Snow Bankcorp CO Bank 74,593 28,214 01/06/95 Completed
Peoples NB CO Bank Colorado Springs S&L CO Thrift 51,033 70,786 06/30/96 Pending
Average 5,572,520 99,885
Median 421,239 59,664
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
7
<PAGE>
FERGUSON & CO., LLP Section IV.
- ------------------- -----------
TABLE IV.2 - COLORADO ACQUISITIONS
<TABLE>
<CAPTION>
Ann'd Ann'd Ann'd Ann'd Final Final Final Final
Completed/ Deal Deal Deal Pr/ Deal Pr/ Deal Deal Deal Pr/ Deal Pr/
Terminated Value Pr/Bk Tg Bk 4-Qtr Value Pr/Bk Tg Bk 4-Qtr
Buyer Date ($M) (%) (%) EPS (x) ($M) (%) (%) EPS (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Zions Bancorp NA 74.0 237.1 276.2 16.5 NA NA NA NA
Community First Bnks NA 115.5 224.3 300.1 14.4 NA NA NA NA
Dickinson Fin'l Corp NA 6.5 183.4 183.4 14.4 NA NA NA NA
First Nat'l of NE 08/06/96 32.0 165.1 165.1 NA 32.0 165.1 165.1 NA
Mountain Parks Fin'l 07/31/96 NA NA NA NA NA NA NA NA
Community First Bnks 10/01/96 12.0 136.7 136.7 12.4 12.7 131.1 131.1 12.4
Mountain Parks Fin'l 07/03/96 4.0 NA NA NA 4.0 NA NA NA
Southrn Colorado BHC 04/10/96 NA NA NA NA NA NA NA NA
Vectra Banking Corp 06/18/96 22.3 176.8 176.8 11.4 22.2 163.0 163.0 11.3
Norwest Corporation 08/05/96 12.1 260.2 260.2 13.0 13.1 273.7 273.7 25.8
FirstBank Hold Co. 03/23/96 14.1 281.6 281.6 7.3 14.1 281.6 281.6 8.5
ColoEast Bankshares 05/15/96 NA NA NA NA NA NA NA NA
Mountain Parks Fin'l 09/27/95 5.2 192.7 192.7 5.8 5.2 168.9 168.9 5.9
Rice Insurance Agncy 10/02/95 3.2 191.5 191.5 8.9 3.2 180.6 180.6 8.3
First Mountain Co. NA NA NA NA NA NA NA NA NA
Aspen Bancshares 06/18/96 10.0 184.0 184.0 9.9 10.0 184.9 184.9 6.1
Bank of Colorado HC 06/01/95 4.1 265.9 265.9 19.7 4.1 252.6 252.6 16.7
Peoples NB NA NA NA NA NA NA NA NA NA
Average 24.2 208.3 217.8 12.1 12.1 200.2 200.2 11.9
Median 12.0 192.1 192.1 12.4 11.4 180.6 180.6 9.9
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
8
<PAGE>
FERGUSON & CO., LLP TABLE IV.3 - RECENT CONVERSIONS SECTION IV.
- ------------------- -----------
(COMPLETED SINCE MAY 31, 1996)
<TABLE>
<CAPTION>
Conversion Gross
Assets Proceeds
Ticker Short Name State IPO Date ($000) ($000)
<S> <C> <C> <C> <C> <C>
PSFI PS Financial, Inc. IL 11/27/96 53,520 21,821
CFNC Carolina Fincorp, Inc. NC 11/25/96 94,110 18,515
DCBI Delphos Citizens Bancorp, Inc. OH 11/21/96 88,022 20,387
FTNB Fulton Bancorp, Inc. MO 10/18/96 85,496 17,193
CNBA Chester Bancorp, Inc. IL 10/08/96 134,781 21,821
SSFC South Street Financial Corp. NC 10/03/96 166,978 44,965
AFED AFSALA Bancorp, Inc. NY 10/01/96 133,046 14,548
CBES CBES Bancorp, Inc. MO 09/30/96 86,168 10,250
WEHO Westwood Homestead Fin. Corp. OH 09/30/96 96,638 28,434
HBEI Home Bancorp of Elgin, Inc. IL 09/27/96 304,520 70,093
PFFC Peoples Financial Corp. OH 09/13/96 78,078 14,910
PFED Park Bancorp, Inc. IL 08/12/96 158,939 27,014
ANA Acadiana Bancshares, Inc. LA 07/16/96 225,248 32,775
PWBK Pennwood Savings Bank PA 07/15/96 41,592 6,101
MBSP Mitchell Bancorp, Inc. NC 07/12/96 28,222 9,799
OCFC Ocean Financial Corp. NJ 07/03/96 1,036,445 167,762
HWEN Home Financial Bancorp IN 07/02/96 33,462 5,059
EGLB Eagle BancGroup, Inc. IL 07/01/96 150,974 13,027
FLKY First Lancaster Bancshares KY 07/01/96 35,361 9,588
PROV Provident Financial Holdings CA 06/28/96 570,691 51,252
PRBC Prestige Bancorp, Inc. PA 06/27/96 91,841 9,630
WYNE Wayne Bancorp, Inc. NJ 06/27/96 207,997 22,314
DIME Dime Community Bancorp, Inc. NY 06/26/96 665,187 145,475
MECH Mechanics Savings Bank CT 06/26/96 662,482 52,900
CNSB CNS Bancorp, Inc. MO 06/12/96 85,390 16,531
LXMO Lexington B&L Financial Corp. MO 06/06/96 49,981 12,650
Maximum 1,036,445 167,762
Minimum 28,222 5,059
Average 206,353 33,262
Median 95,374 19,451
Since 9-30-96:
- --------------
Maximum 166,978 44,965
Minimum 53,520 14,548
Average 107,993 22,750
Median 94,110 20,387
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
9
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
TABLE IV.3 - RECENT CONVERSIONS
(COMPLETED SINCE MAY 31, 1996)
<TABLE>
<CAPTION>
CONVERSION PRICING RATIOS
----------------------------------------------
Price/ Price/ Price/ Current Current Current
Offering Pro-Forma Pro-Forma Adjusted Stock Price/ Price/ Tang
Price Book Value Earnings Assets Price Book Value Book Value
Ticker ($) (%) (x) (%) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
PSFI 10.000 69.9 14.5 29.0 11.875 NA NA
CFNC 10.000 74.7 17.7 16.4 13.125 NA NA
DCBI 10.000 70.2 12.1 18.8 11.938 NA NA
FTNB 10.000 70.5 15.5 16.7 14.875 NA NA
CNBA 10.000 70.1 14.1 13.9 13.125 NA NA
SSFC 10.000 74.1 27.0 21.2 13.875 NA NA
AFED 10.000 69.7 14.1 9.9 11.500 NA NA
CBES 10.000 61.1 13.2 10.6 13.750 83.0 83.0
WEHO 10.000 71.7 92.8 22.7 11.750 77.8 77.8
HBEI 10.000 70.6 17.4 18.7 12.813 90.7 90.7
PFFC 10.000 62.7 26.7 16.0 13.000 NA NA
PFED 10.000 64.9 17.8 14.5 12.375 80.5 80.5
ANA 12.000 69.9 NA 12.7 14.250 83.7 83.7
PWBK 10.000 65.8 13.3 12.8 12.625 83.2 83.2
MBSP 10.000 68.1 94.5 25.8 14.250 94.9 94.9
OCFC 20.000 69.2 13.8 13.9 25.500 93.7 93.7
HWEN 10.000 66.2 12.4 13.1 13.000 84.9 84.9
EGLB 10.000 57.1 58.1 7.9 13.250 79.1 79.1
FLKY 10.000 72.5 19.0 21.3 15.500 110.1 110.1
PROV 10.000 60.9 18.2 8.2 14.250 86.0 86.0
PRBC 10.000 61.9 24.6 9.5 13.000 82.4 82.4
WYNE 10.000 60.9 16.7 9.7 14.375 89.3 89.3
DIME 10.000 69.1 15.7 17.9 14.875 100.6 115.7
MECH 10.000 72.0 NA 7.4 15.500 115.0 115.0
CNSB 10.000 69.3 26.1 16.2 15.000 102.7 102.7
LXMO 10.000 69.1 14.4 20.2 13.500 91.2 91.2
Maximum 20.000 74.7 94.5 29.0 25.500 115.0 115.7
Minimum 10.000 57.1 12.1 7.4 11.500 77.8 77.8
Average 10.462 67.8 25.4 15.6 13.957 90.5 91.3
Median 10.000 69.3 17.1 15.3 13.375 87.6 87.6
Since 9-30-96:
- ----------------
Maximum 10.000 74.7 27.0 29.0 14.875
Minimum 10.000 69.7 12.1 9.9 11.500
Average 10.000 71.3 16.4 18.0 12.902
Median 10.000 70.2 14.5 16.7 13.125
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
10
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
TABLE IV.3 - RECENT CONVERSIONS
(COMPLETED SINCE MAY 31, 1996)
<TABLE>
<CAPTION>
Price One Price One Price One POST CONVERSION PRICE CHANGES
------------------------------------------
Day After Week After Month After One One One To
Conversion Conversion Conversion Day Week Month Date
Ticker ($) ($) ($) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
PSFI 11.641 11.688 NA 16.4 16.9 NA 18.8
CFNC 13.000 13.000 NA 30.0 30.0 NA 31.3
DCBI 12.125 12.125 NA 21.3 21.3 NA 19.4
FTNB 12.500 12.875 14.750 25.0 28.8 NA 48.8
CNBA 12.938 12.625 12.625 29.4 26.3 26.3 31.3
SSFC NA 12.500 12.375 NA 25.0 23.8 38.8
AFED 11.375 11.313 11.563 13.8 13.1 NA 15.0
CBES 12.625 13.438 13.250 26.3 34.4 32.5 37.5
WEHO 10.750 10.625 10.500 7.5 6.3 5.0 17.5
HBEI 11.813 12.500 12.625 18.1 25.0 26.3 28.1
PFFC 10.875 11.500 12.750 8.8 15.0 27.5 30.0
PFED 10.250 10.438 10.500 2.5 4.4 5.0 23.8
ANA 12.000 11.750 12.375 - (2.1) 3.1 18.8
PWBK 9.500 9.125 9.625 (5.0) (8.8) (3.8) 26.3
MBSP NA 10.625 11.000 NA 6.3 10.0 42.5
OCFC 21.250 20.125 21.000 6.3 0.6 5.0 27.5
HWEN 10.250 9.875 10.500 2.5 (1.3) 5.0 30.0
EGLB 11.250 11.250 11.125 12.5 12.5 11.3 32.5
FLKY 13.500 13.375 13.750 35.0 33.8 37.5 55.0
PROV 10.970 10.810 10.125 9.7 8.1 1.3 42.5
PRBC 10.375 10.250 9.750 3.8 2.5 (2.5) 30.0
WYNE 11.125 11.375 11.250 11.3 13.8 NA 43.8
DIME 11.687 12.000 11.875 16.9 20.0 18.8 48.8
MECH 11.500 11.500 11.250 NA 15.0 12.5 55.0
CNSB 11.000 11.625 11.500 10.0 16.3 15.0 50.0
LXMO 9.500 9.750 10.125 (5.0) (2.5) 1.3 35.0
Maximum 21.250 20.125 21.000 35.0 34.4 37.5 55.0
Minimum 9.500 9.125 9.625 (5.0) (8.8) (3.8) 15.0
Average 11.825 11.849 12.008 12.9 13.9 13.0 33.8
Median 11.438 11.563 11.500 11.3 14.4 10.6 31.3
Since 9-30-96:
- --------------
Maximum 13.000 13.000 14.750 30.0 30.0 26.3 48.8
Minimum 11.375 11.313 11.563 13.8 13.1 23.8 15.0
Average 12.263 12.304 12.828 22.6 23.0 25.0 29.0
Median 12.313 12.500 12.500 23.1 25.0 25.0 31.3
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
11
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
TABLE IV.4 - RECENT PINK SHEET CONVERSIONS
(COMPLETED SINCE NOVEMBER 29, 1995)
<TABLE>
<CAPTION>
Conversion
Assets IPO Proceeds IPO Price
Ticker Short Name State IPO Date ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C>
WBIO Washington Bancorp IA 03/12/96 55,202 6,575 10.000
NSGB North Cincinnati Savings Bank OH 05/01/96 56,637 3,968 10.000
FFFB First Federal Financial Bancrp OH 06/04/96 51,296 6,718 10.000
ALGC Algiers Bancorp, Inc. LA 07/09/96 42,450 6,480 10.000
LNXC Lenox Bancorp, Inc. OH 07/18/96 43,149 4,256 10.000
MDWB Midwest Savings Bank IL 09/23/96 36,354 1,918 10.000
FALN First Allen Parish Bancorp LA 09/30/96 29,605 2,645 10.000
Maximum 56,637 6,718 10.000
Minimum 29,605 1,918 10.000
Average 44,956 4,651 10.000
Median 43,149 4,256 10.000
</TABLE>
SOURCE: SNL & P&C CALCULATIONS
12
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
TABLE IV.4 - RECENT PINK SHEET CONVERSIONS
(COMPLETED SINCE NOVEMBER 29, 1995)
<TABLE>
<CAPTION>
CONVERSION PRICING RATIOS
-------------------------------------------------
Price/ Price/ Price/ Price/ Current Current Current Price Increase
Pro-Forma Pro-Forma Pro-Forma Adjusted Stock Price/ Price/ Tang (Decrease)
Book Value Tang. Book Earnings Assets Price Book Value Book Value to Date
Ticker (%) (%) (x) (%) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WBIO 65.4 65.4 12.7 10.6 12.500 78.3 78.3 25.0
NSGB 65.0 65.0 NA 6.5 13.250 94.1 94.1 32.5
FFFB 62.9 62.9 9.4 11.6 12.000 73.7 73.7 20.0
ALGC 67.1 67.1 19.5 13.2 11.500 70.3 70.3 15.0
LNXC 58.2 58.2 29.2 9.0 14.000 83.8 83.8 40.0
MDWB 63.9 63.9 NA 5.0 11.250 77.9 77.9 12.5
FALN 63.9 63.9 7.7 8.2 14.375 NA NA 43.8
Maximum 67.1 67.1 29.2 13.2 14.375 94.1 94.1 43.8
Minimum 58.2 58.2 7.7 5.0 11.250 70.3 70.3 12.5
Average 63.8 63.8 15.7 9.2 12.696 79.7 79.7 27.0
Median 63.9 63.9 12.7 9.0 12.500 78.1 78.1 25.0
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
13
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
TABLE IV.3
COMPARISON OF PRICING RATIOS
<TABLE>
<CAPTION>
Rocky Group Percent Premium
Ford Compared to (Discount) Versus
-------------------------- --------------------------
Federal Average Median Average Median
----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
COMPARISON OF PE RATIO AT
MIDPOINT TO:
- -----------------------------
Comparative group 12.5 32.6 20.2 (61.7) (38.1)
Colorado thrifts 12.5 13.4 13.4 (6.7) (6.7)
Southwest Region thrifts 12.5 15.5 15.8 (19.4) (20.9)
All public thrifts 12.5 14.8 14.2 (15.5) (12.0)
Recent conversions 12.5 25.4 17.1 (50.8) (26.9)
Recent pink sheet conversions 12.5 15.7 12.7 (20.4) (1.6)
COMPARISON OF PE RATIO AT
MAXIMUM TO:
- -----------------------------
Comparative group 13.9 32.6 20.2 (57.4) (31.2)
Colorado thrifts 13.9 13.4 13.4 3.7 3.7
Southwest Region thrifts 13.9 15.5 15.8 (10.3) (12.0)
All public thrifts 13.9 14.8 14.2 (6.1) (2.1)
Recent conversions 13.9 25.4 17.1 (45.3) (18.7)
Recent pink sheet conversions 13.9 15.7 12.7 (11.5) 9.4
COMPARISON OF PE RATIO AT
SUPERMAXIMUM TO:
- -----------------------------
Comparative group 15.2 32.6 20.2 (53.4) (24.8)
Colorado thrifts 15.2 13.4 13.4 13.4 13.4
Southwest Region thrifts 15.2 15.5 15.8 (1.9) (3.8)
All public thrifts 15.2 14.8 14.2 2.7 7.0
Recent conversions 15.2 25.4 17.1 (40.2) (11.1)
Recent pink sheet conversions 15.2 15.7 12.7 (3.2) 19.7
COMPARISON OF PB RATIO AT
MIDPOINT TO:
- -----------------------------
Comparative group 61.0 89.2 86.9 (31.6) (29.8)
Colorado thrifts 61.0 120.4 120.4 (49.3) (49.3)
Southwest Region thrifts 61.0 107.0 102.4 (43.0) (40.4)
All public thrifts 61.0 126.0 120.3 (51.6) (49.3)
Recent conversions 61.0 67.8 69.3 (10.0) (12.0)
Recent pink sheet conversions 61.0 63.8 63.9 (4.4) (4.5)
COMPARISON OF PB RATIO AT
MAXIMUM TO:
- -----------------------------
Comparative group 64.9 89.2 86.9 (27.2) (25.3)
Colorado thrifts 64.9 120.4 120.4 (46.1) (46.1)
Southwest Region thrifts 64.9 107.0 102.4 (39.3) (36.6)
All public thrifts 64.9 126.0 120.3 (48.5) (46.1)
Recent conversions 64.9 67.8 69.3 (4.3) (6.3)
Recent pink sheet conversions 64.9 63.8 63.9 1.7 1.6
COMPARISON OF PB RATIO AT
SUPERMAXIMUM TO:
- -----------------------------
Comparative group 68.8 89.2 86.9 (22.9) (20.8)
Colorado thrifts 68.8 120.4 120.4 (42.9) (42.9)
Southwest Region thrifts 68.8 107.0 102.4 (35.7) (32.8)
All public thrifts 68.8 126.0 120.3 (45.4) (42.8)
Recent conversions 68.8 67.8 69.3 1.5 (0.7)
Recent pink sheet conversions 68.8 63.8 63.9 7.8 7.7
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
14
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
FIGURE IV.I - SNL INDEX
<TABLE>
<CAPTION>
% CHANGE SINCE
---------------------
SNL PREVIOUS
DATE INDEX DATE 12/31/95
---- ----- ---- --------
<S> <C> <C> <C>
12/31/90 96.6
12/31/91 143.9 49.0%
12/31/92 201.1 39.7%
12/31/93 252.5 25.6%
12/31/94 244.7 -3.1%
12/31/95 376.5 53.9%
3/31/96 382.1 1.5% 1.5%
6/30/96 377.2 -1.3% 0.2%
9/30/96 429.3 13.8% 14.0%
12/13/96 473.6 10.3% 25.8%
</TABLE>
[GRAPH APPEARS HERE]
SOURCE: SNL & F&C CALCULATIONS
15
<PAGE>
FERGUSON & CO., LLP SECTION IV.
- ------------------- -----------
FIGURE IV.2 - SELECTED INTEREST RATES
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
1 YEAR 5 YEAR 10 YEAR 30 YEAR
FED FDS (*) T-BILL TREAS. TREAS. TREAS.
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5/31/96 5.19 5.70 6.55 6.77 7.02
6/14/96 5.24 5.84 6.77 6.99 7.23
6/28/96 5.21 5.79 6.63 6.86 7.08
7/15/96 5.26 5.93 6.77 7.00 7.20
7/26/96 5.25 5.53 6.62 6.85 7.05
8/16/96 5.10 5.59 6.30 6.55 6.79
8/30/96 5.21 5.80 6.60 6.84 7.07
9/13/96 5.16 5.90 6.69 6.93 7.16
9/27/96 5.34 5.75 6.53 6.77 6.96
10/17/96 5.25 5.56 6.28 6.55 6.86
11/1/96 5.27 5.46 6.15 6.42 6.71
11/15/96 5.21 5.41 5.97 6.18 6.45
11/29/96 5.30 5.41 5.90 6.12 6.41
12/13/96 5.22 5.45 6.03 6.27 6.53
(*) 7-day avg for week ending 2 days earlier than date shown.
-----------------------------------------------------------------------------------
</TABLE>
[GRAPH APPEARS HERE]
SOURCE: FEDERAL RESERVE BANK OF ST. LOUIS, MO.
16
<PAGE>
EXHIBIT I
<PAGE>
FERGUSON & CO., LLP EXHIBIT I - FIRM QUALIFICATIONS
- -------------------
Ferguson & Co., LLP (F&C), is a financial, economic, and regulatory
consulting firm providing services to financial institutions. It is located in
Irving, Texas. Its services to financial institutions include:
. Mergers and acquisition services
. Business plans
. Fairness opinions and conversion appraisals
. Litigation support
. Operational and efficiency consulting
. Human resources evaluation and management
F&C developed several financial institution databases of information
derived from periodic financial reports filed with regulatory authorities by
financial institutions. For example, F&C developed TAFS and BankSource. TAFS
includes thrifts filing TFR's with the OTS and BankSource includes banks and
savings banks filing call reports with the FDIC. Both databases of information
include information from the periodic reports plus numerous calculations derived
from F&C's analysis. In addition, both databases are interactive, permitting
the user to conduct merger analysis, do peer group comparisons, and a number of
other items. F&C recently sold its electronic publishing segment to Sheshunoff
Information Services Inc., Austin, Texas.
Brief biographical information is presented below on F&C's principals:
WILLIAM C. FERGUSON, MANAGING PARTNER
- -------------------------------------
Mr. Ferguson has approximately 30 years of experience providing various services
to financial institutions. He was a partner in a CPA firm prior to founding F&C
in 1984. Mr. Ferguson is a frequent speaker for financial institution seminars
and he has testified before Congressional Committees several times on his
analysis of the state of the thrift industry. Mr. Ferguson has a B.A. degree
from Austin Peay University and an M.S. degree from the University of Tennessee.
He is a CPA.
1
<PAGE>
FERGUSON & CO., LLP EXHIBIT I - FIRM QUALIFICATIONS
- -------------------
CHARLES M. HEBERT, PRINCIPAL
- ----------------------------
Mr. Hebert has over 30 years of experience providing services to and managing
financial institutions. He spent 7 years as a national bank examiner, 14 years
in bank management, 5 years in thrift management, and has spent the last 7 years
on the F&C consulting staff. Mr. Hebert holds a B.S. degree from Louisiana State
University.
ROBIN L. FUSSELL, PRINCIPAL
- ---------------------------
Mr. Fussell has over 25 years of experience providing professional services to
and managing financial institutions. He worked on the audit staff of a "Big
Six" accounting firm for 12 years, served as CFO of a thrift for 3 years, and
has worked in financial institution consulting for the last 12 years. He is a
co-founder of F&C. He holds a B.S. degree from East Carolina University. He is
a CPA.
2
<PAGE>
EXHIBIT II
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.I-SELECTED PUBLICLY TRADED SOUTHWEST THRIFTS
- -------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ETFS East Texas Financial Services Tyler TX SW SAIF NASDAQ 01/10/95 16.250 17.54
GUPB GFSB Bancorp, Inc. Gallup NM SW SAIF NASDAQ 06/30/95 15.875 14.31
ISBF ISB Financial Corporation New Iberia LA SW SAIF NASDAQ 04/07/95 17.500 123.40
CZF CitiSave Financial Corp Baton Rouge LA SW SAIF AMSE 07/14/95 14.000 13.47
FBHC Fort Bend Holding Corp. Rosenberg TX SW SAIF NASDAQ 06/30/93 24.250 19.87
TSH Teche Holding Co. Franklin LA SW SAIF AMSE 04/19/95 13.250 46.92
MORG Morgan Financial Corp. Fort Morgan CO SW SAIF NASDAQ 01/11/93 11.250 8.76
MERI Meritrust Federal SB Thibodaux LA SW SAIF NASDAQ NA 31.625 24.48
CBSA Coastal Bancorp, Inc. Houston TX SW SAIF NASDAQ NA 22.625 112.31
Maximum 31.625 123.40
Minimum 11.250 8.76
Average 18.514 42.34
Median 16.250 19.87
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
1
<PAGE>
FERGUSON & CO., LLP EXHIBIT 11.1 - SELECTED PUBLICLY TRADED SOUTHWEST THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible
Price/ Current Current Current Total Equity/ Equity/ Core
LTM Price/ Price/T Price/ Dividend Assets Assets T Assets EPS
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($)
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
East Texas Financial 21.4 84.5 84.5 16.0 1.23 115,339 18.9 18.9 0.76
Services
GFSB Bancorp, Inc. 20.1 97.0 97.0 18.0 2.52 79,708 18.5 18.5 0.79
ISB Financial Corporation 17.0 102.4 105.6 18.0 1.94 685,827 16.4 16.0 1.03
CitiSave Financial Corp 15.9 111.0 111.0 17.8 2.86 75,635 16.0 16.0 0.88
Fort Bend Holding Corp. 15.8 114.2 123.6 7.1 1.16 281,694 6.2 5.7 1.54
Teche Holding Co. 13.5 89.8 89.8 12.4 3.77 379,590 13.8 13.8 0.98
Morgan Financial Corp. 13.4 92.4 92.4 11.7 2.13 75,053 12.6 12.6 0.84
Meritrust Federal SB 12.7 145.9 145.9 10.6 2.21 231,058 7.3 7.3 2.50
Coastal Bancorp, Inc. 10.2 125.4 152.3 3.9 1.77 2,859,448 3.2 2.6 2.21
Maximum 21.4 145.9 152.3 18.0 3.77 2,859,448 18.9 18.9 2.50
Minimum 10.2 84.5 84.5 3.9 1.16 75,053 3.2 2.6 0.76
Average 15.5 107.0 111.3 12.8 2.18 531,484 12.5 12.4 1.28
Median 15.8 102.4 105.6 12.4 2.13 231,058 13.8 13.8 0.98
<CAPTION>
ROAA ROACE
Before Before
Extra Extra Merger
(%) (%) Target?
Ticker LTM LTM (Y/N)
<S> <C> <C> <C>
East Texas Financial 0.81 4.17 N
Services
GFSB Bancorp, Inc. 0.80 3.53 N
ISB Financial Corporation 0.80 4.34 N
CitiSave Financial Corp 0.78 4.30 N
Fort Bend Holding Corp. 0.27 3.81 N
Teche Holding Co. 0.72 4.29 N
Morgan Financial Corp. 0.74 5.10 N
Meritrust Federal SB 0.55 7.33 N
Coastal Bancorp, Inc. 0.24 7.11 N
Maximum 0.81 7.33
Minimum 0.24 3.53
Average 0.63 4.89
Median 0.74 4.30
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
2
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.1 - SELECTED PUBLICLY TRADED SOUTHWEST THRIFTS
- -------------------
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Current Assets Core EPS Extra Extra
Pricing (%) EPS ($) (%) (%)
Ticker Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
ETFS 12/13/96 0.23 21.4 0.19 0.74 3.82
GUPB 12/13/96 0.25 18.0 0.22 0.18 0.93
ISBF 12/13/96 NA 16.8 0.26 (0.11) (0.68)
CZF 12/13/96 0.22 20.6 0.17 (0.45) (2.73)
FBHC 12/13/96 1.31 14.4 0.42 (0.86) (13.34)
TSH 12/13/96 NA 11.4 0.29 (0.27) (1.88)
MORG 12/13/96 1.29 13.4 0.21 (0.04) (0.31)
MERI 12/13/96 NA 16.1 0.49 (0.78) (10.48)
CBSA 12/13/96 0.57 10.1 0.56 (0.30) (8.95)
Maximum 1.31 21.4 0.56 0.74 3.82
Minimum 0.22 10.1 0.17 (0.86) (13.34)
Average 0.65 15.8 0.31 (0.21) (3.74)
Median 0.41 16.1 0.26 (0.27) (1.88)
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
3
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.2 - PUBLICLY TRADED COLORADO THRIFTS
- -------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA First Colorado Bancorp, Inc. Lakewood CO SW SAIF NASDAQ 01/02/96 17.500 318.00
MORG Morgan Financial Corp. Fort Morgan CO SW SAIF NASDAQ 01/11/93 11.250 8.76
Maximum 17.500 318.00
Minimum 11.250 8.76
Average 14.375 163.38
Median 14.375 163.38
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
4
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.2 - PUBLICLY TRADED COLORADO THRIFTS
- -------------------
<TABLE>
<CAPTION>
TANGIBLE ROAA ROACE
PRICE/ CURRENT CURRENT CURRENT TOTAL EQUITY/ EQUITY/ CORE BEFORE BEFORE
LTM PRICE/ PRICE/ T PRICE/ DIVIDEND ASSETS ASSETS T ASSETS EPS EXTRA EXTRA
CORE EPS BOOK V BOOK V ASSETS YIELD ($000) (%) (%) ($) (%) (%)
TICKER (X) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA NA 148.4 150.3 22.0 1.83 1,514,552 14.8 14.7 NA 0.84 NA
MORG 13.4 92.4 92.4 11.7 2.13 75,053 12.6 12.6 0.84 0.74 5.10
Maximum 13.4 148.4 150.3 22.0 2.13 1,514,552 14.8 14.7 0.84 0.84 5.10
Minimum 13.4 92.4 92.4 11.7 1.83 75,053 12.6 12.6 0.84 0.74 5.10
Average 13.4 120.4 121.4 16.8 1.98 794,803 13.7 13.6 0.84 0.79 5.10
Median 13.4 120.4 121.4 16.8 1.98 794,803 13.7 13.6 0.84 0.79 5.10
<CAPTION>
MERGER
TARGET?
TICKER (Y/N)
<S> <C>
FFBA N
MORG N
Maximum
Minimum
Average
Median
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
5
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.2 - PUBLICLY TRADED COLORADO THRIFTS
- -------------------
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Current Assets Core EPS Extra Extra
Pricing (%) EPS ($) (%) (%)
Ticker Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
FFBA 12/13/96 0.22 15.6 0.28 (0.05) (0.29)
MORG 12/13/96 1.29 13.4 0.21 (0.04) (0.31)
Maximum 1.29 15.6 0.28 (0.04) (0.29)
Minimum 0.22 13.4 0.21 (0.05) (0.31)
Average 0.76 14.5 0.25 (0.05) (0.30)
Median 0.76 14.5 0.25 (0.05) (0.30)
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
6
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.3 - COMPARATIVES GENERAL
- -------------------
<TABLE>
<CAPTION>
Total Current Current
Number Assets Stock Market
of ($000) Price Value
Ticker Short Name City State Offices MRQ IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY 2 59,860 07/26/93 17.500 4.38
ATSB AmTrust Capital Corp. Peru IN 2 72,108 03/28/95 10.125 5.34
CKFB CKF Bancorp, Inc. Danville KY 1 59,898 01/04/95 19.750 18.59
CRZY Crazy Woman Creek Bancorp Buffalo WY 1 51,517 03/29/96 11.750 12.43
CSBF CSB Financial Group, Inc. Centralia IL 1 41,524 10/09/95 10.563 10.93
GUPB GFSB Bancorp, Inc. Gallup NM 1 79,708 06/30/95 15.875 14.31
JOAC Joachim Bancorp, Inc. De Soto MO 1 36,127 12/28/95 14.375 10.93
MCBN Mid-Coast Bancorp, Inc. Waldoboro ME 2 55,956 11/02/89 18.750 4.31
MIVI Mississippi View Holding Co. Little Falls MN 1 69,322 03/24/95 11.750 10.31
NSLB NS&L Bancorp, Inc. Neosho MO 2 57,288 06/08/95 13.750 11.60
SCCB S. Carolina Community Bancshrs Winnsboro SC 3 43,232 07/07/94 15.000 11.03
Maximum 3 79,708 19.750 18.59
Minimum 1 36,127 10.125 4.31
Average 2 56,958 14.472 10.38
Median 1 57,288 14.375 10.93
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
7
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.4 - COMPARATIVES OPERATIONS
- -------------------
<TABLE>
<CAPTION>
Net Income Loan Total Total Net Loan
Average Before Loss Noninterest Noninterest Chargeoffs/
Assets Net Income Extra Items ROAA ROACE Provision Income Expense Avg Loans
($000) ($000) ($000) (%) (%) ($000) ($000) ($000) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 57,693 (60) (60) (0.10) (1.00) 104 206 1,930 0.07
AmTrust Capital Corp. 71,653 183 183 0.26 2.45 125 409 2,126 0.06
CKF Bancorp, Inc. 58,005 744 744 1.28 4.70 24 50 1,053 -
Crazy Woman Creek Bancorp 45,303 358 358 0.79 3.10 0 74 946 (0.01)
CSB Financial Group, Inc. 41,311 369 369 0.89 3.67 75 67 916 0.29
GFSB Bancorp, Inc. 69,463 557 557 0.80 3.53 21 53 1,416 0.10
Joachim Bancorp, Inc. 35,774 148 148 0.41 1.49 9 55 1,061 -
Mid-Coast Bancorp, Inc. 54,926 188 188 0.34 3.83 93 174 1,609 0.04
Mississippi View Holding
Co. 69,206 905 905 1.31 6.73 (1) 187 1,615 0.21
NS&L Bancorp, Inc. 57,819 560 560 0.97 4.08 11 159 1,286 -
S. Carolina Community
Bancshrs 44,012 376 376 0.85 2.96 0 38 975 -
Maximum 71,653 905 905 1.31 6.73 125 409 2,126 0.29
Minimum 35,774 (60) (60) (0.10) (1.00) (1) 38 916 (0.01)
Average 55,015 393 393 0.71 3.23 42 134 1,358 0.07
Median 57,693 369 369 0.80 3.53 21 74 1,286 0.04
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
8
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.4 - COMPARATIVES OPERATIONS
- -------------------
<TABLE>
<CAPTION>
Common Dividend Interest Interest Net Interest Gain on
LTM EPS Dividends Payout Income/ Expense/ Income/ Sale/
After Extra Per Share Ratio Avg Assets Avg Assets Avg Assets Avg Assets
($) ($) (%) (%) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. (0.28) 0.31 NM 7.54 4.12 3.42 0.01
AmTrust Capital Corp. 0.36 - - 7.11 4.40 2.71 0.63
CKF Bancorp, Inc. 0.82 0.42 51.22 7.35 3.63 3.72 0.49
Crazy Woman Creek Bancorp NA NA NA 7.23 3.76 3.47 0.02
CSB Financial Group, Inc. NA NA NA 6.76 3.12 3.64 -
GFSB Bancorp, Inc. 0.62 0.80 129.03 7.50 3.90 3.60 0.02
Joachim Bancorp, Inc. NA NA NA 7.03 3.17 3.85 0.04
Mid-Coast Bancorp, Inc. 0.78 0.50 64.10 8.17 4.47 3.70 0.08
Mississippi View Holding Co. 1.02 0.16 15.69 7.52 3.61 3.91 0.11
NS&L Bancorp, Inc. 0.68 0.45 66.18 6.37 3.20 3.17 0.14
S. Carolina Community Bancshrs 0.52 0.60 115.38 7.69 3.70 3.99 -
Maximum 1.02 0.80 129.03 8.17 4.47 3.99 0.63
Minimum (0.28) - - 6.37 3.12 2.71 -
Average 0.57 0.40 63.09 7.30 3.73 3.56 0.14
Median 0.65 0.44 64.10 7.35 3.70 3.64 0.04
<CAPTION>
Real
Estate
Expense
($000)
Short Name LTM
<S> <C>
Albion Banc Corp.
AmTrust Capital Corp. (21)
CKF Bancorp, Inc. -
Crazy Woman Creek Bancorp -
CSB Financial Group, Inc. (14)
GFSB Bancorp, Inc. -
Joachim Bancorp, Inc. (2)
Mid-Coast Bancorp, Inc. 4
Mississippi View Holding Co. 22
NS&L Bancorp, Inc. (5)
S. Carolina Community Bancshrs -
-
Maximum 22
Minimum (21)
Average (1)
Median -
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
9
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.4 - COMPARATIVES OPERATIONS
- -------------------
<TABLE>
<CAPTION>
NONINTEREST G&A NONINTEREST NET OPER TOTAL AMORTIZATION
INCOME/ EXPENSE/ EXPENSE/ EXPENSES/ NONRECURRING OF TAX
AVG ASSETS AVG ASSETS AVG ASSETS AVG ASSETS EXPENSE INTANGIBLES PROVISION
(%) (%) (%) (%) ($000) ($000) ($000)
Short Name LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 0.36 3.38 3.35 3.02 275 - (62)
AmTrust Capital Corp. 0.57 2.96 2.97 2.39 295 3 74
CKF Bancorp, Inc. 0.09 1.82 1.82 1.73 274 - 393
Crazy Woman Creek Bancorp 0.16 2.12 2.09 1.96 187 - 163
CSB Financial Group, Inc. 0.16 2.22 2.22 2.06 - - 209
GFSB Bancorp, Inc. 0.08 2.04 2.04 1.97 250 - 326
Joachim Bancorp, Inc. 0.15 2.95 2.97 2.80 167 - 63
Mid-Coast Bancorp, Inc. 0.32 2.89 2.93 2.57 241 - 122
Mississippi View Holding Co. 0.27 2.34 2.33 2.07 - - 527
NS&L Bancorp, Inc. 0.27 2.22 2.22 1.95 - - 257
S. Carolina Community
Bancshrs 0.09 2.22 2.22 2.13 193 - 251
Maximum 0.57 3.38 3.35 3.02 295 3 527
Minimum 0.08 1.82 1.82 1.73 - - (62)
Average 0.23 2.47 2.47 2.24 171 0 211
Median 0.16 2.22 2.22 2.07 193 - 209
<CAPTION>
Extra and
After Tax
Items
($000)
($000)
Short Name LTM
<S> <C>
Albion Banc Corp. -
AmTrust Capital Corp. -
CKF Bancorp, Inc. -
Crazy Woman Creek Bancorp -
CSB Financial Group, Inc. -
GFSB Bancorp, Inc. -
Joachim Bancorp, Inc. -
Mid-Coast Bancorp, Inc. -
Mississippi View Holding Co. -
NS&L Bancorp, Inc. -
S. Carolina Community -
Bancshrs -
Maximum -
Minimum -
Average -
Median -
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
10
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.4 - COMPARATIVES OPERATIONS
- -------------------
<TABLE>
<CAPTION>
Core Yield on Cost of Interest Loan Loss
Efficiency Income/ Preferred Int Earning Int Bearing Effective Yield Provisions/
Ratio Avg Assets Dividends Assets Liabilities Tax Rate Spread Avg Assets
(%) (%) ($000) (%) (%) (%) (%) (%)
Short Name LTM LTM LTM LTM LTM LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 89.45 0.20 - 7.96 4.77 NM 3.19 0.18
AmTrust Capital Corp. 90.34 0.11 - 7.48 4.96 28.79 2.52 0.17
CKF Bancorp, Inc. 47.73 1.27 - 7.48 5.10 34.56 2.38 0.04
Crazy Woman Creek Bancorp 58.32 1.05 - 7.36 5.14 31.29 2.22 -
CSB Financial Group, Inc. 58.38 0.89 NA 6.89 4.49 36.16 2.40 0.18
GFSB Bancorp, Inc. 55.46 1.02 - 7.61 5.14 36.92 2.47 0.03
Joachim Bancorp, Inc. 73.71 0.70 - 7.23 4.46 29.86 2.77 0.03
Mid-Coast Bancorp, Inc. 71.84 0.58 - 8.57 5.02 39.35 3.55 0.17
Mississippi View Holding Co. 56.06 1.16 - 7.74 4.53 36.80 3.21 (0.00)
NS&L Bancorp, Inc. 64.49 0.83 - 6.54 4.28 31.46 2.26 0.02
S.Carolina Community Bancshrs 54.32 1.14 - 7.87 5.28 40.03 2.59 -
Maximum 90.34 1.27 - 8.57 5.28 40.03 3.55 0.18
Minimum 47.73 0.11 - 6.54 4.28 28.79 2.22 (0.00)
Average 65.46 0.81 - 7.52 4.83 34.52 2.69 0.07
Median 58.38 0.89 - 7.48 4.96 35.36 2.52 0.03
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
11
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.5 - COMPARATIVES PRICING
- -------------------
<TABLE>
<CAPTION>
Current Current Price/ Current Current
Stock Market LTM Price/ Price/T
Abbreviated Price Value Core EPS Book V Book V
Ticker Name City State ($) ($M) (x) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC AlbionBancCorp-NY Albion NY 17.500 4.38 39.8 75.9 75.9
ATSB AmTrustCapCorp-IN Peru IN 10.125 5.34 67.5 74.8 75.6
CKFB CKFBancorp-KY Danville KY 19.750 18.59 24.4 117.6 117.6
CRZY CrazyWomanCreek-WY Buffalo WY 11.750 12.43 NA 80.4 80.4
CSBF CSBFinancialGrp-IL Centralia IL 10.563 10.93 NA 85.2 85.2
GUPB GFSBBancorp-NM Gallup NM 15.875 14.31 20.1 97.0 97.0
JOAC JoachimBancorp-MO De Soto MO 14.375 10.93 NA 102.3 102.3
MCBN Mid-Coast Bncp-ME Waldoboro ME 18.750 4.31 14.0 87.8 87.8
MIVI MissViewHoldCo-MN Little Falls MN 11.750 10.31 12.9 83.8 83.8
NSLB NS&LBancorp-MO Neosho MO 13.750 11.60 23.3 86.9 86.9
SCCB SCCommunBancsh-SC Winnsboro SC 15.000 11.03 22.1 89.1 89.1
Maximum 19.750 18.59 67.5 117.6 117.6
Minimum 10.125 4.31 12.9 74.8 75.6
Average 14.472 10.38 28.0 89.2 89.2
Median 14.375 10.93 22.7 86.9 86.9
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
12
<PAGE>
FERGUSON & CO., LLP Exhibit II.5 - COMPARATIVES PRICING
- -------------------
<TABLE>
<CAPTION>
Tangible ROAA ROACE
Current Total Equity/ Equity/ Core Before Before
Price/ Dividend Assets Assets T Assets EPS Extra Extra
Assets Yield ($000) (%) (%) ($) (%) (%)
Ticker (%) (%) MRQ MRQ MRQ LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 7.3 1.75 59,860 9.6 9.6 0.44 (0.10) (1.00)
ATSB 7.4 - 72,108 9.9 9.8 0.15 0.26 2.45
CKFB 31.0 2.23 59,898 25.2 25.2 0.81 1.28 4.70
CRZY 24.1 3.40 51,517 30.0 30.0 NA 0.79 3.10
CSBF 26.3 - 41,524 30.9 30.9 NA 0.89 NA
GUPB 18.0 2.52 79,708 18.5 18.5 0.79 0.80 3.53
JOAC 30.3 3.48 36,127 29.6 29.6 NA 0.41 1.49
MCBN 7.7 2.77 55,956 8.8 8.8 1.34 0.34 3.83
MIVI 15.4 1.36 69,322 18.4 18.4 0.91 1.31 6.73
NSLB 20.2 3.64 57,288 23.3 23.3 0.59 0.97 4.08
SCCB 25.5 4.00 43,232 28.7 28.7 0.68 0.85 2.96
Maximum 31.0 4.00 79,708 30.9 30.9 1.34 1.31 6.73
Minimum 7.3 - 36,127 8.8 8.8 0.15 (0.10) (1.00)
Average 19.4 2.29 56,958 21.2 21.2 0.71 0.71 3.19
Median 20.2 2.52 57,288 23.3 23.3 0.74 0.80 3.32
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
13
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.5 - COMPARATIVES PRICING
- -------------------
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Merger Current Assets Core EPS Extra Extra
Target? Pricing (%) EPS ($) (%) (%)
Ticker (Y/N) Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
ALBC N 12/13/96 0.37 145.8 0.03 (1.14) (11.45)
ATSB N 12/13/96 2.58 18.1 0.14 (0.49) (4.96)
CKFB N 12/13/96 0.57 22.4 0.22 1.38 5.34
CRZY N 12/13/96 0.12 17.3 0.17 0.39 1.29
CSBF N 12/13/96 NA 24.0 0.11 1.02 3.29
GUPB N 12/13/96 0.25 18.0 0.22 0.18 0.93
JOAC N 12/13/96 0.33 44.9 0.08 (0.56) (1.90)
MCBN N 12/13/96 0.41 14.2 0.33 (0.53) (6.07)
MIVI N 12/13/96 0.46 12.2 0.24 1.13 6.04
NSLB N 12/13/96 0.00 20.2 0.17 0.97 4.14
SCCB N 12/13/96 NA 20.8 0.18 0.15 0.52
Maximum 2.58 145.8 0.33 1.38 6.04
Minimum - 12.2 0.03 (1.14) (11.45)
Average 0.57 32.6 0.17 0.23 (0.26)
Median 0.37 20.2 0.17 0.18 0.93
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
14
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.6 - Comparatives Balance Sheets
- -------------------
<TABLE>
<CAPTION>
Total Mortgage- Investment & Loan
Total Cash and Backed Net Foreclosed Servicing Total Other
Assets Investments Securities Loans Real Estate Rights Intangibles Assets
($000) ($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 59,860 10,135 3,855 46,970 151 0 0 2,604
AmTrust Capital Corp. 72,108 16,975 NA 51,166 43 12 79 3,234
CKF Bancorp, Inc. 59,898 6,060 7 52,823 0 0 0 1,015
Crazy Woman Creek Bancorp 51,517 24,617 8,238 25,859 0 0 0 1,041
CSB Financial Group, Inc. 41,524 17,909 NA 22,887 0 0 0 728
GFSB Bancorp, Inc. 79,708 37,535 29,274 41,148 0 NA 0 1,025
Joachim Bancorp, Inc. 36,127 11,838 102 23,598 0 0 0 691
Mid-Coast Bancorp, Inc. 55,956 7,909 694 45,725 144 0 0 2,054
Mississippi View Holding Co. 69,322 25,244 5,349 41,975 0 0 0 1,939
NS&L Bancorp, Inc. 57,288 26,168 5,607 NA 0 0 0 1,405
S. Carolina Community Bancshrs 43,232 8,763 58 NA 249 NA 0 898
Maximum 79,708 37,535 29,274 52,823 249 12 79 3,234
Minimum 36,127 6,060 7 22,887 0 0 0 691
Average 56,958 17,559 5,909 39,128 53 1 7 1,512
Median 57,288 16,975 3,855 41,975 0 0 0 1,041
<CAPTION>
Total
Deposits
($000)
Short Name MRQ
<S> <C>
Albion Banc Corp. 47,104
AmTrust Capital Corp. 47,236
CKF Bancorp, Inc. 43,486
Crazy Woman Creek Bancorp 29,381
CSB Financial Group, Inc. 28,465
GFSB Bancorp, Inc. 48,000
Joachim Bancorp, Inc. 24,725
Mid-Coast Bancorp, Inc. 42,650
Mississippi View Holding Co. 55,988
NS&L Bancorp, Inc. 42,997
S. Carolina Community Bancshrs 30,318
Maximum 55,988
Minimum 24,725
Average 40,032
Median 42,997
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
15
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.6 - COMPARATIVES BALANCE SHEETS
- -------------------
<TABLE>
<CAPTION>
Total Subordinated Other Total Preferred Common Total
Borrowings Debt Liabilities Liabilities Equity Equity Equity
($000) ($000) ($000) ($000) ($000) ($000) ($000)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 6,282 0 707 54,093 0 5,767 5,767
AmTrust Capital Corp. 16,899 0 825 64,960 0 7,148 7,148
CKF Bancorp, Inc. 261 0 1,047 44,794 0 15,104 15,104
Crazy Woman Creek Bancorp 6,113 0 554 36,048 0 15,469 15,469
CSB Financial Group, Inc. 0 0 222 28,687 0 12,837 12,837
GFSB Bancorp, Inc. 15,946 0 1,017 64,963 0 14,745 14,745
Joachim Bancorp, Inc. 0 0 721 25,446 0 10,681 10,681
Mid-Coast Bancorp, Inc. 7,940 0 451 51,041 0 4,915 4,915
Mississippi View Holding Co. 0 0 582 56,570 0 12,752 12,752
NS&L Bancorp, Inc. 0 0 940 43,937 0 13,351 13,351
S. Carolina Community Bancshrs 0 0 528 30,846 0 12,386 12,386
Maximum 16,899 0 1,047 64,963 0 15,469 15,469
Minimum 0 0 222 25,446 0 4,915 4,915
Average 4,858 0 690 45,580 0 11,378 11,378
Median 261 0 707 44,794 0 12,752 12,752
<CAPTION>
Regulatory
Tangible
Capital
($000)
Short Name MRQ
<S> <C>
Albion Banc Corp. 4,869
AmTrust Capital Corp. 7,100
CKF Bancorp, Inc. 12,441
Crazy Woman Creek Bancorp 10,550
CSB Financial Group, Inc. NA
GFSB Bancorp, Inc. NA
Joachim Bancorp, Inc. 7,346
Mid-Coast Bancorp, Inc. 4,803
Mississippi View Holding Co. 10,646
NS&L Bancorp, Inc. 10,240
S. Carolina Community Bancshrs NA
Maximum 12,441
Minimum 4,803
Average 8,499
Median 8,793
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
16
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.6 - COMPARATIVES BALANCE SHEETS
- -------------------
<TABLE>
<CAPTION>
Regulatory Regulatory
Core Total Tangible Core Risk-Based NPAs/ Reserves/
Capital Capital Capital/ Capital/ Capital/ Assets Assets
($000) ($000) Tangible Adj Tangible Risk-Weightd (%) (%)
Short Name MRQ MRQ Assets (%) Assets (%) Assets (%) MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 4,869 5,178 8.8 8.8 17.2 0.37 0.52
AmTrust Capital Corp. 7,100 7,500 10.0 10.0 16.7 2.58 0.69
CKF Bancorp, Inc. 12,441 12,559 21.0 21.0 34.9 0.57 0.20
Crazy Woman Creek Bancorp 10,550 10,808 20.8 20.8 52.7 0.12 0.54
CSB Financial Group, Inc. NA NA NA NA NA NA 0.26
GFSB Bancorp, Inc. NA NA 15.7 15.7 35.5 0.25 0.39
Joachim Bancorp, Inc. 7,346 7,421 21.9 21.9 45.5 0.33 0.21
Mid-Coast Bancorp, Inc. 4,803 5,080 8.9 8.9 16.1 0.41 0.50
Mississippi View Holding Co. 10,646 11,069 15.4 15.4 33.0 0.46 1.27
NS&L Bancorp, Inc. 10,240 10,284 18.6 18.6 49.6 - 0.08
S. Carolina Community Bancshrs NA NA 24.0 24.0 53.1 NA 0.68
Maximum 12,441 12,559 24.0 24.0 53.1 2.58 1.27
Minimum 4,803 5,080 8.8 8.8 16.1 - 0.08
Average 8,499 8,737 16.5 16.5 35.4 0.57 0.49
Median 8,793 8,892 17.2 17.2 35.2 0.37 0.50
<CAPTION>
Loan Loss
Reserves/
NPLs
(%)
Short Name MRQ
<S> <C>
Albion Banc Corp. 278.38
AmTrust Capital Corp. 27.22
CKF Bancorp, Inc. 34.71
Crazy Woman Creek Bancorp 452.46
CSB Financial Group, Inc. NA
GFSB Bancorp, Inc. 159.18
Joachim Bancorp, Inc. 63.87
Mid-Coast Bancorp, Inc. 322.09
Mississippi View Holding Co. 273.21
NS&L Bancorp, Inc. NM
S. Carolina Community Bancshrs NA
Maximum 452.46
Minimum 27.22
Average 201.39
Median 216.20
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
17
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.6 - COMPARATIVES BALANCE SHEETS
- -------------------
<TABLE>
<CAPTION>
Publicly Tangible Earn Assets/ Full-Time Loans Cash and
Reported Publicly Rep Int Bearing Equivalent Serviced MBS/ Inv.(ex MBS)/
Book Value Book Value Liabilities Employees For Others Assets Assets
($) ($) (%) (Actual) ($000) (%) (%)
Short Name MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 23.06 23.06 109.77 26 11,367 6.44 10.49
AmTrust Capital Corp. 13.39 13.39 107.16 28 28,000 NA NA
CKF Bancorp, Inc. 16.80 16.80 135.55 8 0 0.01 10.11
Crazy Woman Creek Bancorp 14.62 14.62 143.21 10 81 15.99 31.79
CSB Financial Group, Inc. 12.40 12.40 143.36 NA NA NA NA
GFSB Bancorp, Inc. 16.36 16.36 124.97 NA 0 36.73 10.36
Joachim Bancorp, Inc. 14.05 14.05 140.16 13 0 0.28 32.49
Mid-Coast Bancorp, Inc. 21.36 21.36 105.84 22 6,993 1.24 12.89
Mississippi View Holding Co. 14.02 14.02 120.88 21 0 7.72 28.70
NS&L Bancorp, Inc. 15.83 15.83 130.01 16 0 9.79 35.89
S.Carolina Community Bancshrs 16.84 16.84 138.41 NA NA 0.13 20.14
Maximum 23.06 23.06 143.36 28 28,000 36.73 35.89
Minimum 12.40 12.40 105.84 8 0 0.01 10.11
Average 16.25 16.25 127.21 18 5,160 8.70 21.43
Median 15.83 15.83 130.01 19 0 6.44 20.14
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
18
<PAGE>
FERGUSON & F&C CO., LLP EXHIBIT II.7 - COMPARATIVES RISK CHARACTERISTICS
- -----------------------
<TABLE>
<CAPTION>
NPAs + Loans
NPAs/ 90+ Pst Due/ NPAs/ Reserves/ Reserves/
Assets Assets Equity Loans NPAs
(%) (%) (%) (%) (%)
Short Name MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C>
Albion Banc Corp. 0.37 0.37 3.83 0.65 139.82
AmTrust Capital Corp. 2.58 2.58 25.99 0.95 26.59
CKF Bancorp, Inc. 0.57 1.47 2.25 0.22 34.71
Crazy Woman Creek Bancorp 0.12 0.12 0.39 1.06 452.46
CSB Financial Group, Inc. NA 0.70 NA 0.47 NA
GFSB Bancorp, Inc. 0.25 0.25 1.33 0.75 159.18
Joachim Bancorp, Inc. 0.33 0.33 1.11 0.32 63.87
Mid-Coast Bancorp, Inc. 0.41 0.41 4.68 0.60 120.43
Mississippi View Holding Co. 0.46 0.51 2.52 2.04 273.21
NS&L Bancorp, Inc. 0.00 0.02 0.00 0.14 NM
S. Carolina Community Bancshrs NA NA NA 0.87 NA
Maximum 2.58 2.58 25.99 2.04 452.46
Minimum 0.00 0.02 0.00 0.14 26.59
Average 0.57 0.68 4.68 0.73 158.78
Median 0.37 0.39 2.25 0.65 130.13
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
19
<PAGE>
FERGUSON & CO., LLP EXHIBIT II.7 - COMPARATIVES RISK CHARACTERISTICS
- -------------------
<TABLE>
<CAPTION>
Net Loan Intangible One Year Earn Assets/
Chargeoffs/ Loans/ Assets/ Cum Gap/ Net Int Bearing
Avg Loans Assets Equity Assets Loans Liabilities
(%) (%) (%) (%) ($000) (%)
Short Name MRQ MRQ MRQ MRY MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
Albion Banc Corp. 0.09 78.98 0.00 NA 46,970 109.77
AmTrust Capital Corp. 0.00 72.47 1.11 NA 51,166 107.16
CKF Bancorp, Inc. 0.00 88.39 0.00 NA 52,823 135.55
Crazy Woman Creek Bancorp 0.14 50.73 0.00 NA 25,859 143.21
CSB Financial Group, Inc. 0.39 55.38 0.00 NA 22,887 143.36
GFSB Bancorp, Inc. 0.02 52.01 0.00 NA 41,148 124.97
Joachim Bancorp, Inc. 0.00 65.53 0.00 NA 23,598 140.16
Mid-Coast Bancorp, Inc. (0.02) 82.43 0.00 (11.49) 45,725 105.84
Mississippi View Holding Co. 0.05 62.05 0.00 NA 41,975 120.88
NS&L Bancorp, Inc. 0.00 51.94 0.00 NA NA 130.01
S. Carolina Community Bancshrs 0.00 77.75 0.00 (32.71) NA 138.41
Maximum 0.39 88.39 1.11 (11.49) 52,823 143.36
Minimum (0.02) 50.73 0.00 (32.71) 22,887 105.84
Average 0.06 67.06 0.10 (22.10) 39,128 127.21
Median 0.00 65.53 0.00 (22.10) 41,975 130.01
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
20
<PAGE>
EXHIBIT III
<PAGE>
FERGUSON & CO., LLP EXHIBIT III
- -------------------
ROCKY FORD FS&LA OF COLORADO
ROCKY FORD, CO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
(ALL $ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 20,032 19,104 19,699 20,310
% Change in Assets 2.50 (4.63) 3.11 3.10
Total Loans 10,722 10,513 11,360 11,846
Deposits 17,671 16,547 16,662 17,209
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 2,081 2,261 2,622 2,763
Tangible Capital 2,081 2,261 2,528 2,614
Core Capital 2,081 2,261 2,528 2,614
Risk-Based Capital 2,112 2,286 2,588 2,674
Equity Capital/Total Assets 10.39 11.84 13.31 13.60
Core Capital/Risk Based Assets 31.53 36.24 37.75 34.24
Core Capital/Adj Tang Assets 10.39 11.84 12.89 12.97
Tangible Cap/Tangible Assets 10.39 11.84 12.89 12.97
Risk-Based Cap/Risk-Wt Assets 32.00 36.64 38.65 35.03
PROFITABILITY:
Net Income(Loss) 317 276 220 87
Ret on Avg Assets Bef Ext Item 1.60 1.41 1.14 0.87
Net Interest Income/Avg Assets 4.12 4.06 3.69 3.36
Noninterest Income/Avg Assets 0.45 0.40 0.41 0.40
Noninterest Expense/Avg Assets 2.18 2.15 2.37 2.34
Yield/Cost Spread 3.97 3.84 3.26 2.92
LIQUIDITY:
Int Earn Assets/Int Bear Liab 109.30 111.85 113.33 114.09
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO - 0.28 0.65 0.62
Nonaccrual Loans/Gross Loans - - - -
Nonaccrual Lns/Ln Loss Reserve - - - -
Repos Assets/Tot Assets - 0.13 0.19 0.19
Net Chrg-Off/Av Adj Lns - 0.18 - -
Nonmtg 1-4 Constr&Conv Lns/TA 0.86 0.72 0.60 1.80
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
1
<PAGE>
FERGUSON & CO., LLP EXHIBIT III
- -------------------
SELECTED PEER GROUP RATIOS & RANKINGS
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
<S> <C> <C> <C> <C>
Peer Group Category 1 1 1 1
CAPITAL:
Equity Capital/Total Assets 10.39 11.84 13.31 13.60
Peer Group Percentile 62 57 68 67
Core Cap/Adj Tangible Assets 10.39 11.84 12.89 12.97
Peer Group Percentile 63 58 67 66
Tangible Cap/Tangible Assets 10.39 11.84 12.89 12.97
Peer Group Percentile 63 58 67 66
Risk-Based Cap/Risk-Wt Assets 32.00 36.64 38.65 35.03
Peer Group Percentile 75 77 82 74
ASSET QUALITY:
Risk Assets/Total Assets 0.92 1.07 0.88 1.09
Peer Group Percentile 83 73 83 81
Risk Weighted Assts/Tot Assts 32.95 32.66 33.99 37.59
Peer Group Percentile 87 90 87 82
Nonaccrual Loans/Gross Loans - - - -
Peer Group Percentile 100 100 100 100
Repos Assets/Tot Assets - 0.13 0.19 0.19
Peer Group Percentile 100 26 24 22
90+ Day Del Loans/Gross Loans - 0.05 0.32 0.30
Peer Group Percentile 100 47 37 38
90Day P Due+NonAccr-(1-4)/LLR - - - -
Peer Group Percentile 100 100 100 100
LIQUIDITY:
Avg Reg Liquidity Ratio 35.55 34.51 29.95 27.81
Peer Group Percentile 84 86 79 71
PROFITABILITY:
Ret on Avg Assets Bef Ext Item 1.60 1.41 1.14 0.87
Peer Group Percentile 89 87 89 73
Return on Equity Capital 15.23 12.21 8.39 6.30
Peer Group Percentile 79 87 81 62
Int Earn Assets/Int Bear Liab 109.30 111.85 113.33 114.09
Peer Group Percentile 64 62 67 73
Yield on Earning Assts 8.10 7.78 8.29 7.71
Peer Group Percentile 76 73 78 56
Cost of Funds 4.13 3.93 5.03 4.79
Peer Group Percentile 38 40 28 50
Yield/Cost Spread 3.97 3.84 3.26 2.92
Peer Group Percentile 74 70 54 47
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
2
<PAGE>
FERGUSON & CO., LLP EXHIBIT III
- -------------------
ROCKY FORD FS&LA OF COLORADO
ROCKY FORD, CO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
9/30/95 12/31/95 3/31/96 6/30/96
(ALL $ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 19,569 19,699 20,033 20,310
% Change in Assets 1.67 0.66 1.70 1.38
Total Loans 11,128 11,360 11,711 11,846
Deposits 16,702 16,662 16,953 17,209
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 2,432 2,622 2,662 2,763
Tangible Capital 2,432 2,528 2,662 2,614
Core Capital 2,432 2,528 2,662 2,614
Risk-Based Capital 2,510 2,588 2,722 2,674
Equity Capital/Total Assets 12.43 13.31 13.29 13.60
Core Capital/Risk Based Assets 37.13 37.75 38.29 34.24
Core Capital/Adj Tang Assets 12.43 12.89 13.29 12.97
Tangible Cap/Tangible Assets 12.43 12.89 13.29 12.97
Risk-Based Cap/Risk-Wt Assets 38.32 38.65 39.15 35.03
PROFITABILITY:
Net Income(Loss) 47 49 40 47
Ret on Avg Assets Bef Ext Item 0.97 1.00 0.81 0.93
Net Interest Income/Avg Assets 3.46 3.28 3.34 3.37
Noninterest Income/Avg Assets 0.45 0.39 0.36 0.44
Noninterest Expense/Avg Assets 2.43 2.16 2.36 2.32
Yield/Cost Spread 3.04 2.85 2.92 2.92
LIQUIDITY:
Int Earn Assets/Int Bear Liab 112.93 113.33 113.80 114.09
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO - 0.65 0.63 0.62
Nonaccrual Loans/Gross Loans - - 0.31 -
Nonaccrual Lns/Ln Loss Reserve - - 60.00 -
Repos Assets/Tot Assets - 0.19 0.19 0.19
Net Chrg-Off/Av Adj Lns - - - -
Nonmtg 1-4 Constr&Conv Lns/TA 2.51 2.42 3.89 3.60
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
3
<PAGE>
FERGUSON & CO., LLP EXHIBIT III
- -------------------
SELECTED PEER GROUP RATIOS & RANKINGS
<TABLE>
<CAPTION>
9/30/95 12/31/95 3/31/96 6/30/96
<S> <C> <C> <C> <C>
Peer Group Category 1 1 1 1
CAPITAL:
Equity Capital/Total Assets 12.43 13.31 13.29 13.60
Peer Group Percentile 63 68 67 67
Core Cap/Adj Tangible Assets 12.43 12.89 13.29 12.97
Peer Group Percentile 63 67 69 66
Tangible Cap/Tangible Assets 12.43 12.89 13.29 12.97
Peer Group Percentile 63 67 69 66
Risk-Based Cap/Risk-Wt Assets 38.32 38.65 39.15 35.03
Peer Group Percentile 80 82 82 74
ASSET QUALITY:
Risk Assets/Total Assets 0.72 0.88 1.23 1.09
Peer Group Percentile 84 83 79 81
Risk Weighted Assts/Tot Assts 33.47 33.99 34.70 37.59
Peer Group Percentile 87 87 86 82
Nonaccrual Loans/Gross Loans - - 0.31 -
Peer Group Percentile 100 100 33 100
Repos Assets/Tot Assets - 0.19 0.19 0.19
Peer Group Percentile 100 24 27 22
90+ Day Del Loans/Gross Loans - 0.32 - 0.30
Peer Group Percentile 100 37 100 38
90Day P Due+NonAccr-(1-4)/LLR - - - -
Peer Group Percentile 100 100 100 100
LIQUIDITY:
Avg Reg Liquidity Ratio 33.43 29.95 29.27 27.81
Peer Group Percentile 80 79 76 71
PROFITABILITY:
Ret on Avg Assets Bef Ext Item 0.97 1.00 0.81 0.93
Peer Group Percentile 76 80 74 67
Return on Equity Capital 7.73 7.48 6.01 6.80
Peer Group Percentile 78 75 69 54
Int Earn Assets/Int Bear Liab 112.93 113.33 113.80 114.09
Peer Group Percentile 65 67 70 73
Yield on Earning Assts 7.93 7.84 7.73 7.69
Peer Group Percentile 59 50 53 51
Cost of Funds 4.88 4.99 4.81 4.76
Peer Group Percentile 46 45 52 47
Yield/Cost Spread 3.04 2.85 2.92 2.92
Peer Group Percentile 53 45 49 45
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
4
<PAGE>
EXHIBIT IV
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
ALBION FS&LA
ALBION, NY
ALBC FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
(ALL $ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 50,282 55,371 56,264 57,115
% Change in Assets 21.69 10.12 1.61 1.51
Total Loans 39,666 47,042 44,124 47,024
Deposits 36,310 38,494 46,432 47,403
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 4,390 4,787 4,992 5,069
Tangible Capital 4,390 4,787 4,916 5,030
Core Capital 4,390 4,787 4,916 5,030
Risk-Based Capital 4,494 5,011 5,160 5,273
Equity Capital/Total Assets 8.73 8.65 8.87 8.88
Core Capital/Risk Based Assets 16.97 15.63 16.39 16.42
Core Capital/Adj Tang Assets 8.73 8.65 8.75 8.81
Tangible Cap/Tangible Assets 8.73 8.65 8.75 8.81
Risk-Based Cap/Risk-Wt Assets 17.37 16.36 17.20 17.22
PROFITABILITY:
Net Income(Loss) 392 357 169 90
Ret on Avg Assets Bef Ext Item 0.86 0.68 0.29 0.32
Net Interest Income/Avg Assets 3.51 3.83 3.27 3.41
Noninterest Income/Avg Assets 0.49 0.32 0.37 0.50
Noninterest Expense/Avg Assets 2.69 2.90 3.12 3.41
Yield/Cost Spread 3.40 3.79 3.28 3.55
LIQUIDITY:
Int Earn Assets/Int Bear Liab 109.29 108.07 105.09 104.06
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.04 0.64 0.82 1.33
Nonaccrual Loans/Gross Loans 0.86 0.46 0.73 0.52
Nonaccrual Lns/Ln Loss Reserve 281.30 99.11 131.97 100.82
Repos Assets/Tot Assets 0.07 0.06 0.04 0.34
Net Chrg-Off/Av Adj Lns (0.02) 0.07 0.02 0.08
Nonmtg 1-4 Constr&Conv Lns/TA 4.40 4.70 4.51 9.08
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
1
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
AMERICANTRUST FSB
PERU, IN
ATSB FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
(ALL $ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 58,041 66,235 73,614 71,763
% Change in Assets 7.96 14.12 11.14 (2.51)
Total Loans 44,205 47,372 51,350 51,668
Deposits 49,882 50,260 51,668 44,645
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 3,493 3,651 7,171 7,139
Tangible Capital 3,493 3,651 7,171 7,139
Core Capital 3,493 3,651 7,171 7,139
Risk-Based Capital 3,574 4,054 7,171 7,139
Equity Capital/Total Assets 6.02 5.51 9.74 9.95
Core Capital/Risk Based Assets 10.39 8.97 16.92 16.73
Core Capital/Adj Tang Assets 6.02 5.52 9.74 9.95
Tangible Cap/Tangible Assets 6.02 5.52 9.74 9.95
Risk-Based Cap/Risk-Wt Assets 10.63 9.96 16.92 16.73
PROFITABILITY:
Net Income(Loss) 774 246 226 238
Ret on Avg Assets Bef Ext Item 1.38 0.40 0.34 0.65
Net Interest Income/Avg Assets 3.75 3.11 2.67 2.81
Noninterest Income/Avg Assets 0.72 0.71 0.78 1.28
Noninterest Expense/Avg Assets 2.53 2.85 2.87 2.67
Yield/Cost Spread 3.94 3.31 2.58 2.81
LIQUIDITY:
Int Earn Assets/Int Bear Liab 100.75 99.77 103.85 102.74
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 2.48 1.94 2.20 1.88
Nonaccrual Loans/Gross Loans 0.23 0.21 0.62 0.17
Nonaccrual Lns/Ln Loss Reserve 41.22 23.00 89.80 18.02
Repos Assets/Tot Assets 0.07 - - 0.06
Net Chrg-Off/Av Adj Lns 0.07 - 0.11 -
Nonmtg 1-4 Constr&Conv Lns/TA 7.57 4.38 3.52 7.57
</TABLE>
SOURCE : TAFS, BY SHESHUNOFF
2
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
CENTRAL KENTUCKY FSB
DANVILLE, KY
CKFB FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
(ALL $ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 50,050 56,377 56,545 58,739
% Change in Assets 3.51 12.64 0.30 3.88
Total Loans 41,974 45,441 49,997 54,113
Deposits 43,599 44,273 43,126 44,906
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,664 11,290 12,295 12,748
Tangible Capital 5,664 10,989 11,781 12,220
Core Capital 5,664 10,989 11,781 12,220
Risk-Based Capital 5,740 11,065 11,881 12,332
Equity Capital/Total Assets 11.32 20.03 21.74 21.70
Core Capital/Risk Based Assets 21.41 39.04 33.63 34.63
Core Capital/Adj Tang Assets 11.32 19.65 21.03 20.99
Tangible Cap/Tangible Assets 11.32 19.65 21.03 20.99
Risk-Based Cap/Risk-Wt Assets 21.70 39.31 33.92 34.94
PROFITABILITY:
Net Income(Loss) 560 542 764 414
Ret on Avg Assets Bef Ext Item 1.29 1.02 1.37 1.42
Net Interest Income/Avg Assets 3.21 2.98 3.87 3.70
Noninterest Income/Avg Assets 0.16 0.16 0.16 0.16
Noninterest Expense/Avg Assets 1.35 1.60 1.89 1.77
Yield/Cost Spread 2.93 2.46 3.11 2.87
LIQUIDITY:
Int Earn Assets/Int Bear Liab 110.09 123.66 125.92 126.85
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.41 1.48 1.09 1.63
Nonaccrual Loans/Gross Loans 0.25 - 0.00 0.63
Nonaccrual Lns/Ln Loss Reserve 136.84 - 2.00 310.71
Repos Assets/Tot Assets 0.07 - - -
Net Chrg-Off/Av Adj Lns - - - -
Nonmtg 1-4 Constr&Conv Lns/TA 10.59 10.51 13.09 29.61
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
3
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
BUFFALO FS&LA
BUFFALO, WY
CRZY FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
(ALL $ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 33,015 35,836 38,217 50,327
% Change in Assets 2.46 8.54 6.64 31.69
Total Loans 20,718 23,177 23,907 25,701
Deposits 26,510 29,114 29,028 28,518
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,134 5,513 5,982 10,346
Tangible Capital 5,134 5,513 5,961 10,525
Core Capital 5,134 5,513 5,961 10,525
Risk-Based Capital 5,272 5,607 6,185 10,781
Equity Capital/Total Assets 15.55 15.38 15.65 20.56
Core Capital/Risk Based Assets 32.35 32.02 33.42 51.40
Core Capital/Adj Tang Assets 15.55 15.38 15.61 20.80
Tangible Cap/Tangible Assets 15.55 15.38 15.61 20.80
Risk-Based Cap/Risk-Wt Assets 33.22 32.56 34.67 52.65
PROFITABILITY:
Net Income(Loss) 498 465 395 127
Ret on Avg Assets Bef Ext Item 1.53 1.35 1.07 0.53
Net Interest Income/Avg Assets 3.96 3.93 3.29 2.85
Noninterest Income/Avg Assets 0.21 0.56 0.54 0.26
Noninterest Expense/Avg Assets 2.35 2.41 2.27 2.24
Yield/Cost Spread 3.57 3.52 2.70 2.05
LIQUIDITY:
Int Earn Assets/Int Bear Liab 114.74 116.28 116.44 123.58
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 4.07 0.01 0.33 0.54
Nonaccrual Loans/Gross Loans 1.17 0.01 0.33 0.53
Nonaccrual Lns/Ln Loss Reserve 104.66 1.40 28.57 49.12
Repos Assets/Tot Assets 1.53 - - -
Net Chrg-Off/Av Adj Lns 0.46 (0.09) (0.10) (0.05)
Nonmtg 1-4 Constr&Conv Lns/TA 8.50 8.83 6.73 9.51
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
4
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
CENTRALIA SVGS BK
CENTRALIA, IL
CSBF FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
($'S IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 34,134 33,660 37,826 38,096
% Change in Assets - (1.39) 12.38 0.71
Securities-Book Value 12,030 14,697 12,740 13,253
Securities-Fair Value 12,774 14,363 12,871 13,253
Total Loans & Leases 17,756 17,360 20,890 22,994
Total Deposits 28,961 28,053 28,357 28,587
Loan/Deposit Ratio 61.31 61.88 73.67 80.44
Provision for Loan Losses 24 48 96 22
CAPITAL:
Equity Capital 4,945 5,352 8,562 8,660
Total Qualifying Capital(Est) 5,005 5,448 8,639 8,817
Equity Capital/Average Assets 14.49 15.79 23.41 22.87
Tot Qual Cap/Rk Bsd Asts(Est) 42.13 46.46 55.30 53.04
Tier 1 Cap/Rsk Bsed Asts(Est) 41.62 45.73 54.41 52.39
T1 Cap/Avg Assets(Lev Est) 14.53 16.08 21.09 22.95
Dividends Declared/Net Income - - - -
PROFITABILITY:
Net Income(Loss) 464 419 282 192
Return on Average Assets 1.36 1.24 0.77 1.01
Return on Average Equity Cap 9.38 8.14 4.79 4.47
Net Interest Margin 4.48 4.08 3.87 3.83
Net Int Income/Avg Assets 4.39 3.99 3.54 3.52
Noninterest Income/Avg Assets 0.18 0.17 0.19 0.22
Noninterest Exp/Avg Assets 1.81 2.07 2.15 2.12
ASSET QUALITY:
NPL+Frcl RE/Lns+Frcl RE 0.29 1.53 1.62 1.25
NPA's/Equity + LLR 1.02 4.87 3.90 3.28
LLR/Nonperf & Restrcd Lns 117.65 33.20 41.30 37.50
Foreclosed RE/Total Assets - 0.02 - -
90+ Day Del Loans/Total Loans 0.29 1.49 0.03 0.23
Loan Loss Reserves/Total Lns 0.34 0.50 0.67 0.47
Net Charge-Offs/Average Loans 0.06 0.13 0.22 0.51
Dom Risk R/E Lns/Tot Dom Lns 5.08 3.96 8.36 10.05
LIQUIDITY:
Brokered Dep/Total Dom Deps - - - -
$100M+ Time Dep/Total Dom Dep 5.31 6.76 5.22 5.52
Int Earn Assets/Int Bear Liab 116.72 118.73 130.07 129.84
Pledged Sec/Total Sec - - - -
Fair Value Sec/Amort Cost Sec 106.18 97.63 101.84 99.51
</TABLE>
SOURCE: BANKSOURCE, BY SHESHUNOFF
5
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
GALLUP FSB
GALLUP, NM
GUPB FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
<S> <C> <C> <C> <C>
(ALL $ AMOUNTS IN THOUSANDS)
BALANCE SHEET:
Total Assets 41,055 44,032 66,826 73,855
% Change in Assets (1.62) 7.25 51.77 10.52
Total Loans 27,302 30,224 34,104 38,934
Deposits 34,641 36,950 39,772 46,177
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 6,195 6,676 12,290 11,722
Tangible Capital 6,195 6,676 12,078 11,595
Core Capital 6,195 6,676 12,078 11,595
Risk-Based Capital 6,399 6,894 11,926 11,353
Equity Capital/Total Assets 15.09 15.16 18.39 15.87
Core Capital/Risk Based Assets 33.93 31.08 48.98 36.28
Core Capital/Adj Tang Assets 15.09 15.16 18.19 15.73
Tangible Cap/Tangible Assets 15.09 15.16 18.19 15.73
Risk-Based Cap/Risk-Wt Assets 35.05 32.10 48.36 35.53
PROFITABILITY:
Net Income(Loss) 575 588 721 355
Ret on Avg Assets Bef Ext Item 1.39 1.38 1.38 1.01
Net Interest Income/Avg Assets 3.79 4.19 3.98 3.17
Noninterest Income/Avg Assets 0.13 0.13 0.13 0.11
Noninterest Expense/Avg Assets 1.60 2.17 1.89 1.67
Yield/Cost Spread 3.28 3.76 3.19 2.54
LIQUIDITY:
Int Earn Assets/Int Bear Liab 114.90 114.99 120.11 114.56
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.87 0.30 0.09 0.38
Nonaccrual Loans/Gross Loans 0.16 - - 0.36
Nonaccrual Lns/Ln Loss Reserve 21.08 - - 48.22
Repos Assets/Tot Assets 0.24 0.09 - -
Net Chrg-Off/Av Adj Lns 0.01 - 0.10 0.01
Nonmtg 1-4 Constr&Conv Lns/TA 5.25 10.14 7.91 26.68
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
6
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
JOACHIM FS&LA
DE SOTO, MO
JOAC FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
(ALL $ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 31,101 29,034 33,539 33,643
% Change in Assets (0.22) (6.65) 15.52 0.31
Total Loans 22,939 22,242 21,968 22,914
Deposits 26,904 24,652 25,345 25,255
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 3,780 4,030 7,286 7,385
Tangible Capital 3,780 4,030 7,286 7,385
Core Capital 3,780 4,030 7,286 7,385
Risk-Based Capital 3,827 4,088 7,356 7,459
Equity Capital/Total Assets 12.15 13.88 21.72 21.95
Core Capital/Risk Based Assets 21.68 25.83 44.85 45.04
Core Capital/Adj Tang Assets 12.16 13.88 21.73 21.94
Tangible Cap/Tangible Assets 12.16 13.88 21.73 21.94
Risk-Based Cap/Risk-Wt Assets 21.95 26.20 45.28 45.49
PROFITABILITY:
Net Income(Loss) 255 251 210 106
Ret on Avg Assets Bef Ext Item 0.82 0.83 0.68 0.63
Net Interest Income/Avg Assets 3.74 3.77 3.56 3.66
Noninterest Income/Avg Assets 0.45 0.38 0.29 0.33
Noninterest Expense/Avg Assets 2.60 2.82 2.77 3.07
Yield/Cost Spread 3.76 3.76 3.35 3.02
LIQUIDITY:
Int Earn Assets/Int Bear Liab 108.50 109.88 123.18 124.25
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 2.80 3.20 0.13 0.51
Nonaccrual Loans/Gross Loans 0.51 0.37 0.07 0.47
Nonaccrual Lns/Ln Loss Reserve 248.94 141.38 21.43 144.59
Repos Assets/Tot Assets 0.81 1.07 - -
Net Chrg-Off/Av Adj Lns 0.01 0.02 0.02 -
Nonmtg 1-4 Constr&Conv Lns/TA 4.56 5.92 4.55 11.28
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
7
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
WALDOBORO BANK FSB
WALDOBORO, ME
MCBN FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
(ALL $ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 50,035 52,508 55,423 55,057
% Change in Assets 7.49 4.94 5.55 (0.66)
Total Loans 42,698 44,093 44,092 44,804
Deposits 35,398 38,161 41,932 41,316
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 4,212 4,472 4,857 4,877
Tangible Capital 4,212 4,472 4,857 4,884
Core Capital 4,212 4,472 4,857 4,884
Risk-Based Capital 4,418 4,650 5,077 5,138
Equity Capital/Total Assets 8.42 8.52 8.76 8.86
Core Capital/Risk Based Assets 15.02 15.23 15.64 15.32
Core Capital/Adj Tang Assets 8.42 8.52 8.76 8.87
Tangible Cap/Tangible Assets 8.42 8.52 8.76 8.87
Risk-Based Cap/Risk-Wt Assets 15.76 15.84 16.35 16.11
PROFITABILITY:
Net Income(Loss) 558 428 385 177
Ret on Avg Assets Bef Ext Item 1.06 0.83 0.71 0.65
Net Interest Income/Avg Assets 3.73 3.61 3.47 3.63
Noninterest Income/Avg Assets 0.44 0.36 0.41 0.45
Noninterest Expense/Avg Assets 2.32 2.43 2.66 2.87
Yield/Cost Spread 3.61 3.57 3.44 3.67
LIQUIDITY:
Int Earn Assets/Int Bear Liab 105.48 104.69 104.43 102.77
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 1.77 1.00 1.39 0.77
Nonaccrual Loans/Gross Loans 1.63 0.24 1.19 0.22
Nonaccrual Lns/Ln Loss Reserve 328.11 59.55 240.00 39.76
Repos Assets/Tot Assets 0.10 0.65 0.16 0.45
Net Chrg-Off/Av Adj Lns 0.04 0.45 0.06 0.18
Nonmtg 1-4 Constr&Conv Lns/TA 6.13 8.01 10.06 22.53
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
8
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
COMMUNITY FS&LA
LITTLE FALLS, MN
MIVI FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
<S> <C> <C> <C> <C>
(ALL $ AMOUNTS IN THOUSANDS)
BALANCE SHEET:
Total Assets 64,942 62,111 69,212 69,324
% Change in Assets (2.47) (4.36) 11.43 0.16
Total Loans 44,315 44,310 43,438 42,390
Deposits 58,783 55,312 54,689 56,025
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,646 6,137 10,912 10,784
Tangible Capital 5,634 6,043 10,692 10,647
Core Capital 5,634 6,043 10,692 10,647
Risk-Based Capital 5,985 6,419 11,092 11,069
Equity Capital/Total Assets 8.69 9.88 15.77 15.56
Core Capital/Risk Based Assets 17.01 18.90 32.13 31.78
Core Capital/Adj Tang Assets 8.68 9.74 15.50 15.39
Tangible Cap/Tangible Assets 8.68 9.74 15.50 15.39
Risk-Based Cap/Risk-Wt Assets 18.07 20.08 33.33 33.03
PROFITABILITY:
Net Income(Loss) 748 414 837 379
Ret on Avg Assets Bef Ext Item 1.14 0.65 1.22 1.09
Net Interest Income/Avg Assets 3.25 3.40 3.63 3.46
Noninterest Income/Avg Assets 0.39 0.40 0.53 0.46
Noninterest Expense/Avg Assets 2.05 2.40 2.17 2.14
Yield/Cost Spread 3.06 3.23 3.21 2.95
LIQUIDITY:
Int Earn Assets/Int Bear Liab 108.19 108.61 115.61 115.95
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.55 0.09 0.22 0.81
Nonaccrual Loans/Gross Loans 0.01 0.05 - 0.68
Nonaccrual Lns/Ln Loss Reserve 0.58 2.06 - 33.98
Repos Assets/Tot Assets 0.11 - 0.02 -
Net Chrg-Off/Av Adj Lns 0.19 (0.03) 0.33 0.03
Nonmtg 1-4 Constr&Conv Lns/TA 4.64 5.96 2.47 6.37
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
9
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
NEOSHO S&LA, FA
NEOSHO, MO
NSLB FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
(ALL $ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 52,078 49,738 53,156 55,069
% Change in Assets (0.43) (4.49) 6.87 3.60
Total Loans 22,758 25,095 28,013 29,866
Deposits 46,092 43,274 41,964 43,398
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,531 6,018 9,947 10,240
Tangible Capital 5,531 6,018 9,947 10,240
Core Capital 5,531 6,018 9,947 10,240
Risk-Based Capital 5,552 6,036 9,945 10,284
Equity Capital/Total Assets 10.62 12.10 18.71 18.59
Core Capital/Risk Based Assets 31.27 34.70 51.58 49.36
Core Capital/Adj Tang Assets 10.62 12.10 18.71 18.59
Tangible Cap/Tangible Assets 10.62 12.10 18.71 18.59
Risk-Based Cap/Risk-Wt Assets 31.39 34.81 51.57 49.58
PROFITABILITY:
Net Income(Loss) 590 471 471 226
Ret on Avg Assets Bef Ext Item 1.27 0.93 0.88 0.81
Net Interest Income/Avg Assets 3.32 3.04 2.95 2.88
Noninterest Income/Avg Assets 0.63 0.59 0.53 0.48
Noninterest Expense/Avg Assets 2.02 2.17 2.24 2.19
Yield/Cost Spread 3.25 2.94 2.58 2.33
LIQUIDITY:
Int Earn Assets/Int Bear Liab 109.01 110.37 119.53 120.35
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 0.08 0.04 0.12 -
Nonaccrual Loans/Gross Loans - - 0.12 -
Nonaccrual Lns/Ln Loss Reserve - - 89.74 -
Repos Assets/Tot Assets - - - -
Net Chrg-Off/Av Adj Lns - - (0.02) -
Nonmtg 1-4 Constr&Conv Lns/TA 0.53 0.42 0.33 0.28
</TABLE>
SOURCE TAFS, BY SHESHUNOFF
10
<PAGE>
FERGUSON & CO., LLP EXHIBIT IV
- -------------------
COMMUNITY FS&LA
WINNSBORO, SC
SCCB FINANCIAL HIGHLIGHTS
- ----
<TABLE>
<CAPTION>
1993 1994 1995 YTD 6/96
(ALL $ AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET:
Total Assets 39,843 40,840 41,118 42,315
% Change in Assets 0.15 2.50 0.68 2.91
Total Loans 32,422 33,294 33,022 33,719
Deposits 33,728 30,376 30,378 31,274
Broker Originated Deposits - - - -
CAPITAL:
Equity Capital 5,766 9,424 9,906 10,168
Tangible Capital 5,766 9,424 9,906 10,168
Core Capital 5,766 9,424 9,906 10,168
Risk-Based Capital 5,932 9,659 10,139 10,400
Equity Capital/Total Assets 14.47 23.08 24.09 24.03
Core Capital/Risk Based Assets 29.99 50.30 52.30 51.95
Core Capital/Adj Tang Assets 14.47 23.08 24.09 24.03
Tangible Cap/Tangible Assets 14.47 23.08 24.09 24.03
Risk-Based Cap/Risk-Wt Assets 30.85 51.55 53.53 53.14
PROFITABILITY:
Net Income(Loss) 706 848 585 251
Ret on Avg Assets Bef Ext Item 1.77 2.10 1.43 1.20
Net Interest Income/Avg Assets 4.30 4.58 4.10 3.70
Noninterest Income/Avg Assets 0.17 0.32 0.18 0.23
Noninterest Expense/Avg Assets 1.25 1.42 1.98 1.94
Yield/Cost Spread 3.99 4.08 3.14 2.67
LIQUIDITY:
Int Earn Assets/Int Bear Liab 113.14 127.21 128.04 128.73
Brokered Deposits/Tot Deposits - - - -
ASSET QUALITY:
Nonperf Lns+REO/Total Lns+REO 5.92 2.96 1.78 2.14
Nonaccrual Loans/Gross Loans 5.17 1.32 1.35 1.74
Nonaccrual Lns/Ln Loss Reserve 1,031.33 154.76 154.95 204.78
Repos Assets/Tot Assets 0.28 0.28 0.10 0.09
Net Chrg-Off/Av Adj Lns - - - -
Nonmtg 1-4 Constr&Conv Lns/TA 6.05 5.59 5.45 12.31
</TABLE>
SOURCE: TAFS, BY SHESHUNOFF
11
<PAGE>
EXHIBIT V
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV Advantage Bancorp, Inc. Kenosha WI MW SAIF NASDAQ 03/23/92 31.875 108.14
ABBK Abington Savings Bank Abington MA NE BIF NASDAQ 06/10/86 19.625 37.03
ABCW Anchor BanCorp Wisconsin Madison WI MW SAIF NASDAQ 07/16/92 34.750 160.75
AFFFZ America First Financial Fund San Francisco CA WE SAIF NASDAQ NA 29.375 176.56
AHM Ahmanson & Company (H.F.) Irwindale CA WE SAIF NYSE 10/25/72 31.500 3,323.13
ALBK ALBANK Financial Corporation Albany NY MA SAIF NASDAQ 04/01/92 31.000 405.81
AMFB American Federal Bank, FSB Greenville SC SE SAIF NASDAQ 01/19/89 19.000 208.44
ANBK American National Bancorp Baltimore MD MA SAIF NASDAQ 10/31/95 12.250 44.14
ANDB Andover Bancorp, Inc. Andover MA NE BIF NASDAQ 05/08/86 25.750 132.10
ASBI Ameriana Bancorp New Castle IN MW SAIF NASDAQ 03/02/87 15.625 51.22
ASFC Astoria Financial Corporation Lake Success NY MA SAIF NASDAQ 11/18/93 35.000 752.90
BANC BankAtlantic Bancorp, Inc. Fort Lauderdale FL SE SAIF NASDAQ 11/29/83 13.000 191.37
BDJI First Federal Bancorporation Bemidji MN MW SAIF NASDAQ 04/04/95 18.000 12.61
BFSB Bedford Bancshares, Inc. Bedford VA SE SAIF NASDAQ 08/22/94 18.000 20.59
BKC American Bank of Connecticut Waterbury CT NE BIF AMSE 12/01/81 28.750 65.86
BKCO Bankers Corp. Perth Amboy NJ MA BIF NASDAQ 03/16/90 20.000 247.56
BKCT Bancorp Connecticut, Inc. Southington CT NE BIF NASDAQ 07/03/86 22.250 58.77
BKUNA BankUnited Financial Corp. Coral Gables FL SE SAIF NASDAQ 12/11/85 8.750 47.72
BSBC Branford Savings Bank Branford CT NE BIF NASDAQ 11/04/86 3.875 20.07
BVFS Bay View Capital Corp. San Mateo CA WE SAIF NASDAQ 05/09/86 41.500 275.57
CAFI Camco Financial Corporation Cambridge OH MW SAIF NASDAQ NA 16.250 33.73
CAPS Capital Savings Bancorp, Inc. Jefferson City MO MW SAIF NASDAQ 12/29/93 14.000 26.26
CARV Carver Bancorp, Inc. New York NY MA SAIF NASDAQ 10/25/94 8.000 18.52
CASB Cascade Financial Corp. Everett WA WE SAIF NASDAQ 09/16/92 13.000 26.66
CASH First Midwest Financial, Inc. Storm Lake IA MW SAIF NASDAQ 09/20/93 24.750 48.16
CBCI Calumet Bancorp, Inc. Dolton IL MW SAIF NASDAQ 02/20/92 32.625 77.55
CBCO CB Bancorp, Inc. Michigan City IN MW SAIF NASDAQ 12/28/92 24.250 28.18
CBIN Community Bank Shares New Albany IN MW SAIF NASDAQ 04/10/95 12.500 24.80
CBNH Community Bankshares, Inc. Concord NH NE BIF NASDAQ 05/08/86 20.250 49.19
CBSA Coastal Bancorp, Inc. Houston TX SW SAIF NASDAQ NA 22.625 112.31
CEBK Central Co-Operative Bank Somerville MA NE BIF NASDAQ 10/24/86 18.375 36.11
CENF CENFED Financial Corp. Pasadena CA WE SAIF NASDAQ 10/25/91 28.000 142.84
CFB Commercial Federal Corporation Omaha NE MW SAIF NYSE 12/31/84 46.000 658.18
CFCP Coastal Financial Corp. Myrtle Beach SC SE SAIF NASDAQ 09/26/90 21.000 72.16
CFFC Community Financial Corp. Staunton VA SE SAIF NASDAQ 03/30/88 21.000 26.71
CFSB CFSB Bancorp, Inc. Lansing MI MW SAIF NASDAQ 06/22/90 19.250 92.89
CFX CFX Corporation Keene NH NE BIF AMSE 02/12/87 16.250 199.18
CIBI Community Investors Bancorp Bucyrus OH MW SAIF NASDAQ 02/07/95 16.750 11.16
CKFB CKF Bancorp, Inc. Danville KY MW SAIF NASDAQ 01/04/95 19.750 18.59
CMRN Cameron Financial Corp Cameron MO MW SAIF NASDAQ 04/03/95 15.500 44.17
CMSV Community Savings, MHC North Palm Beach FL SE SAIF NASDAQ 10/24/94 18.250 89.34
CNIT CENIT Bancorp, Inc. Norfolk VA SE SAIF NASDAQ 08/06/92 39.250 64.11
CNSK Covenant Bank for Savings Haddonfield NJ MA BIF NASDAQ NA 12.000 32.91
COFD Collective Bancorp, Inc. Egg Harbor City NJ MA SAIF NASDAQ 02/07/84 34.000 692.65
COFI Charter One Financial Cleveland OH MW SAIF NASDAQ 01/22/88 39.125 1,829.68
CSA Coast Savings Financial Los Angeles CA WE SAIF NYSE 12/23/85 35.500 659.72
CTBK Center Banks Incorporated Skaneateles NY MA BIF NASDAQ 06/02/86 16.125 15.29
CTZN CitFed Bancorp, Inc. Dayton OH MW SAIF NASDAQ 01/23/92 29.750 255.31
CVAL Chester Valley Bancorp Inc. Downingtown PA MA SAIF NASDAQ 03/27/87 18.500 30.26
CZF CitiSave Financial Corp Baton Rouge LA SW SAIF AMSE 07/14/95 14.000 13.47
DIBK Dime Financial Corp. Wallingford CT NE BIF NASDAQ 07/09/86 17.500 89.76
DME Dime Bancorp, Inc. New York NY MA BIF NYSE 08/19/86 14.750 1,570.09
DNFC D & N Financial Corp. Hancock MI MW SAIF NASDAQ 02/13/85 15.375 116.66
DSL Downey Financial Corp. Newport Beach CA WE SAIF NYSE 01/01/71 18.875 480.55
EBSI Eagle Bancshares Tucker GA SE SAIF NASDAQ 04/01/86 13.625 62.02
EFBI Enterprise Federal Bancorp West Chester OH MW SAIF NASDAQ 10/17/94 14.500 30.01
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
1
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EGFC Eagle Financial Corp. Bristol CT NE SAIF NASDAQ 02/03/87 28.750 130.35
EIRE Emerald Isle Bancorp, Inc. Quincy MA NE BIF NASDAQ 09/08/86 18.500 32.66
EQSB Equitable Federal Savings Bank Wheaton MD MA SAIF NASDAQ 09/10/93 26.750 16.05
ETFS East Texas Financial Services Tyler TX SW SAIF NASDAQ 01/10/95 16.250 17.54
FBBC First Bell Bancorp, Inc. Pittsburgh PA MA SAIF NASDAQ 06/29/95 16.000 124.13
FBCI Fidelity Bancorp, Inc. Chicago IL MW SAIF NASDAQ 12/15/93 17.125 49.08
FBHC Fort Bend Holding Corp. Rosenberg TX SW SAIF NASDAQ 06/30/93 24.250 19.87
FBSI First Bancshares, Inc. Mountain Grove MO MW SAIF NASDAQ 12/22/93 16.500 19.91
FCIT First Citizens Financial Corp. Gaithersburg MD MA SAIF NASDAQ 12/17/86 18.750 54.88
FCME First Coastal Corporation Westbrook ME NE BIF NASDAQ NA 7.250 9.84
FED FirstFed Financial Corp. Santa Monica CA WE SAIF NYSE 12/16/83 22.250 234.02
FESX First Essex Bancorp, Inc. Andover MA NE BIF NASDAQ 08/04/87 13.375 81.04
FFBI First Financial Bancorp, Inc. Belvidere IL MW SAIF NASDAQ 10/04/93 15.875 7.18
FFBS FFBS BanCorp, Inc. Columbus MS SE SAIF NASDAQ 07/01/93 23.000 36.12
FFBZ First Federal Bancorp, Inc. Zanesville OH MW SAIF NASDAQ 07/13/92 16.000 25.12
FFCH First Financial Holdings Inc. Charleston SC SE SAIF NASDAQ 11/10/83 23.250 147.81
FFES First Federal of East Hartford East Hartford CT NE SAIF NASDAQ 06/23/87 23.000 60.14
FFFC FFVA Financial Corp. Lynchburg VA SE SAIF NASDAQ 10/12/94 21.250 106.73
FFFG F.F.O. Financial Group, Inc. St. Cloud FL SE SAIF NASDAQ 10/13/88 2.750 23.18
FFFL Fidelity FSB of Florida, MHC West Palm Beach FL SE SAIF NASDAQ 01/07/94 17.250 115.99
FFHC First Financial Corp. Stevens Point WI MW SAIF NASDAQ 12/24/80 28.500 853.08
FFHH FSF Financial Corp. Hutchinson MN MW SAIF NASDAQ 10/07/94 14.875 49.14
FFHS First Franklin Corporation Cincinnati OH MW SAIF NASDAQ 01/26/88 16.000 18.53
FFKY First Federal Financial Corp. Elizabethtown KY MW SAIF NASDAQ 07/15/87 19.250 80.78
FFLC FFLC Bancorp, Inc. Leesburg FL SE SAIF NASDAQ 01/04/94 20.250 50.51
FFSL First Independence Corp. Independence KS MW SAIF NASDAQ 10/08/93 19.625 11.45
FFSW FirstFederal Financial Svcs Wooster OH MW SAIF NASDAQ 03/31/87 39.000 140.89
FFSX First Fed SB of Siouxland, MHC Sioux City IA MW SAIF NASDAQ 07/13/92 30.250 56.97
FFWC FFW Corp. Wabash IN MW SAIF NASDAQ 04/05/93 22.000 15.45
FFWD Wood Bancorp, Inc. Bowling Green OH MW SAIF NASDAQ 08/31/93 16.500 24.71
FFYF FFY Financial Corp. Youngstown OH MW SAIF NASDAQ 06/28/93 25.875 132.41
FGHC First Georgia Holding, Inc. Brunswick GA SE SAIF NASDAQ 02/11/87 8.625 17.45
FIBC Financial Bancorp, Inc. Long Island City NY MA SAIF NASDAQ 08/17/94 14.500 25.96
FISB First Indiana Corporation Indianapolis IN MW SAIF NASDAQ 08/02/83 25.500 211.51
FKFS First Keystone Financial Media PA MA SAIF NASDAQ 01/26/95 20.000 25.85
FLFC First Liberty Financial Corp. Macon GA SE SAIF NASDAQ 12/06/83 18.500 112.30
FMCO FMS Financial Corporation Burlington NJ MA SAIF NASDAQ 12/14/88 17.375 42.65
FMSB First Mutual Savings Bank Bellevue WA WE BIF NASDAQ 12/17/85 18.000 44.15
FNGB First Northern Capital Corp. Green Bay WI MW SAIF NASDAQ 12/29/83 16.000 70.10
FOBC Fed One Bancorp Wheeling WV SE SAIF NASDAQ 01/19/95 16.125 39.79
FRC First Republic Bancorp San Francisco CA WE BIF NYSE NA 17.000 125.15
FSBI Fidelity Bancorp, Inc. Pittsburgh PA MA SAIF NASDAQ 06/24/88 19.000 26.09
FSFC First Southeast Financial Corp Anderson SC SE SAIF NASDAQ 10/08/93 9.500 41.69
FSLA First Savings Bank, MHC Edison NJ MA SAIF NASDAQ 07/10/92 18.000 128.98
FSPG First Home Bancorp, Inc. Pennsville NJ MA SAIF NASDAQ 04/20/87 19.500 39.59
FTF Texarkana First Financial Corp Texarkana AR SE SAIF AMSE 07/07/95 14.500 27.33
FTFC First Federal Capital Corp. La Crosse WI MW SAIF NASDAQ 11/02/89 24.000 147.13
FTSB Fort Thomas Financial Corp. Fort Thomas KY MW SAIF NASDAQ 06/28/95 14.250 22.43
GBCI Glacier Bancorp, Inc. Kalispell MT WE SAIF NASDAQ 03/30/84 23.375 78.92
GDW Golden West Financial Oakland CA WE SAIF NYSE 05/29/59 62.000 3,557.31
GFCO Glenway Financial Corp. Cincinnati OH MW SAIF NASDAQ 11/30/90 19.000 21.88
GFSB GFS Bancorp, Inc. Grinnell IA MW SAIF NASDAQ 01/06/94 20.750 10.43
GLBK Glendale Co-Operative Bank Everett MA NE BIF NASDAQ 01/10/94 20.000 4.95
GLN Glendale Federal Bank, FSB Glendale CA WE SAIF NYSE 10/01/83 22.250 1,049.44
GPT GreenPoint Financial Corp. Flushing NY MA BIF NYSE 01/28/94 49.375 2,353.02
GRTR Greater New York Savings Bank New York NY MA BIF NASDAQ 06/17/87 13.500 181.84
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
2
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GSBC Great Southern Bancorp, Inc. Springfield MO MW SAIF NASDAQ 12/14/89 17.250 150.59
GSLC Guaranty Financial Corp. Charlottesville VA SE SAIF NASDAQ NA 8.250 7.62
GTFN Great Financial Corporation Louisville KY MW SAIF NASDAQ 03/31/94 29.125 412.23
GUPB GFSB Bancorp, Inc. Gallup NM SW SAIF NASDAQ 06/30/95 15.875 14.31
GWF Great Western Financial Chatsworth CA WE SAIF NYSE NA 29.500 4,062.46
HALL Hallmark Capital Corp. West Allis WI MW SAIF NASDAQ 01/03/94 17.625 25.43
HARB Harbor Federal Savings Bk, MHC Fort Pierce FL SE SAIF NASDAQ 01/06/94 32.000 157.90
HARL Harleysville Savings Bank Harleysville PA MA SAIF NASDAQ 08/04/87 18.750 24.22
HAVN Haven Bancorp, Inc. Woodhaven NY MA SAIF NASDAQ 09/23/93 28.500 123.20
HBFW Home Bancorp Fort Wayne IN MW SAIF NASDAQ 03/30/95 18.500 51.66
HBS Haywood Bancshares, Inc. Waynesville NC SE BIF AMSE 12/18/87 18.500 22.22
HFFC HF Financial Corp. Sioux Falls SD MW SAIF NASDAQ 04/08/92 16.500 48.00
HFGI Harrington Financial Group Richmond IN MW SAIF NASDAQ NA 10.563 34.40
HFSA Hardin Bancorp, Inc. Hardin MO MW SAIF NASDAQ 09/29/95 12.375 11.82
HHFC Harvest Home Financial Corp. Cheviot OH MW SAIF NASDAQ 10/10/94 9.875 9.23
HIFS Hingham Instit. for Savings Hingham MA NE BIF NASDAQ 12/20/88 17.500 22.71
HMCI HomeCorp, Inc. Rockford IL MW SAIF NASDAQ 06/22/90 17.750 20.03
HMNF HMN Financial, Inc. Spring Valley MN MW SAIF NASDAQ 06/30/94 18.250 85.17
HOMF Home Federal Bancorp Seymour IN MW SAIF NASDAQ 01/23/88 35.250 78.48
HPBC Home Port Bancorp, Inc. Nantucket MA NE BIF NASDAQ 08/25/88 16.875 31.08
HRBF Harbor Federal Bancorp, Inc. Baltimore MD MA SAIF NASDAQ 08/12/94 15.125 26.54
HRZB Horizon Financial Corp. Bellingham WA WE BIF NASDAQ 08/01/86 13.250 85.58
HTHR Hawthorne Financial Corp. El Segundo CA WE SAIF NASDAQ NA 7.438 19.33
HVFD Haverfield Corporation Cleveland OH MW SAIF NASDAQ 03/19/85 18.500 35.27
IBSF IBS Financial Corp. Cherry Hill NJ MA SAIF NASDAQ 10/13/94 15.625 168.04
IFSB Independence Federal Savings Washington DC MA SAIF NASDAQ 06/06/85 7.625 9.76
INBI Industrial Bancorp Bellevue OH MW SAIF NASDAQ 08/01/95 12.375 68.74
IPSW Ipswich Savings Bank Ipswich MA NE BIF NASDAQ 05/26/93 11.625 13.77
IROQ Iroquois Bancorp, Inc. Auburn NY MA BIF NASDAQ 01/22/86 16.750 39.54
ISBF ISB Financial Corporation New Iberia LA SW SAIF NASDAQ 04/07/95 17.500 123.40
IWBK InterWest Bancorp, Inc. Oak Harbor WA WE SAIF NASDAQ NA 32.250 255.36
JSBA Jefferson Savings Bancorp Ballwin MO MW SAIF NASDAQ 04/08/93 22.875 95.66
JSBF JSB Financial, Inc. Lynbrook NY MA BIF NASDAQ 06/27/90 36.500 356.91
JXSB Jacksonville Savings Bank, MHC Jacksonville IL MW SAIF NASDAQ 04/21/95 12.500 15.90
KNK Kankakee Bancorp, Inc. Kankakee IL MW SAIF AMSE 01/06/93 24.000 33.96
KSAV KS Bancorp, Inc. Kenly NC SE SAIF NASDAQ 12/30/93 20.875 13.85
KSBK KSB Bancorp, Inc. Kingfield ME NE BIF NASDAQ 06/24/93 23.000 9.45
KYF Kentucky First Bancorp, Inc. Cynthiana KY MW SAIF AMSE 08/29/95 11.500 15.97
LARK Landmark Bancshares, Inc. Dodge City KS MW SAIF NASDAQ 03/28/94 17.000 31.50
LARL Laurel Capital Group, Inc. Allison Park PA MA SAIF NASDAQ 02/20/87 15.875 24.06
LFED Leeds Federal Savings Bk, MHC Baltimore MD MA SAIF NASDAQ 05/02/94 16.000 55.28
LIFB Life Bancorp, Inc. Norfolk VA SE SAIF NASDAQ 10/11/94 18.375 180.94
LISB Long Island Bancorp, Inc. Melville NY MA SAIF NASDAQ 04/18/94 30.875 760.89
LOGN Logansport Financial Corp. Logansport IN MW SAIF NASDAQ 06/14/95 11.750 15.54
LSBI LSB Financial Corp. Lafayette IN MW BIF NASDAQ 02/03/95 18.750 17.21
LSBX Lawrence Savings Bank North Andover MA NE BIF NASDAQ 05/02/86 8.250 35.06
LVSB Lakeview Financial West Paterson NJ MA SAIF NASDAQ 12/22/93 23.500 58.45
MAFB MAF Bancorp, Inc. Clarendon Hills IL MW SAIF NASDAQ 01/12/90 34.625 363.06
MARN Marion Capital Holdings Marion IN MW SAIF NASDAQ 03/18/93 20.375 37.54
MASB MASSBANK Corp. Reading MA NE BIF NASDAQ 05/28/86 37.375 100.31
MBB MSB Bancorp, Inc. Goshen NY MA BIF AMSE 09/03/92 19.125 54.20
MBB MSB Bancorp, Inc. Goshen NY MA BIF AMSE NA 19.125 54.20
MBLF MBLA Financial Corp. Macon MO MW SAIF NASDAQ 06/24/93 19.000 25.73
MCBN Mid-Coast Bancorp, Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 18.750 4.31
MCBS Mid Continent Bancshares Inc. El Dorado KS MW SAIF NASDAQ 06/27/94 23.750 47.90
MDBK Medford Savings Bank Medford MA NE BIF NASDAQ 03/18/86 25.000 113.35
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
3
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MERI Meritrust Federal SB Thibodaux LA SW SAIF NASDAQ NA 31.625 24.48
MFBC MFB Corp. Mishawaka IN MW SAIF NASDAQ 03/25/94 16.500 32.57
MFFC Milton Federal Financial Corp. West Milton OH MW SAIF NASDAQ 10/07/94 14.125 32.04
MFLR Mayflower Co-operative Bank Middleboro MA NE BIF NASDAQ 12/23/87 14.750 13.12
MFSL Maryland Federal Bancorp Hyattsville MD MA SAIF NASDAQ 06/02/87 34.250 107.19
MGNL Magna Bancorp, Inc. Hattiesburg MS SE SAIF NASDAQ 03/13/91 18.000 247.34
MIDC MidConn Bank Kensington CT NE BIF NASDAQ 09/11/86 19.313 37.39
MIFC Mid-Iowa Financial Corp. Newton IA MW SAIF NASDAQ 10/14/92 6.250 10.36
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 11.750 10.31
MLBC ML Bancorp, Inc. Villanova PA MA SAIF NASDAQ 08/11/94 14.563 169.86
MORG Morgan Financial Corp. Fort Morgan CO SW SAIF NASDAQ 01/11/93 11.250 8.76
MSBF MSB Financial, Inc. Marshall MI MW SAIF NASDAQ 02/06/95 19.250 12.58
MWBI Midwest Bancshares, Inc. Burlington IA MW SAIF NASDAQ 11/12/92 26.500 9.26
MWBX MetroWest Bank Framingham MA NE BIF NASDAQ 10/10/86 4.875 67.71
MWFD Midwest Federal Financial Baraboo WI MW SAIF NASDAQ 07/08/92 18.000 29.42
NASB North American Savings Bank Grandview MO MW SAIF NASDAQ 09/27/85 33.750 76.54
NEIB Northeast Indiana Bancorp Huntington IN MW SAIF NASDAQ 06/28/95 13.500 25.25
NFSL Newnan Holdings, Inc. Newnan GA SE SAIF NASDAQ 03/01/86 25.250 40.08
NHTB New Hampshire Thrift Bncshrs New London NH NE SAIF NASDAQ 05/22/86 11.750 19.95
NMSB NewMil Bancorp, Inc. New Milford CT NE BIF NASDAQ 02/01/86 8.750 35.37
NSLB NS&L Bancorp, Inc. Neosho MO MW SAIF NASDAQ 06/08/95 13.750 11.60
NSSB Norwich Financial Corp. Norwich CT NE BIF NASDAQ 11/14/86 19.500 105.01
NSSY Norwalk Savings Society Norwalk CT NE BIF NASDAQ 06/16/94 24.250 57.99
NTMG Nutmeg Federal S&LA Danbury CT NE SAIF NASDAQ NA 7.250 5.15
NWEQ Northwest Equity Corp. Amery WI MW SAIF NASDAQ 10/11/94 12.250 11.38
NWSB Northwest Savings Bank, MHC Warren PA MA SAIF NASDAQ 11/07/94 13.250 309.73
NYB New York Bancorp Inc. Douglaston NY MA SAIF NYSE 01/28/88 33.875 375.97
OFCP Ottawa Financial Corp. Holland MI MW SAIF NASDAQ 08/19/94 16.750 86.75
OHSL OHSL Financial Corp. Cincinnati OH MW SAIF NASDAQ 02/10/93 20.750 25.37
PALM Palfed, Inc. Aiken SC SE SAIF NASDAQ 12/15/85 14.500 75.80
PBCI Pamrapo Bancorp, Inc. Bayonne NJ MA SAIF NASDAQ 11/14/89 18.875 60.98
PBCT People's Bank, MHC Bridgeport CT NE BIF NASDAQ 07/06/88 27.250 1,104.17
PBKB People's Bancshares, Inc. South Easton MA NE BIF NASDAQ 10/23/86 10.625 36.07
PBNB People's Savings Financial Cp. New Britain CT NE BIF NASDAQ 08/20/86 27.750 52.85
PCBC Perry County Financial Corp. Perryville MO MW SAIF NASDAQ 02/13/95 17.000 14.49
PCCI Pacific Crest Capital Agoura Hills CA WE BIF NASDAQ NA 11.750 34.78
PERT Perpetual Bank, MHC Anderson SC SE SAIF NASDAQ 10/26/93 22.000 33.10
PFDC Peoples Bancorp Auburn IN MW SAIF NASDAQ 07/07/87 20.000 46.51
PFNC Progress Financial Corporation Blue Bell PA MA SAIF NASDAQ 07/18/83 8.375 31.24
PFSB PennFed Financial Services,Inc West Orange NJ MA SAIF NASDAQ 07/15/94 20.125 97.67
PFSL Pocahontas FS&LA, MHC Pocahontas AR SE SAIF NASDAQ 04/05/94 17.250 28.02
PHBK Peoples Heritage Finl Group Portland ME NE BIF NASDAQ 12/04/86 25.750 585.41
PKPS Poughkeepsie Savings Bank, FSB Poughkeepsie NY MA SAIF NASDAQ 11/19/85 5.250 65.90
PLE Pinnacle Bank Jasper AL SE SAIF AMSE 12/17/86 17.000 15.13
POBS Portsmouth Bank Shares Portsmouth NH NE BIF NASDAQ 02/09/88 13.625 78.20
PSAB Prime Bancorp, Inc. Philadelphia PA MA SAIF NASDAQ 11/21/88 20.250 75.43
PSBK Progressive Bank, Inc. Fishkill NY MA BIF NASDAQ 08/01/84 23.000 89.00
PTRS Potters Financial Corp. East Liverpool OH MW SAIF NASDAQ 12/31/93 18.750 9.49
PULB Pulaski Bank, Savings Bk, MHC St. Louis MO MW SAIF NASDAQ 05/11/94 14.125 29.58
PULS Pulse Bancorp South River NJ MA SAIF NASDAQ 09/18/86 15.750 48.04
PVFC PVF Capital Corp. Bedford Heights OH MW SAIF NASDAQ 12/30/92 15.000 34.85
PVSA Parkvale Financial Corporation Monroeville PA MA SAIF NASDAQ 07/16/87 25.250 102.05
PWBC PennFirst Bancorp, Inc. Ellwood City PA MA SAIF NASDAQ 06/13/90 13.500 52.61
QCBC Quaker City Bancorp, Inc. Whittier CA WE SAIF NASDAQ 12/30/93 16.500 62.71
QCFB QCF Bancorp, Inc. Virginia MN MW SAIF NASDAQ 04/03/95 17.688 25.23
QCSB Queens County Bancorp, Inc. Flushing NY MA BIF NASDAQ 11/23/93 47.250 362.26
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
4
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RARB Raritan Bancorp Inc. Raritan NJ MA BIF NASDAQ 03/01/87 23.250 35.60
RCSB RCSB Financial, Inc. Rochester NY MA BIF NASDAQ 04/29/86 27.875 428.88
RELY Reliance Bancorp, Inc. Garden City NY MA SAIF NASDAQ 03/31/94 18.750 167.10
RFED Roosevelt Financial Group Chesterfield MO MW SAIF NASDAQ 01/23/87 18.938 798.38
ROSE TR Financial Corp. Garden City NY MA BIF NASDAQ 06/29/93 31.625 283.01
RVSB Riverview Savings Bank, MHC Camas WA WE SAIF NASDAQ 10/26/93 16.750 36.78
SBCN Suburban Bancorporation, Inc. Cincinnati OH MW SAIF NASDAQ 09/30/93 15.000 22.12
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 15.000 11.03
SECP Security Capital Corporation Milwaukee WI MW SAIF NASDAQ 01/03/94 73.250 674.31
SFED SFS Bancorp, Inc. Schenectady NY MA SAIF NASDAQ 06/30/95 14.875 19.02
SFFC StateFed Financial Corporation Des Moines IA MW SAIF NASDAQ 01/05/94 16.500 13.03
SFSB SuburbFed Financial Corp. Flossmoor IL MW SAIF NASDAQ 03/04/92 19.000 23.80
SFSL Security First Corp. Mayfield Heights OH MW SAIF NASDAQ 01/22/88 16.625 82.66
SHEN First Shenango Bancorp, Inc. New Castle PA MA SAIF NASDAQ 04/06/93 22.500 50.81
SISB SIS Bancorp, Inc. Springfield MA NE BIF NASDAQ 02/08/95 23.250 133.05
SMBC Southern Missouri Bancorp, Inc Poplar Bluff MO MW SAIF NASDAQ 04/13/94 14.250 23.34
SMFC Sho-Me Financial Corp. Mt. Vernon MO MW SAIF NASDAQ 07/01/94 21.625 35.60
SOPN First Savings Bancorp, Inc. Southern Pines NC SE SAIF NASDAQ 01/06/94 18.000 67.39
SOSA Somerset Savings Bank Somerville MA NE BIF NASDAQ 07/09/86 2.000 33.30
SPBC St. Paul Bancorp, Inc. Chicago IL MW SAIF NASDAQ 05/18/87 27.625 499.51
SSBK Strongsville Savings Bank Strongsville OH MW SAIF NASDAQ NA 22.500 56.94
STFR St. Francis Capital Corp. Milwaukee WI MW SAIF NASDAQ 06/21/93 26.500 145.10
STND Standard Financial, Inc. Chicago IL MW SAIF NASDAQ 08/01/94 21.000 340.14
STSA Sterling Financial Corp. Spokane WA WE SAIF NASDAQ NA 13.750 76.14
SVRN Sovereign Bancorp, Inc. Wyomissing PA MA SAIF NASDAQ 08/12/86 13.000 641.34
SWBI Southwest Bancshares Hometown IL MW SAIF NASDAQ 06/24/92 18.250 48.45
SWCB Sandwich Co-operative Bank Sandwich MA NE BIF NASDAQ 07/25/86 29.625 55.97
TBK Tolland Bank Tolland CT NE BIF AMSE 12/19/86 11.625 13.46
TCB TCF Financial Corp. Minneapolis MN MW SAIF NYSE 06/17/86 41.750 1,455.83
THR Three Rivers Financial Corp. Three Rivers MI MW SAIF AMSE 08/24/95 13.625 11.60
THRD TF Financial Corporation Newtown PA MA SAIF NASDAQ 07/13/94 16.000 68.61
TRIC Tri-County Bancorp, Inc. Torrington WY WE SAIF NASDAQ 09/30/93 19.000 11.57
TSBS Trenton SB, MHC Lawrenceville NJ MA BIF NASDAQ 08/03/95 16.000 144.59
TSH Teche Holding Co. Franklin LA SW SAIF AMSE 04/19/95 13.250 46.92
TWIN Twin City Bancorp Bristol TN SE SAIF NASDAQ 01/04/95 17.250 14.84
UBMT United Financial Corp. Great Falls MT WE SAIF NASDAQ 09/23/86 18.750 22.94
UFRM United Federal Savings Bank Rocky Mount NC SE SAIF NASDAQ 07/01/80 7.750 23.75
VFFC Virginia First Financial Corp. Petersburg VA SE SAIF NASDAQ 01/01/78 12.875 73.95
WAMU Washington Mutual Inc. Seattle WA WE BIF NASDAQ 03/11/83 42.375 3,057.55
WAYN Wayne Savings & Loan Co. MHC Wooster OH MW SAIF NASDAQ 06/25/93 23.000 34.45
WBST Webster Financial Corporation Waterbury CT NE SAIF NASDAQ 12/12/86 37.750 286.28
WCBI Westco Bancorp Westchester IL MW SAIF NASDAQ 06/26/92 21.500 55.92
WEFC Wells Financial Corp. Wells MN MW SAIF NASDAQ 04/11/95 13.000 27.02
WFCO Winton Financial Corp. Cincinnati OH MW SAIF NASDAQ 08/04/88 12.000 23.83
WFSL Washington Federal, Inc. Seattle WA WE SAIF NASDAQ 11/17/82 25.750 1,047.91
WRNB Warren Bancorp, Inc. Peabody MA NE BIF NASDAQ 07/09/86 15.625 57.14
WSB Washington Savings Bank, FSB Waldorf MD MA SAIF AMSE NA 4.938 20.84
WSFS WSFS Financial Corporation Wilmington DE MA BIF NASDAQ 11/26/86 9.875 136.69
WSTR WesterFed Financial Corp. Missoula MT WE SAIF NASDAQ 01/10/94 18.125 79.66
WVS Financial Corporation Pittsburgh PA MA SAIF NASDAQ 11/29/93 24.250 42.12
YFED York Financial Corp. York PA MA SAIF NASDAQ 02/01/84 16.375 121.43
Maximum 73.250 4,062.46
Minimum 2.000 4.31
Average 20.004 185.32
Median 18.375 48.45
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
5
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible ROAA ROACE
Price/ Current Current Current Total Equity/ Equity/ Core Before Before
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS Extra Extra Merger
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (% Target?
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AADV 14.8 127.1 137.8 10.6 1.00 1,016,385 8.7 8.1 2.15 0.31 3.18 N
ABBK 13.4 114.3 128.5 7.7 2.04 484,071 6.7 6.0 1.46 0.72 10.87 N
ABCW 12.1 145.5 149.5 8.5 1.44 1,891,584 5.8 5.7 2.88 0.68 9.99 N
AFFFZ 11.6 118.3 120.7 7.9 5.45 2,227,591 6.9 6.8 2.54 0.45 6.61 N
AHM 16.3 167.0 199.1 6.6 2.79 50,588,224 4.9 4.3 1.93 0.23 2.91 N
ALBK 14.2 129.3 150.6 11.6 1.94 3,509,729 9.0 7.8 2.19 0.76 7.71 N
AMFB 12.2 191.9 207.7 14.9 2.11 1,394,874 7.8 7.2 1.56 1.05 13.04 N
ANBK 18.6 94.7 94.7 9.1 0.98 486,639 9.2 9.2 0.66 0.15 1.44 N
ANDB 10.9 142.3 142.3 11.0 2.33 1,198,787 7.7 7.7 2.37 1.06 13.77 N
ASBI 15.3 117.8 117.9 12.8 3.84 399,721 10.9 10.9 1.02 0.61 5.10 N
ASFC 14.8 133.0 162.3 10.4 1.26 7,266,185 7.8 6.5 2.37 0.50 6.03 N
BANC 13.7 137.0 147.4 8.8 1.12 2,170,480 6.4 6.0 0.95 0.85 10.90 N
BDJI 19.6 102.3 102.3 11.8 - 107,256 11.5 11.5 0.92 0.31 2.20 N
BFSB 12.1 106.2 106.2 16.2 2.44 127,360 14.3 14.3 1.49 1.10 6.98 N
BKC 15.6 144.0 151.2 12.0 4.73 547,987 8.4 8.0 1.84 1.25 14.02 N
BKCO 10.5 132.0 134.5 10.6 3.20 2,330,150 8.1 7.9 1.90 1.07 11.65 N
BKCT 13.8 135.8 135.8 14.7 3.60 402,397 10.9 10.9 1.61 1.18 10.89 N
BKUNA 17.9 111.5 117.9 6.1 - 824,360 8.4 8.1 0.49 0.36 1.23 N
BSBC 14.9 158.2 158.2 14.4 2.07 175,993 9.2 9.2 0.26 0.97 11.08 N
BVFS 17.0 142.3 150.7 8.0 1.45 3,428,175 5.7 5.4 2.44 - (0.01) N
CAFI 10.7 117.7 117.7 8.9 2.83 378,078 7.6 7.6 1.52 0.78 9.63 N
CAPS 13.9 134.5 134.5 11.4 1.71 231,245 8.4 8.4 1.01 0.63 6.28 N
CARV 19.5 53.5 56.0 5.1 - 365,056 9.5 9.1 0.41 (0.03) (0.32) N
CASB 18.1 129.5 129.5 7.8 - 340,380 6.1 6.1 0.72 0.49 7.75 N
CASH 14.3 112.8 120.8 12.9 2.18 342,095 11.4 10.7 1.73 1.06 8.14 N
CBCI 14.1 97.5 97.5 15.7 - 492,779 16.2 16.2 2.31 0.99 5.97 N
CBCO 11.8 145.5 145.5 14.1 5.36 200,008 9.7 9.7 2.05 1.11 11.67 N
CBIN 12.6 97.4 97.6 10.6 2.72 234,600 10.9 10.8 0.99 0.59 5.03 N
CBNH 14.1 125.7 125.7 9.0 3.16 548,724 7.2 7.2 1.44 0.85 11.58 N
CBSA 10.2 125.4 152.3 3.9 1.77 2,859,448 3.2 2.6 2.21 0.24 7.11 N
CEBK 19.6 112.7 128.0 11.1 1.74 325,915 9.8 8.8 0.94 0.53 5.35 N
CENF 10.8 131.2 131.4 6.6 1.29 2,160,973 5.0 5.0 2.60 0.53 10.75 N
CFB 12.0 177.2 198.4 9.6 0.91 6,667,758 5.4 4.9 3.83 0.61 10.29 N
CFCP 19.3 261.2 261.2 15.9 2.10 452,809 6.1 6.1 1.09 1.04 17.09 N
CFFC 12.7 119.4 119.4 16.6 2.48 160,791 13.9 13.9 1.65 1.02 7.45 N
CFSB 13.5 147.7 147.7 11.4 2.49 811,964 7.7 7.7 1.43 0.70 8.52 N
CFX 14.4 154.0 166.2 13.1 5.69 1,520,677 8.5 7.9 1.13 0.70 7.44 N
CIBI 12.7 98.6 98.6 11.8 2.39 94,799 11.9 11.9 1.32 0.68 5.03 N
CKFB 24.4 117.6 117.6 31.0 2.23 59,898 25.2 25.2 0.81 1.28 4.70 N
CMRN 15.8 95.3 95.3 25.1 1.81 175,841 26.4 26.4 0.98 1.60 5.77 N
CMSV 16.6 118.6 118.6 14.2 4.38 626,045 12.0 12.0 1.10 0.88 7.10 N
CNIT 16.2 132.8 145.8 9.4 2.55 685,962 7.0 6.5 2.42 0.40 5.61 N
CNSK 17.9 154.0 154.0 8.5 - 387,177 7.3 7.3 0.67 0.42 5.35 N
COFD 12.4 190.3 203.2 13.2 2.94 5,252,483 6.9 6.5 2.74 0.89 12.81 N
COFI 12.0 200.9 217.4 13.2 2.35 13,826,085 6.6 6.1 3.27 0.19 2.92 N
CSA 17.2 159.6 162.2 7.7 - 8,549,032 4.8 4.8 2.06 0.12 2.40 N
CTBK 11.4 96.1 96.1 6.3 2.48 241,905 6.6 6.6 1.42 0.64 9.18 N
CTZN 14.2 145.9 166.7 9.3 1.08 2,747,617 6.4 5.6 2.10 0.46 6.79 N
CVAL 12.6 120.4 120.4 10.6 2.38 284,386 8.8 8.8 1.47 0.60 6.55 N
CZF 15.9 111.0 111.0 17.8 2.86 75,635 16.0 16.0 0.88 0.78 4.30 N
DIBK 7.0 151.1 157.8 13.0 1.83 691,830 8.6 8.3 2.51 1.76 21.99 N
DME 12.6 153.7 155.1 8.0 - 19,683,465 5.2 5.1 1.17 0.37 7.59 N
DNFC 10.1 151.3 153.4 8.3 - 1,408,131 5.6 5.5 1.52 0.71 12.54 N
DSL 14.6 125.3 127.4 9.7 1.70 4,954,337 7.7 7.6 1.29 0.43 5.28 N
EBSI 10.4 108.0 108.0 9.7 4.40 642,136 8.9 8.9 1.31 0.65 7.78 N
EFBI 22.3 95.2 95.4 14.1 - 213,876 14.8 14.8 0.65 0.92 5.39 N
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
6
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible ROAA ROACE
Price/ Current Current Current Total Equity/ Equity/ Core Before Before
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS Extra Extra
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%)
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EGFC 16.2 128.9 175.7 9.3 3.20 1,406,583 7.2 5.4 1.78 1.00 13.82
EIRE 13.4 121.9 121.9 8.3 1.51 392,382 6.8 6.8 1.38 0.59 8.86
EQSB 8.6 113.2 113.2 6.0 - 267,776 5.3 5.3 3.13 0.78 14.98
ETFS 21.4 84.5 84.5 16.0 1.23 115,339 18.9 18.9 0.76 0.81 4.17
FBBC 13.8 116.7 116.7 21.5 2.50 576,981 18.4 18.4 1.16 1.40 6.71
FBCI 16.0 100.5 100.9 10.3 1.40 475,862 10.3 10.2 1.07 0.50 4.08
FBHC 15.8 114.2 123.6 7.1 1.16 281,694 6.2 5.7 1.54 0.27 3.81
FBSI 14.2 87.4 87.5 12.9 1.21 154,306 14.8 14.8 1.16 0.67 4.00
FCIT 14.5 138.8 138.8 8.2 - 668,459 5.9 5.9 1.29 0.45 7.38
FCME 2.3 120.0 120.0 7.2 - 136,429 6.0 6.0 3.20 1.49 45.72
FED 19.7 127.2 129.3 5.6 - 4,196,726 4.4 4.3 1.13 0.06 1.28
FESX 11.7 125.4 125.4 9.3 3.59 869,168 7.4 7.4 1.14 0.98 13.15
FFBI 22.4 95.6 95.6 7.4 - 97,143 7.7 7.7 0.71 0.12 1.28
FFBS 20.2 138.4 138.4 28.7 2.17 125,727 19.6 19.6 1.14 1.09 5.51
FFBZ 14.2 193.9 194.2 13.6 1.50 184,467 7.6 7.6 1.13 0.81 10.65
FFCH 12.6 155.9 155.9 9.6 3.10 1,546,149 6.1 6.1 1.85 0.48 7.55
FFES 10.0 104.3 104.6 6.4 2.61 942,648 6.1 6.1 2.29 0.44 6.89
FFFC 16.7 126.0 128.6 20.1 1.88 530,095 14.9 14.6 1.27 0.99 6.28
FFFG 12.5 123.3 123.3 7.5 - 311,028 6.1 6.1 0.22 0.21 3.28
FFFL 22.1 144.5 145.9 13.5 4.64 857,366 9.4 9.3 0.78 0.39 3.90
FFHC 12.5 212.5 220.1 15.2 2.63 5,595,612 7.2 6.9 2.28 0.92 12.71
FFHH 22.2 96.0 96.0 14.6 3.36 354,636 13.4 13.4 0.67 0.51 3.25
FFHS 15.0 93.8 94.6 8.5 2.00 218,329 9.1 9.0 1.07 0.28 2.94
FFKY 16.5 164.1 175.5 22.6 2.49 357,281 13.8 13.0 1.17 1.25 8.80
FFLC 16.6 93.8 93.8 15.2 1.98 335,993 16.2 16.2 1.22 0.63 3.72
FFSL 12.5 88.0 88.0 10.6 2.04 108,539 12.0 12.0 1.57 0.78 6.20
FFSW 18.0 258.8 316.8 12.7 1.23 1,110,723 7.4 6.5 2.17 0.92 13.44
FFSX 18.3 156.0 157.5 12.4 2.38 458,154 8.0 7.9 1.65 0.40 4.82
FFWC 10.1 99.8 99.8 10.0 2.73 154,551 10.0 10.0 2.18 0.89 8.31
FFWD 14.9 123.1 123.1 16.2 2.18 152,374 13.2 13.2 1.11 0.89 6.32
FFYF 17.5 129.5 129.5 22.0 2.71 602,557 17.0 17.0 1.48 0.83 4.59
FGHC 16.0 145.7 163.7 12.1 0.93 144,022 8.3 7.5 0.54 0.89 10.65
FIBC 12.4 100.7 101.3 9.7 2.07 266,763 9.7 9.6 1.17 0.47 4.31
FISB 20.6 156.4 158.6 14.2 2.20 1,485,436 9.1 9.0 1.24 0.90 10.11
FKFS 12.7 112.0 112.0 8.8 1.00 294,241 7.9 7.9 1.57 0.32 3.92
FLFC 15.2 162.4 191.9 11.2 2.16 991,226 7.7 6.7 1.22 1.03 14.22
FMCO 10.0 126.7 129.7 8.3 1.15 518,540 6.5 6.4 1.73 0.52 7.86
FMSB 12.4 166.8 166.8 11.0 1.11 400,600 6.6 6.6 1.45 1.02 15.40
FNGB 15.4 101.0 101.0 11.5 3.75 607,977 11.4 11.4 1.04 0.53 4.25
FOBC 12.2 97.0 102.3 11.8 3.60 341,528 11.7 11.1 1.32 0.70 5.72
FRC 15.0 106.0 106.1 5.9 - 2,122,168 5.6 5.6 1.13 0.54 9.52
FSBI 11.7 119.8 120.0 8.2 1.68 317,874 6.9 6.8 1.63 0.44 6.00
FSFC 13.4 125.8 125.8 12.7 2.11 329,336 10.1 10.1 0.71 (0.03) (0.19)
FSLA 16.4 143.0 163.2 13.2 2.02 974,771 9.3 8.2 1.10 0.47 4.98
FSPG 8.6 125.8 128.6 8.1 2.46 487,209 6.5 6.3 2.28 0.91 14.00
FTF 9.0 103.4 103.4 16.5 3.10 165,747 15.9 15.9 1.61 1.46 7.34
FTFC 14.6 158.9 168.5 10.1 2.67 1,469,422 6.3 6.0 1.65 0.71 10.18
FTSB 17.4 103.6 103.6 25.2 1.75 88,874 24.4 24.4 0.82 1.33 5.39
GBCI 12.8 202.6 202.7 19.1 2.74 412,042 9.5 9.4 1.82 1.36 14.25
GDW 8.4 156.7 156.7 9.6 0.71 37,011,423 6.1 6.1 7.39 1.00 15.60
GFCO 12.8 83.0 84.8 7.7 3.58 283,727 9.3 9.1 1.48 0.25 2.66
GFSB 11.6 105.8 105.8 12.2 1.93 85,206 11.6 11.6 1.79 0.91 7.59
GLBK 20.4 84.5 84.5 13.4 - 36,940 15.9 15.9 0.98 0.79 4.97
GLN 22.7 151.2 163.0 7.0 - 15,104,367 6.2 5.9 0.98 0.06 (0.86)
GPT 19.8 145.7 263.9 17.6 1.62 13,410,291 10.6 6.1 2.49 0.82 7.83
GRTR 20.2 121.1 121.1 7.1 1.48 2,566,626 8.0 8.0 0.67 0.71 7.37
<CAPTION>
Merger
Target?
Ticker (Y/N)
<S> <C>
EGFC N
EIRE N
EQSB N
ETFS N
FBBC N
FBCI N
FBHC N
FBSI N
FCIT N
FCME N
FED N
FESX N
FFBI N
FFBS N
FFBZ N
FFES N
FFFC N
FFFG N
FFFL N
FFHC N
FFHH N
FFHS N
FFKY N
FFLC N
FFSL N
FFSW N
FFSX N
FFWC N
FFWD N
FFYF N
FGHC N
FIBC N
FISB N
FKFS N
FLFC N
FMCO N
FMSB N
FNGB N
FOBC N
FRC N
FSBI N
FSFC N
FSLA N
FSPG N
FTF N
FTFC N
FTSB N
GBCI N
GDW N
GFCO N
GFSB N
GLBK N
GLN N
GPT N
GRTR N
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
7
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
<TABLE>
<CAPTION>
Tangible ROAA ROACE
Price/ Current Current Current Total Equity/ Equity/ Core Before Before
LTM Price/ Price/ T Price/ Dividend Assets Assets T Assets EPS Extra Extra
TICKER Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%)
(x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GSBC 15.4 226.1 226.1 22.9 2.32 657,659 10.1 10.1 1.12 1.36 13.40
GSLC 13.8 119.7 119.7 6.6 1.21 115,229 5.5 5.5 0.60 0.44 7.22
GTFN 22.6 151.1 157.7 14.6 1.65 2,830,684 9.7 9.3 1.29 0.71 6.48
GUPB 20.1 97.0 97.0 18.0 2.52 79,708 18.5 18.5 0.79 0.80 3.53
GWF 14.1 165.4 188.0 9.3 3.39 43,548,593 6.0 5.4 2.09 0.48 7.52
HALL 13.3 93.7 93.7 6.6 - 387,671 7.0 7.0 1.33 0.41 5.33
HARB 13.6 186.2 194.4 14.9 3.75 1,057,443 8.0 7.7 2.35 0.91 10.51
HARL 9.9 123.5 123.5 7.7 2.35 315,495 6.2 6.2 1.90 0.55 8.07
HAVN 9.5 131.2 131.9 7.9 2.11 1,564,697 6.0 6.0 3.01 0.58 9.07
HBFW 21.0 109.1 109.1 16.9 1.08 315,901 15.5 15.5 0.88 0.84 4.99
HBS 16.5 110.7 115.2 17.0 3.03 130,859 15.3 14.8 1.12 0.70 4.57
HFFC 12.3 100.2 100.6 8.7 2.18 554,139 9.0 9.0 1.34 0.59 6.55
HFGI 16.8 148.2 148.2 6.4 - 534,576 4.4 4.4 0.63 0.25 5.91
HFSA 18.2 84.4 84.4 14.2 3.23 87,807 16.8 16.8 0.68 0.44 2.39
HHFC 15.7 72.3 72.3 12.1 4.05 76,399 16.7 16.7 0.63 0.75 4.14
HJFS 11.8 121.2 121.2 11.8 2.06 193,193 9.7 9.7 1.48 1.07 10.62
HMCI 19.1 98.1 98.1 5.9 - 340,449 6.0 6.0 0.93 0.10 1.57
HMNF 16.9 102.0 102.0 15.1 - 565,385 14.8 14.8 1.08 0.81 4.92
HOMF 11.8 151.9 157.7 12.4 1.70 633,395 8.2 7.9 3.00 0.99 11.96
HPBC 10.2 158.3 158.3 16.5 4.74 188,647 10.4 10.4 1.65 1.75 15.74
HRBF 24.4 96.6 96.6 12.4 2.65 213,804 12.9 12.9 0.62 0.27 1.73
HRZB 12.1 107.9 107.9 17.2 3.02 500,340 15.9 15.9 1.10 1.52 9.40
HTHR 12.8 60.7 60.7 2.3 - 827,784 5.3 5.3 0.58 0.89 16.58
HVFD 13.3 127.9 128.0 10.1 2.92 350,603 7.9 7.9 1.39 0.40 4.77
IBSF 22.6 116.4 116.4 22.6 2.05 742,051 19.4 19.4 0.69 0.61 2.98
IFSB 19.6 58.6 67.6 3.9 2.89 247,888 6.7 5.9 0.39 0.13 1.98
INBI 14.7 113.3 113.3 21.5 3.23 320,372 18.9 18.9 0.84 0.73 3.31
IPSW 10.3 147.3 147.3 8.7 1.72 158,116 5.9 5.9 1.13 1.33 21.97
IROQ 9.6 137.6 153.7 8.4 1.91 473,684 7.1 6.5 1.74 0.75 10.86
ISBF 17.0 102.4 105.6 18.0 1.94 685,827 16.4 16.0 1.03 0.80 4.34
IWBK 15.1 230.0 236.1 14.9 1.61 1,712,151 6.5 6.3 2.14 0.82 11.48
JSBA 13.3 106.0 128.6 8.5 1.40 1,128,339 7.2 6.0 1.72 0.23 3.21
JSBF 15.5 108.6 108.6 23.5 3.29 1,518,830 21.6 21.6 2.36 1.65 7.60
JXSB 23.6 96.1 96.3 11.1 3.20 143,710 11.5 11.5 0.53 0.19 1.57
KNK 16.8 96.0 103.2 9.6 1.67 352,926 10.0 9.4 1.43 0.42 4.16
KSAV 12.9 100.2 100.3 14.4 2.87 96,150 14.4 14.4 1.62 0.82 5.30
KSBK 6.9 101.3 108.9 7.1 0.87 134,079 7.0 6.5 3.36 0.93 13.70
KYF 16.2 83.5 83.5 18.6 4.35 86,009 22.3 22.3 0.71 0.89 3.68
LARK 17.9 97.3 97.3 14.7 2.35 213,734 15.2 15.2 0.95 0.70 4.20
LARL 9.3 114.5 114.5 11.9 2.77 201,911 10.4 10.4 1.71 1.06 10.00
LFED 18.6 124.9 124.9 20.1 4.25 274,696 16.1 16.1 0.86 0.77 4.69
LIFB 16.0 124.4 128.7 12.9 2.40 1,404,760 10.4 10.1 1.15 0.65 4.87
LISB 19.2 146.6 146.6 14.2 1.30 5,363,791 9.7 9.7 1.61 0.64 6.16
LOGN 14.0 97.6 97.6 19.5 3.40 79,726 20.0 20.0 0.84 1.24 4.78
LSBI 23.2 95.4 95.4 9.7 1.71 177,840 9.4 9.4 0.81 0.50 4.77
LSBX 7.5 129.3 129.3 10.6 - 330,288 8.2 8.2 1.10 1.48 19.04
LVSB 15.7 120.7 151.5 12.4 1.06 472,698 10.2 8.3 1.50 1.24 11.87
MAFB 12.1 150.2 175.5 11.5 1.04 3,162,622 7.7 6.6 2.87 0.56 8.42
MARN 15.9 94.8 94.8 21.5 3.93 174,597 22.7 22.7 1.28 1.13 4.76
MASB 11.8 114.7 114.7 11.4 2.57 879,132 10.0 10.0 3.18 1.08 10.62
MBB 18.6 97.6 248.4 6.4 3.14 848,255 8.0 4.2 1.03 0.17 0.83
MBB 18.6 97.6 248.4 6.4 3.14 848,255 8.0 4.2 1.03 0.17 0.83
MBLF 17.6 91.9 91.9 11.3 2.11 227,391 12.3 12.3 1.08 0.58 4.07
MCBN 14.0 87.8 87.8 7.7 2.77 55,956 8.8 8.8 1.34 0.34 3.83
MCBS 12.2 124.6 124.7 14.1 1.68 339,731 10.8 10.8 1.94 1.07 8.54
MDBK 11.9 125.2 136.5 11.2 2.72 1,008,200 9.0 8.3 2.10 1.04 11.57
<CAPTION>
MERGER
TARGET?
TICKER (Y/N)
<S> <C>
GSBC N
GSLC N
GTFN N
GUPB N
GWF N
HALL N
HARB N
HARL N
HAVN N
HBFW N
HBS N
HFFC N
HFGI N
HFSA N
HHFC N
HJFS N
HMCI N
HMNF N
HOMF N
HPBC N
HRBF N
HRZB N
HTHR N
HVFD N
IBSF N
IFSB N
INBI N
IPSW N
IROQ N
ISBF N
IWBK N
JSBA N
JSBF N
JXSB N
KNK N
KSAV N
KSBK N
KYF N
LARK N
LARL N
LFED N
LIFB N
LISB N
LOGN N
LSBI N
LSBX N
LVSB N
MAFB N
MARN N
MASB N
MBB N
MBB N
MBLF N
MCBN N
MCBS N
MDBK N
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
8
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible ROAA ROACE
Price/ Current Current Current Total Equity/ Equity/ Core Before Before
LTM Price/ Price/T Price/ Dividend Assets Assets T Assets EPS Extra Extra Merger
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%) Target?
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MERI 12.7 145.9 145.9 10.6 2.21 231,058 7.3 7.3 2.50 0.55 7.33 N
MFBC 23.9 86.4 86.4 15.5 1.94 210,559 17.9 17.9 0.69 0.73 3.71 N
MFFC 22.4 95.7 95.7 17.7 3.97 180,831 18.5 18.5 0.63 0.67 3.28 N
MFLR 13.8 114.3 116.6 11.3 3.25 116,263 9.9 9.7 1.07 0.91 9.29 N
MFSL 17.1 118.0 119.9 9.5 1.93 1,130,517 8.1 7.9 2.00 0.74 8.98 N
MGNL 11.8 196.5 206.2 19.0 3.33 1,302,239 9.7 9.3 1.52 1.37 13.79 N
MIDC 16.4 107.3 127.4 10.4 3.11 358,429 9.7 8.3 1.18 0.51 5.36 N
MIFC 10.4 97.4 97.5 9.1 1.28 115,260 9.4 9.4 0.60 0.93 10.00 N
MIVI 12.9 83.8 83.8 15.4 1.36 69,322 18.4 18.4 0.91 1.31 6.73 N
MLBC 14.3 116.0 119.9 9.2 2.61 1,888,847 7.3 7.1 1.02 0.75 9.17 N
MORG 13.4 92.4 92.4 11.7 2.13 75,053 12.6 12.6 0.84 0.74 5.10 N
MSBF 12.5 99.9 99.9 20.0 2.60 62,832 20.1 20.1 1.54 1.40 6.19 N
MWBI 10.2 102.1 102.1 6.7 2.26 137,707 6.6 6.6 2.60 0.66 9.51 N
MWBX 10.6 176.6 176.6 13.6 2.05 498,738 7.7 7.7 0.46 1.31 17.12 N
MWFD 16.8 176.6 184.8 14.8 1.67 194,707 8.4 8.1 1.07 1.04 11.26 N
NASB 9.8 152.0 157.9 10.3 1.85 740,298 6.8 6.6 3.45 1.26 17.33 N
NEIB 15.2 94.5 94.5 16.5 2.37 160,032 17.4 17.4 0.89 1.02 4.97 N
NFSL 10.6 173.9 224.6 15.7 1.74 255,946 9.0 7.1 2.38 2.09 18.60 N
NHTB 13.2 103.9 103.9 7.6 4.26 264,016 7.3 7.3 0.89 0.40 5.25 N
NMSB 16.5 109.9 109.9 11.6 2.74 306,177 10.5 10.5 0.53 0.78 7.06 N
NSLB 23.3 86.9 86.9 20.2 3.64 57,288 23.3 23.3 0.59 0.97 4.08 N
NSSB 18.6 140.3 154.9 15.1 2.46 694,443 10.8 9.9 1.05 0.87 8.10 N
NSSY 19.1 131.6 137.2 9.1 0.83 637,156 7.2 6.9 1.27 0.81 10.27 N
NTMG 22.0 102.4 102.4 5.5 2.07 93,924 5.8 5.8 0.33 0.32 4.83 N
NWEQ 14.9 90.4 90.4 11.9 3.27 95,501 1.1 12.1 0.82 0.71 5.18 N
NWSB 15.8 165.4 173.9 16.3 2.42 1,901,532 9.8 9.4 0.84 0.70 6.49 N
NYB 11.6 247.4 247.4 12.8 2.36 2,940,907 5.2 5.2 2.93 1.16 20.26 N
OFCP 17.5 115.1 145.7 10.5 2.15 827,275 9.1 7.3 0.96 0.40 3.11 N
OHSL 15.0 100.8 100.8 11.7 3.66 217,627 11.6 11.6 1.38 0.57 4.60 N
PALM 19.9 143.6 150.6 11.5 0.55 659,902 8.0 7.7 0.73 0.37 4.46 N
PBCI 13.8 111.6 112.6 16.8 4.77 362,975 15.1 14.9 1.37 0.85 5.44 N
PBCT 17.5 184.6 184.9 15.3 3.23 7,236,600 8.3 8.3 1.56 1.13 14.07 N
PBKB 14.2 125.2 131.8 7.0 3.01 513,421 5.6 5.4 0.75 0.76 13.20 N
PBNB 13.9 117.5 126.1 11.5 3.32 459,966 9.8 9.2 2.00 0.96 8.99 N
PCBC 18.1 96.1 96.1 18.0 1.77 80,394 18.8 18.8 0.94 0.88 4.36 N
PCCI 12.6 145.1 145.1 13.1 - 265,125 9.0 9.0 0.93 1.17 16.14 N
PERT 16.7 113.8 NA 15.8 - 209,827 13.9 NA 1.32 0.73 6.02 N
PFDC 11.2 109.0 109.0 16.6 3.00 280,012 15.2 15.2 1.79 1.15 7.50 N
PFNC 11.5 167.2 168.2 8.5 0.96 367,171 5.1 5.1 0.73 0.60 11.58 N
PFSB 11.5 99.5 123.9 8.6 1.39 1,142,473 7.9 6.4 1.75 0.53 5.83 N
PFSL 11.1 123.5 123.5 7.3 4.87 381,562 6.0 6.0 1.55 0.54 8.98 N
PHBK 12.1 172.1 191.3 14.6 2.64 4,456,244 8.5 7.7 2.13 1.12 13.11 N
PKPS 3.6 93.9 93.9 7.7 1.91 860,853 8.2 8.2 1.48 1.48 17.88 N
PLE 10.1 102.1 105.9 7.9 4.24 191,659 7.7 7.5 1.69 0.50 6.40 N
POBS 16.4 116.9 116.9 29.1 4.40 268,654 24.9 24.9 0.83 2.32 9.50 N
PSAB 12.7 131.2 139.8 11.1 3.36 677,306 8.5 8.0 1.59 0.73 7.97 N
PSBK 9.5 123.3 140.9 10.1 2.32 886,043 8.2 7.3 2.41 1.12 13.12 N
PTRS 21.3 92.1 92.1 7.6 1.49 125,497 8.2 8.2 0.88 0.03 0.27 N
PULB 22.4 129.2 129.2 16.5 7.08 179,457 12.8 12.8 0.63 0.88 7.15 N
PULS 11.2 124.9 124.9 9.6 4.44 502,500 7.7 7.7 1.41 0.74 7.02 N
PVSC 7.5 155.1 155.1 10.1 - 345,279 6.5 6.5 1.99 0.94 14.18 N
PVSA 11.4 148.9 149.4 11.0 2.06 924,365 7.4 7.4 2.22 0.73 10.23 N
PWBC 13.4 107.8 118.9 7.5 2.67 700,794 7.0 6.4 1.01 0.42 5.47 N
QCBB 18.5 94.1 94.4 8.5 - 737,999 9.0 9.0 0.89 0.22 2.24 N
QCFC 11.7 96.4 96.4 17.0 - 148,321 17.6 17.6 1.51 1.24 6.18 N
QCSB 16.0 175.3 175.3 27.3 2.12 1,325,872 15.6 15.6 2.96 1.80 10.69 N
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
9
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
Tangible ROAA ROACE
Price/ Current Current Current Total Equity/ Equity/ Core Before Before
LTM Price/ Price/T Price/ Dividend Assets Assets T Assets EPS Extra Extra Merger
Core EPS Book V Book V Assets Yield ($000) (%) (%) ($) (%) (%) Target?
Ticker (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM LTM LTM (Y/N)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
RARB 11.7 128.2 130.9 10.1 2.58 354,176 7.8 7.7 1.98 0.84 11.12 N
RCSB 12.3 135.1 139.0 10.7 2.15 4,006,755 7.9 7.7 2.26 1.03 12.44 N
RELY 12.8 111.7 165.5 9.1 2.99 1,829,440 8.2 5.7 1.46 0.50 5.19 N
RFED 11.1 176.0 185.7 8.8 3.27 9,047,562 5.6 5.4 1.70 0.44 8.52 N
ROSE 12.2 131.6 131.6 9.0 2.53 3,140,494 6.4 6.4 2.60 0.97 15.05 N
RVSB 15.2 156.1 174.5 16.8 1.31 219,224 10.8 9.7 1.10 0.99 9.05 N
SBCN 19.2 84.5 84.5 10.5 4.00 209,942 12.1 12.1 0.78 0.17 1.28 N
SCCB 22.1 89.1 89.1 25.5 4.00 43,232 28.7 28.7 0.68 0.85 2.96 N
SECP 18.1 128.7 128.7 19.3 1.23 3,494,427 15.9 15.9 4.05 0.84 4.99 N
SFED 14.7 89.8 89.8 11.5 1.61 166,030 12.8 12.8 1.01 0.45 3.22 N
SFFC 13.9 89.3 89.3 16.1 2.42 81,059 18.0 18.0 1.19 0.98 4.97 N
SFSB 14.4 93.7 94.3 6.1 1.68 390,910 6.5 6.5 1.32 0.23 3.21 N
SFSL 11.7 148.6 151.6 13.8 2.65 599,822 9.3 9.1 1.42 0.90 9.69 N
SHEN 20.5 110.2 110.2 13.2 2.13 384,088 12.0 12.0 1.10 0.75 5.65 N
SISB 5.4 132.8 132.8 10.4 - 1,284,566 7.6 7.6 4.30 2.06 28.71 N
SMBC 15.5 92.6 92.6 14.6 3.51 160,124 15.7 15.7 0.92 0.67 4.04 N
SMFC 15.5 108.3 108.3 12.2 - 292,094 10.2 10.2 1.40 0.69 5.95 N
SOPN 17.5 100.6 100.6 25.6 3.78 263,203 25.5 25.5 1.03 1.27 4.89 N
SOSA 13.3 114.9 114.9 6.5 - 510,715 5.7 5.7 0.15 0.48 8.66 N
SPBC 13.9 134.4 134.9 11.7 1.74 4,276,208 8.7 8.7 1.99 0.59 6.44 N
SSBK 13.6 135.9 138.6 10.5 2.13 542,191 7.7 7.6 1.66 0.64 7.74 N
STFR 14.8 114.6 120.2 10.3 1.81 1,404,116 8.9 8.5 1.79 0.81 8.04 N
STND 20.2 129.2 129.4 14.5 1.52 2,339,731 11.3 11.2 1.04 0.55 4.39 N
STSA 20.2 130.6 159.5 5.0 - 1,531,295 5.5 4.8 0.68 0.14 0.43 N
SVRN 16.5 167.5 244.4 6.9 0.65 9,364,636 4.9 3.7 0.79 0.57 12.10 N
SWBI 13.5 124.1 124.1 12.9 4.16 376,277 10.4 10.4 1.35 0.82 6.79 N
SWCB 14.8 147.7 156.4 12.1 4.05 460,876 8.2 7.8 2.00 0.91 11.17 N
TBK 11.9 93.5 97.4 5.9 1.03 228,055 6.3 6.1 0.98 0.63 10.17 N
TCB 15.2 278.7 290.9 20.5 1.80 7,114,466 7.3 7.1 2.75 1.19 16.00 N
THR 17.0 91.7 92.1 13.3 2.64 87,369 14.5 14.4 0.80 0.52 3.43 N
THRD 15.0 88.4 101.9 10.4 2.00 663,092 10.8 9.5 1.07 0.63 4.49 N
TRIC 18.3 91.3 91.3 14.6 2.63 79,475 15.9 15.9 1.04 0.66 3.82 N
TSBS 21.3 142.4 145.3 27.6 2.19 524,020 19.4 19.1 0.75 1.67 8.71 N
TSH 13.5 89.8 89.8 12.4 3.77 379,590 13.8 13.8 0.98 0.72 4.29 N
TWIN 14.1 110.7 110.7 13.9 3.71 107,067 12.5 12.5 1.22 0.78 5.78 N
UBMT 14.7 94.3 94.3 21.3 4.91 107,945 22.5 22.5 1.28 1.20 5.24 N
UFRM 18.9 120.3 120.3 9.0 2.58 263,582 7.5 7.5 0.41 0.27 3.38 N
VFFC 13.3 121.0 124.8 9.5 0.78 781,358 7.8 7.6 0.97 1.43 17.98 N
WAMU 14.4 211.1 234.4 13.6 2.27 22,413,697 7.5 6.9 2.95 0.98 14.34 N
WAYN 22.6 152.9 152.9 13.7 4.00 250,856 9.0 9.0 1.02 0.25 2.70 N
WBST 13.7 151.9 196.2 7.7 1.91 3,984,454 5.4 4.3 2.76 0.55 9.96 N
WCBI 14.7 117.2 117.2 18.2 2.79 307,772 15.5 15.5 1.46 0.99 6.33 N
WEFC 14.4 97.3 97.3 13.4 - 201,316 13.8 13.8 0.90 0.56 3.82 N
WFCO 11.5 113.1 116.1 8.4 3.50 282,833 7.5 7.3 1.04 0.94 12.39 N
WFSL 12.3 181.3 190.3 20.5 3.57 5,114,978 11.3 10.8 2.09 1.63 13.85 N
WRNB 10.2 176.0 176.0 16.1 2.82 353,935 9.2 9.2 1.53 1.74 19.52 N
WSB 10.3 96.8 96.8 8.5 2.03 246,742 8.7 8.7 0.48 0.91 11.60 N
WSFS 7.5 169.4 171.1 10.5 - 1,306,714 6.2 6.1 1.32 1.47 24.49 N
WSTR 16.9 101.8 101.8 14.1 2.10 566,109 13.8 13.8 1.07 0.58 4.25 N
WVFC 12.1 123.0 123.0 15.9 3.30 265,820 12.9 12.9 2.00 1.24 8.69 N
YFED 13.0 132.4 132.4 10.5 3.66 1,154,446 8.0 8.0 1.26 0.61 7.21 N
Maximum 24.4 278.7 316.8 31.0 7.08 50,588,224 28.7 28.7 7.39 2.32 45.72
Minimum 2.3 53.5 56.0 2.3 - 36,940 3.2 2.6 0.15 (0.03) (0.86)
Averag 14.8 126.0 132.6 12.4 2.18 1,732,077 10.4 10.1 1.46 0.78 7.93
Median 14.2 120.3 124.0 11.5 2.15 399,721 9.0 8.3 1.29 0.74 6.79
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
10
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Current Assets Core EPS Extra Extra
Pricing (%) EPS ($) (%) (%)
Ticker Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
AADV 12/13/96 0.47 14.2 0.56 (1.47) (15.89)
ABBK 12/13/96 0.25 11.7 0.42 0.76 11.53
ABCW 12/13/96 0.75 12.4 0.70 0.02 0.24
AFFFZ 12/13/96 0.58 40.8 0.18 (0.99) (14.18)
AHM 12/13/96 2.14 11.3 0.70 (0.65) (17.34)
ALBK 12/13/96 0.83 12.7 0.61 0.20 2.08
AMFB 12/13/96 0.51 11.3 0.42 0.28 3.66
ANBK 12/13/96 NA 15.3 0.20 (0.58) (6.00)
ANDB 12/13/96 1.30 7.6 0.85 1.29 16.83
ASBI 12/13/96 0.41 13.5 0.29 (0.23) (2.12)
ASFC 12/13/96 0.58 10.8 0.81 (0.18) (2.28)
BANC 12/13/96 0.72 12.5 0.26 0.21 3.06
BDJI 12/13/96 0.23 16.7 0.27 (0.73) (5.98)
BFSB 12/13/96 - 9.6 0.47 0.40 2.72
BKC 12/13/96 2.39 10.7 0.67 1.25 14.43
BKCO 12/13/96 1.11 9.1 0.55 0.90 10.83
BKCT 12/13/96 1.45 12.6 0.44 1.27 12.04
BKUNA 12/13/96 0.85 12.2 0.18 (0.08) (6.05)
BSBC 12/13/96 2.19 12.1 0.08 1.18 13.08
BVFS 12/13/96 0.69 8.7 1.20 (0.25) (4.14)
CAFI 12/13/96 0.23 11.6 0.35 (0.34) (4.23)
CAPS 12/13/96 0.12 12.5 0.28 (0.22) (2.50)
CARV 12/13/96 0.30 15.4 0.13 (0.86) (9.03)
CASB 12/13/96 0.51 18.1 0.18 (0.43) (6.95)
CASH 12/13/96 0.20 12.4 0.50 1.09 9.16
CBCI 12/13/96 1.29 13.6 0.60 0.17 1.04
CBCO 12/13/96 1.70 11.0 0.55 0.52 5.32
CBIN 12/13/96 0.13 11.2 0.28 (0.21) (1.90)
CBNH 12/13/96 0.37 12.1 0.42 0.93 13.10
CBSA 12/13/96 0.57 10.1 0.56 (0.30) (8.95)
CEBK 12/13/96 1.69 13.9 0.33 0.81 8.23
CENF 12/13/96 1.34 5.2 1.36 0.24 4.73
CFB 12/13/96 1.07 12.8 0.90 (0.25) (4.10)
CFCP 12/13/96 0.07 17.5 0.30 1.10 18.12
CFFC 12/13/96 0.20 11.7 0.45 0.23 1.68
CFSB 12/13/96 0.20 12.3 0.39 (0.15) (1.82)
CFX 12/13/96 0.73 12.0 0.34 0.12 1.36
CIBI 12/13/96 0.88 12.7 0.33 (0.44) (3.61)
CKFB 12/13/96 0.57 22.4 0.22 1.38 5.34
CMRN 12/13/96 0.37 15.5 0.25 1.56 5.88
CMSV 12/13/96 0.53 11.1 0.41 1.14 9.55
CNIT 12/13/96 0.77 12.4 0.79 (0.07) (0.96)
CNSK 12/13/96 1.17 37.5 0.08 (0.41) (9.65)
COFD 12/13/96 0.43 11.6 0.73 0.34 4.73
COFI 12/13/96 0.31 10.8 0.91 0.15 2.16
CSA 12/13/96 1.53 14.8 0.60 (0.76) (15.06)
CTBK 12/13/96 1.37 9.4 0.43 0.67 10.33
CTZN 12/13/96 0.91 13.8 0.54 (0.28) (4.29)
CVAL 12/13/96 0.76 11.6 0.40 (0.29) (3.17)
CZF 12/13/96 0.22 20.6 0.17 (0.45) (2.73)
DIBK 12/13/96 0.99 7.1 0.62 1.84 22.10
DME 12/13/96 2.45 8.8 0.42 0.34 6.72
DNFC 12/13/96 0.66 13.7 0.28 (0.31) (5.44)
DSL 12/13/96 1.36 12.4 0.38 (0.52) (6.67)
EBSI 12/13/96 1.06 13.6 0.25 (0.09) (0.94)
EFBI 12/13/96 0.04 19.1 0.19 0.77 5.09
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
11
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Current Assets Core EPS Extra Extra
Pricing (%) EPS ($) (%) (%)
Ticker Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
EGFC 12/13/96 1.22 12.6 0.57 (0.07) (0.95)
EIRE 12/13/96 0.23 10.5 0.44 0.76 11.28
EQSB 12/13/96 0.77 7.9 0.85 0.81 15.35
ETFS 12/13/96 0.23 21.4 0.19 0.74 3.82
FBBC 12/13/96 0.10 12.5 0.32 0.77 4.11
FBCI 12/13/96 0.67 15.3 0.28 (0.18) (1.65)
FBHC 12/13/96 1.31 14.4 0.42 (0.86) (13.34)
FBSI 12/13/96 0.08 10.1 0.41 0.09 0.57
FCIT 12/13/96 2.58 10.4 0.45 (0.31) (5.05)
FCME 12/13/96 2.24 7.3 0.25 0.89 18.95
FED 12/13/96 2.15 12.6 0.44 (0.50) (11.10)
FESX 12/13/96 0.55 8.6 0.39 1.19 15.88
FFBI 12/13/96 0.22 19.8 0.20 (0.70) (8.84)
FFBS 12/13/96 0.33 17.4 0.33 0.33 1.70
FFBZ 12/13/96 0.49 16.0 0.25 (0.19) (2.44)
FFCH 12/13/96 1.20 12.4 0.47 (0.37) (5.90)
FFES 12/13/96 0.54 6.5 0.89 0.10 1.66
FFFC 12/13/96 0.44 15.2 0.35 0.27 1.79
FFFG 12/13/96 2.94 13.8 0.05 (0.63) (9.56)
FFFL 12/13/96 0.40 19.6 0.22 (0.44) (4.55)
FFHC 12/13/96 0.29 13.0 0.55 (0.26) (3.60)
FFHH 12/13/96 0.06 16.9 0.22 0.12 0.86
FFHS 12/13/96 0.44 14.8 0.27 (0.75) (8.09)
FFKY 12/13/96 0.06 17.2 0.28 0.32 2.29
FFLC 12/13/96 0.23 14.9 0.34 (0.27) (1.60)
FFSL 12/13/96 0.40 11.2 0.44 (0.16) (1.31)
FFSW 12/13/96 0.16 10.8 0.90 0.29 2.45
FFSX 12/13/96 0.11 16.1 0.47 (0.50) (6.04)
FFWC 12/13/96 0.10 9.2 0.60 0.21 2.04
FFWD 12/13/96 0.04 12.1 0.34 0.07 0.52
FFYF 12/13/96 0.84 17.5 0.37 (0.34) (1.94)
FGHC 12/13/96 1.34 13.5 0.16 0.94 11.17
FIBC 12/13/96 3.37 9.5 0.38 (0.51) (5.06)
FISB 12/13/96 1.76 NM - 0.01 0.06
FKFS 12/13/96 2.28 10.0 0.50 (0.39) (4.89)
FLFC 12/13/96 1.22 14.5 0.32 1.05 14.39
FMCO 12/13/96 1.18 8.4 0.52 (0.36) (5.45)
FMSB 12/13/96 0.02 11.0 0.41 1.03 15.58
FNGB 12/13/96 0.12 12.1 0.33 (0.26) (2.22)
FOBC 12/13/96 0.14 10.9 0.37 (0.16) (1.36)
FRC 12/13/96 2.05 13.7 0.31 0.63 11.28
FSBI 12/13/96 0.50 8.6 0.55 (0.30) (4.36)
FSFC 12/13/96 0.06 11.3 0.21 (0.35) (3.49)
FSLA 12/13/96 0.74 18.0 0.25 (0.62) (6.61)
FSPG 12/13/96 0.78 7.5 0.65 0.72 11.21
FTF 12/13/96 0.08 8.6 0.42 0.52 2.89
FTFC 12/13/96 0.12 10.7 0.56 (0.02) (0.25)
FTSB 12/13/96 1.27 17.8 0.20 1.28 5.28
GBCI 12/13/96 0.09 13.0 0.45 0.82 8.66
GDW 12/13/96 1.37 4.1 3.74 1.50 24.71
GFCO 12/13/96 0.41 12.5 0.38 (0.62) (6.61)
GFSB 12/13/96 1.63 11.8 0.44 0.17 1.45
GLBK 12/13/96 0.30 17.2 0.29 0.77 4.87
GLN 12/13/96 1.76 16.9 0.33 (0.54) (11.49)
GPT 12/13/96 2.91 15.8 0.78 1.00 9.50
GRTR 12/13/96 7.81 22.5 0.15 0.78 8.45
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
12
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Current Assets Core EPS Extra Extra
Pricing (%) EPS ($) (%) (%)
Ticker Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
GSBC 12/13/96 1.83 18.0 0.24 0.30 2.89
GSLC 12/13/96 NA 11.5 0.18 (0.12) (2.08)
GTFN 12/13/96 0.42 23.5 0.31 (0.05) (0.56)
GUPB 12/13/96 0.25 18.0 0.22 0.18 0.93
GWF 12/13/96 1.79 12.1 0.61 (0.36) (7.23)
HALL 12/13/96 0.04 12.6 0.35 (0.06) (0.84)
HARB 12/13/96 0.50 11.8 0.68 0.15 1.82
HARL 12/13/96 - 8.7 0.54 (0.19) (3.00)
HAVN 12/13/96 1.01 6.1 1.17 0.02 0.32
HBFW 12/13/96 - 17.8 0.26 0.90 5.64
HBS 12/13/96 2.33 13.2 0.35 (0.04) (0.26)
HFFC 12/13/96 0.59 10.6 0.39 (0.27) (2.98)
HFGI 12/13/96 0.23 12.6 0.21 0.10 2.07
HFSA 12/13/96 0.19 18.2 0.17 (0.60) (3.53)
HHFC 12/13/96 0.19 15.4 0.16 0.74 4.33
HIFS 12/13/96 0.78 10.9 0.40 1.11 11.37
HMCI 12/13/96 3.22 11.7 0.38 (0.89) (14.33)
HMNF 12/13/96 0.08 17.6 0.26 (0.10) (0.68)
HOMF 12/13/96 0.45 9.5 0.93 0.27 3.31
HPBC 12/13/96 0.29 10.0 0.42 1.68 15.86
HRBF 12/13/96 0.43 15.8 0.24 (0.28) (2.08)
HRZB 12/13/96 0.01 13.3 0.25 1.49 9.28
HTHR 12/13/96 10.58 NM (0.10) (1.09) (32.90)
HVFD 12/13/96 0.28 13.2 0.35 (0.71) (8.22)
IBSF 12/13/96 0.11 20.6 0.19 (0.46) (2.34)
IFSB 12/13/96 NA 11.9 0.16 (0.55) (8.17)
INBI 12/13/96 0.18 30.9 0.10 (1.85) (9.57)
IPSW 12/13/96 1.81 10.4 0.28 1.24 21.28
IROQ 12/13/96 0.89 7.8 0.54 0.25 2.52
ISBF 12/13/96 NA 16.8 0.26 (0.11) (0.68)
JWBK 12/13/96 0.54 13.7 0.59 (0.10) (1.51)
JSBA 12/13/96 1.02 11.2 0.51 (1.01) (13.85)
JSBF 12/13/96 1.30 14.5 0.63 1.72 8.08
JXSB 12/13/96 0.37 16.5 0.19 (0.73) (6.08)
KNK 12/13/96 0.56 14.0 0.43 (0.03) (0.30)
KSAV 12/13/96 0.55 9.7 0.54 0.05 0.32
KSBK 12/13/96 1.37 5.8 0.99 0.85 12.28
KYF 12/13/96 - 18.0 0.16 0.07 0.31
LARK 12/13/96 0.05 11.2 0.38 0.13 0.84
LARL 12/13/96 0.64 9.0 0.44 0.14 1.28
LFED 12/13/96 0.01 18.2 0.22 (0.16) (0.97)
LIFB 12/13/96 0.38 12.8 0.36 0.05 0.43
LISB 12/13/96 NA 21.4 0.36 (0.14) (1.46)
LOGN 12/13/96 0.36 12.2 0.24 0.41 1.81
LSBI 12/13/96 1.37 12.7 0.37 0.79 8.31
LSBX 12/13/96 0.85 6.1 0.34 1.76 22.36
LVSB 12/13/96 1.21 12.0 0.49 0.30 2.94
MAFB 12/13/96 0.40 11.1 0.78 (0.04) (0.55)
MARN 12/13/96 0.95 14.6 0.35 0.29 1.25
MASB 12/13/96 0.27 11.1 0.84 1.12 11.46
MBB 12/13/96 0.78 17.7 0.27 (0.41) (8.02)
MBB 12/13/96 0.78 17.7 0.27 (0.41) (8.02)
MBLF 12/13/96 0.19 13.6 0.35 0.20 1.51
MCBN 12/13/96 0.41 14.2 0.33 (0.53) (6.07)
MCBS 12/13/96 0.15 10.4 0.57 0.57 4.95
MDBK 12/13/96 0.53 12.0 0.52 1.01 11.37
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
13
<PAGE>
FERSUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Current Assets Core EPS Extra Extra
Pricing (%) EPS ($) (%) (%)
TICKER Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
MERI 12/13/96 NA 16.1 0.49 (0.78) (10.48)
MFBC 12/13/96 0.01 19.6 0.21 0.83 4.53
MFFC 12/13/96 0.19 25.2 0.14 (0.27) (1.45)
MFLR 12/13/96 1.11 13.2 0.28 0.94 9.59
MFSL 12/13/96 0.40 15.6 0.55 0.68 8.33
MGNL 12/13/96 2.52 11.3 0.40 0.54 5.56
MIDC 12/13/96 1.65 11.8 0.41 (0.06) (0.60)
MIFC 12/13/96 0.05 7.4 0.21 1.28 13.87
MIVI 12/13/96 0.46 12.2 0.24 1.13 6.04
MLBC 12/13/96 0.61 7.4 0.49 0.87 11.86
MORG 12/13/96 1.29 13.4 0.21 (0.04) (0.31)
MSBF 12/13/96 0.24 12.0 0.40 0.27 1.30
MWBI 12/13/96 0.47 9.6 0.69 (0.54) (8.05)
MWBX 12/13/96 1.63 10.2 0.12 1.36 17.31
MWFD 12/13/96 0.24 17.3 0.26 0.21 2.45
NASD 12/13/96 3.12 9.3 0.91 1.33 18.85
NEIB 12/13/96 0.20 12.5 0.27 0.57 3.16
NFSL 12/13/96 NA 10.5 0.60 1.17 11.18
NHTB 12/13/96 0.94 12.8 0.23 (0.37) (5.03)
NMSB 12/13/96 1.76 15.6 0.14 0.79 7.49
NSLB 12/13/96 - 20.2 0.17 0.97 4.14
NSSB 12/13/96 1.66 15.7 0.31 1.01 9.72
NSSY 12/13/96 1.99 11.2 0.54 0.82 11.66
NTMG 12/13/96 NA 25.9 0.07 (0.67) (12.87)
NWEQ 12/13/96 1.19 16.1 0.19 0.05 0.41
NWSB 12/13/96 0.86 13.8 0.24 (0.18) (1.76)
NYB 12/13/96 1.18 9.5 0.89 0.74 13.83
OFCP 12/13/96 0.18 15.0 0.28 (0.56) (5.68)
OHSL 12/13/96 0.01 17.3 0.30 (0.37) (3.14)
PALM 12/13/96 3.44 18.1 0.20 (0.60) (7.35)
PBCI 12/13/96 2.38 16.9 0.28 (0.41) (2.68)
PBCT 12/13/96 1.42 16.6 0.41 1.15 14.20
PBKB 12/13/96 1.02 12.7 0.21 0.75 13.71
PBNB 12/13/96 0.61 13.6 0.51 0.92 9.15
PCBC 12/13/96 NA 17.0 0.25 0.55 2.83
PCCI 12/13/96 2.24 18.4 0.16 1.08 12.98
PERT 12/13/96 NA 17.2 0.32 (0.14) (1.12)
PFDC 12/13/96 0.37 9.6 0.52 0.12 0.75
PFNC 12/13/96 0.98 15.0 0.14 (0.68) (12.79)
PFSB 12/13/96 0.86 9.7 0.52 (0.28) (3.34)
PFSL 12/13/96 0.16 7.4 0.58 0.45 7.51
PHBK 12/13/96 1.03 10.6 0.61 1.29 15.23
PKPS 12/13/96 3.81 13.1 0.10 (0.28) (3.32)
PLE 12/13/96 0.83 8.9 0.48 (0.55) (6.91)
POBS 12/13/96 0.17 15.5 0.22 2.19 9.00
PSAB 12/13/96 1.34 10.8 0.47 (0.06) (0.71)
PSBK 12/13/96 1.03 9.0 0.64 1.13 14.08
PTRS 12/13/96 2.20 23.4 0.20 (1.06) (12.06)
PULB 12/13/96 0.29 25.2 0.14 0.76 5.99
PULS 12/13/96 1.07 10.4 0.38 (0.45) (5.69)
PVFC 12/13/96 0.56 3.6 1.05 (0.01) (0.20)
PVSA 12/13/96 0.26 10.5 0.60 (0.34) (4.66)
PWBC 12/13/96 0.59 12.1 0.28 (0.16) (2.33)
QCBC 12/13/96 1.81 20.6 0.20 (0.69) (7.47)
QCFB 12/13/96 NA 10.1 0.44 0.39 2.11
QCSB 12/13/96 0.53 15.3 0.77 1.72 11.06
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
14
<PAGE>
FERGUSON & CO., LLP EXHIBIT V - SELECTED PUBLICLY TRADED THRIFTS
- -------------------
<TABLE>
<CAPTION>
ROAA ROACE
NPAs/ Price/ Core Before Before
Current Assets Core EPS Extra Extra
Pricing (%) EPS ($) (%) (%)
Ticker Date MRQ (x) MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C>
RARB 12/13/96 0.44 10.6 0.55 0.70 9.20
RCSB 12/13/96 0.63 10.3 0.68 1.09 14.78
RELY 12/13/96 0.96 9.8 0.48 (0.31) (3.73)
RFED 12/13/96 0.74 12.1 0.39 0.08 0.80
ROSE 12/13/96 NA 9.8 0.81 1.07 16.91
RVSB 12/13/96 0.20 16.8 0.25 0.04 0.41
SBCN 12/13/96 0.13 20.8 0.18 (0.52) (4.22)
SCCB 12/13/96 NA 20.8 0.18 0.15 0.52
SECP 12/13/96 0.10 15.3 1.20 0.33 2.04
SFED 12/13/96 0.61 10.3 0.36 (0.30) (2.31)
SFFC 12/13/96 0.43 12.1 0.34 0.34 1.82
SFSB 12/13/96 0.27 10.6 0.45 (0.47) (6.93)
SFSL 12/13/96 0.21 10.4 0.40 0.19 2.04
SHEN 12/13/96 0.50 NM - 0.01 0.09
SISB 12/13/96 0.50 3.2 1.82 3.35 46.25
SMBC 12/13/96 0.71 14.3 0.25 (0.25) (1.52)
SMFC 12/13/96 0.06 11.8 0.46 0.26 2.42
SOPN 12/13/96 0.10 16.1 0.28 0.46 1.80
SOSA 12/13/96 8.41 12.5 0.04 0.48 8.47
SPBC 12/13/96 0.47 12.1 0.57 (0.33) (3.67)
SSBK 12/13/96 0.08 15.6 0.36 (0.31) (3.88)
STFR 12/13/96 0.28 17.0 0.39 (0.13) (1.34)
STND 12/13/96 0.16 16.4 0.32 (0.17) (1.53)
STSA 12/13/96 0.58 NM - (0.88) (24.96)
SVRN 12/13/96 0.55 NM - - (1.62)
SWBI 12/13/96 0.22 13.8 0.33 (0.16) (1.43)
SWCB 12/13/96 0.77 12.0 0.62 0.93 11.68
TBK 12/13/96 2.78 22.4 0.13 0.66 10.67
TCB 12/13/96 0.76 15.4 0.68 0.31 4.03
THR 12/13/96 1.22 15.5 0.22 (0.42) (2.89)
THRD 12/13/96 0.32 13.8 0.29 (0.15) (1.16)
TRIC 12/13/96 0.07 18.3 0.26 (0.13) (0.83)
TSBS 12/13/96 0.36 22.2 0.18 1.19 6.15
TSH 12/13/96 NA 11.4 0.29 (0.27) (1.88)
TWIN 12/13/96 0.40 12.7 0.34 (0.18) (1.42)
UBMT 12/13/96 0.62 14.7 0.32 0.14 0.60
UFRM 12/13/96 1.01 NM (0.02) (1.32) (16.96)
VFFC 12/13/96 2.32 11.9 0.27 0.10 1.25
WAMU 12/13/96 0.56 13.4 0.79 0.72 10.16
WAYN 12/13/96 0.59 22.1 0.26 (0.90) (9.52)
WBST 12/13/96 0.85 11.5 0.82 0.50 9.06
WCBI 12/13/96 0.53 12.8 0.42 0.14 0.89
WEFC 12/13/96 0.27 11.6 0.28 (0.29) (2.07)
WFCO 12/13/96 0.40 10.0 0.30 0.87 11.34
WFSL 12/13/96 0.79 10.9 0.59 1.13 9.78
WRNB 12/13/96 1.75 10.0 0.39 1.81 19.74
WSB 12/13/96 0.95 7.7 0.16 1.13 13.38
WSFS 12/13/96 2.76 5.3 0.47 1.92 32.02
WSTR 12/13/96 0.06 16.2 0.28 (0.13) (0.91)
WVFC 12/13/96 0.36 11.2 0.54 0.37 2.91
YFED 12/13/96 1.62 19.5 0.21 (0.56) (6.82)
Maximum 10.58 40.8 3.74 3.35 46.25
Minimum - 3.2 (0.10) (1.85) (32.90)
Average 0.90 13.5 0.42 0.20 1.70
Median 0.56 12.6 0.35 0.08 0.52
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
15
<PAGE>
EXHIBIT VI
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT VI - COMPARATIVE SELECTION
To search for a comparative group for RF Federal, we selected all thrifts from
the entire U.S. with assets under $75 million that have sufficient trading
volume to produce meaningful market information. All of these thrifts are listed
on either AMEX, NYSE, or Nasdaq.
We found 24 thrifts in the asset size described above. We eliminated 13 and
retained a group of 11. Normally, we consider 10 to be the desired sample size.
We selected one extra in case we have to drop some of the group before RF
Federal's conversion is completed.
We eliminated thrifts for the following reasons: 1) BIF insured; 2) Earnings
that are not meaningful or no meaningful EPS and PE information; 3) Merger
agreement has been executed; 4) Non-performing assets in excess of 1.5% of total
assets; 5) Loans under 50% of total assets; and 6) Loans serviced more than 40%
of total assets. After eliminating the thrifts described above, there were 12
remaining. During the latter half of November, Classic Bancshares (CLAS) filed
financial statements revealing that it had completed an acquisition and
increased its size to over $130 million in assets. Since this was well in excess
of our upper limit of $75 million, we dropped it and reduced our group to 11.
The group of 24 from which the comparative group was selected is listed on
Exhibit VI.1 and the selected comparative group is listed on Exhibit VI.2. On
Exhibit VI.1, we have underlined the cells that indicate which ones were not
selected and why. Set forth below is a legend for the column summarizing reasons
individual thrifts were not selected.
A BIF insured.
B No meaningful earnings or EPS data.
C Merger agreement has been executed.
D Non-performing assets in excess of 1.5% of assets.
E Loans are less than 50% of assets.
F Loans serviced exceeds 40% of assets.
G Subsequent acquisition increased assets beyond comparable group size.
1
<PAGE>
FERGUSON & CO., LLP EXHIBIT VI.1 - COMPARATIVE GROUP SELECTION
- -------------------
<TABLE>
<CAPTION>
DEPOSIT CURRENT CURRENT
INSURANCE STOCK MARKET
AGENCY PRICE VALUE
TICKER SHORT NAME CITY STATE REGION (BIF/SAIF) EXCHANGE IPO DATE ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY MA SAIF NASDAQ 07/26/93 16.875 4.18
ATSB AmTrust Capital Corp. Peru IN MW SAIF NASDAQ 03/28/95 10.000 5.28
BRFC Bridgeville Savings Bank Bridgeville PA MA SAIF NASDAQ 10/07/94 15.250 17.14
- ---------
CKFB CKF Bancorp, Inc. Danville KY MW SAIF NASDAQ 01/04/95 19.750 18.59
CLAS Classic Bancshares, Inc. Ashland KY MW SAIF NASDAQ 12/29/95 11.688 15.46
- ---------
CRZY Crazy Woman Creek Bancorp Buffalo WY WE SAIF NASDAQ 03/29/96 11.750 12.43
CSBF CSB Financial Group, Inc. Centralia IL MW SAIF NASDAQ 10/09/95 10.063 10.42
FLKY First Lancaster Bancshares Lancaster KY MW SAIF NASDAQ 07/01/96 15.750 15.10
- --------- -----------
GLBK Glendale Co-Operative Bank Everett MA NE BIF NASDAQ 01/10/94 20.000 4.95
- --------- ------------
GUPB GFSB Bancorp, Inc. Gallup NM SW SAIF NASDAQ 06/30/95 14.313 12.90
GWBC Gateway Bancorp, Inc. Catlettsburg KY MW SAIF NASDAQ 01/18/95 14.000 15.59
- ---------
HBBI Home Building Bancorp Washington IN MW SAIF NASDAQ 02/08/95 17.500 5.45
- ---------
HWEN Home Financial Bancorp Spencer IN MW SAIF NASDAQ 07/02/96 12.500 6.32
- --------- -----------
JOAC Joachim Bancorp, Inc. De Soto MO MW SAIF NASDAQ 12/28/95 15.000 11.41
LONF London Financial Corporation London OH MW SAIF NASDAQ 04/01/96 12.000 6.35
- --------- -----------
LXMO Lexington B&L Financial Corp. Lexington MO MW SAIF NASDAQ 06/06/96 12.063 15.26
- --------- -----------
MCBN Mid-Coast Bancorp, Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 19.500 4.49
MFSB Mutual Bancompany Jefferson City MO MW SAIF NASDAQ 02/02/95 22.250 7.42
- ---------
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 11.875 10.42
MSBF MSB Financial, Inc. Marshall MI MW SAIF NASDAQ 02/06/95 18.500 12.09
- ---------
NSLB NS&L Bancorp, Inc. Neosho MO MW SAIF NASDAQ 06/08/95 13.500 11.39
PWBK Pennwood Savings Bank Pittsburgh PA MA SAIF NASDAQ 07/15/96 12.250 7.47
- --------- -----------
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 15.000 11.03
SSB Scotland Bancorp, Inc Laurinburg NC SE SAIF AMSE 04/01/96 13.250 24.38
- --------- -----------
Maximum 22.250 24.38
Minimum 10.000 4.18
Average 14.776 11.06
Median 14.157 11.21
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
2
<PAGE>
FERGUSON & CO., LLP EXHIBIT VI.1 - COMPARATIVE GROUP SELECTION
- -------------------
<TABLE>
<CAPTION>
Price/ Tang. ROAA
LTM Price/ Current Current Current Total Equity/ Equity/ Core Core Before
Core Core Price/ Price/ T Price/ Div Assets Assets T Assets EPS EPS Extra
EPS EPS B Value B Value Assets Yield ($000) (%) (%) ($) ($) (%)
Ticker (x) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM MRQ LTM
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 31.8 28.1 71.3 71.3 7.4 1.82 57,784 10.3 10.3 0.53 0.15 0.24
ATSB 66.7 17.9 73.9 NA 7.3 - 72,108 9.9 NA 0.15 0.14 0.26
BRFC 23.5 20.1 108.0 108.0 31.3 2.10 54,835 28.9 28.9 0.65 0.19 0.97
- ---------
CKFB 24.4 22.4 117.6 117.6 31.0 2.23 59,898 25.2 25.2 0.81 0.22 1.28
CLAS NA 22.5 79.2 79.2 22.5 2.05 68,754 28.4 28.4 NA 0.13 0.72
- ---------
CRZY NA 17.3 80.4 80.4 24.1 3.40 51,517 30.0 30.0 NA 0.17 0.79
CSBF NA 22.9 81.2 81.2 25.1 - 41,524 30.9 30.9 NA 0.11 0.89
FLKY NA NA 111.9 111.9 39.9 - 37,842 35.7 35.7 NA NA NA
- -------------------------- ----------------
GLBK 20.4 17.2 84.5 84.5 13.4 - 36,940 15.9 15.9 0.98 0.29 0.79
- ---------
GUPB 16.5 14.9 88.4 88.4 18.5 2.80 73,251 21.0 21.0 0.87 0.24 1.23
GWBC 26.9 NM 89.5 89.5 22.4 2.86 69,496 25.1 25.1 0.52 - 0.84
- ---------
HBBI NM NM 92.9 92.9 12.8 1.71 42,560 12.9 12.9 (0.01) (0.05) (0.32)
- -------------------------- ----------------
HWEN NA NA 81.7 81.7 16.4 - 38,683 20.0 20.0 NA NA 0.51
- -------------------------- ----------------
JOAC NA 46.9 106.8 106.8 31.6 3.33 36,127 29.6 29.6 NA 0.08 0.41
LONF NA NA 79.9 79.9 17.1 2.00 37,189 21.4 21.4 NA NA NA
- -------------------------- ----------------
LXMO NA NA 81.5 81.5 24.9 - 61,294 30.6 30.6 NA NA NA
- -------------------------- ----------------
MCBN 14.6 14.8 91.3 91.3 8.0 2.67 55,956 8.8 8.8 1.34 0.33 0.34
MFSB 57.1 79.5 119.0 119.0 13.9 - 53,311 11.7 11.7 0.39 0.07 0.20
- ---------
MIVI 13.1 12.4 84.7 84.7 15.6 1.35 69,322 18.4 18.4 0.91 0.24 1.31
MSBF 12.0 11.6 96.0 96.0 19.2 2.70 62,832 20.1 20.1 1.54 0.40 1.40
- ---------
NSLB 22.9 19.9 85.3 85.3 19.9 3.70 57,288 23.3 23.3 0.59 0.17 0.97
PWBK NA NA NA NA NA - 42,366 9.6 9.6 NA NA NA
- -------------------------- ----------------
SCCB 22.4 26.8 89.7 89.7 25.0 4.00 44,172 27.9 27.9 0.67 0.14 1.11
SSB NA NA 98.7 98.7 34.6 2.26 70,488 35.1 35.1 NA NA NA
- -------------------------- ----------------
Maximum 66.7 79.5 119.0 119.0 39.9 4.00 73,251 35.7 35.7 1.54 0.40 1.40
Minimum 12.0 11.6 71.3 71.3 7.3 - 36,127 8.8 8.8 (0.01) (0.05) (0.32)
Average 27.1 24.7 91.0 91.8 21.0 1.71 53,981 22.1 22.6 0.71 0.17 0.73
Median 22.9 20.0 88.4 89.0 19.9 2.03 55,396 22.3 23.3 0.66 0.16 0.79
<CAPTION>
ROAA
Before
Extra
(%)
Ticker MRQ
<S> <C>
ALBC 0.27
ATSB (0.49)
BRFC 0.28
- ---------
CKFB 1.38
CLAS 0.96
- ---------
CRZY 0.39
CSBF 1.02
FLKY 0.56
- ---------
GLBK 0.77
- ---------
GUPB 1.26
GWBC 0.02
- ---------
HBBI (1.50)
- ---------
HWEN (0.12)
- ---------
JOAC (0.56)
LONF 1.19
- ---------
LXMO 1.03
- ---------
MCBN (0.53)
MFSB 0.05
- ---------
MIVI 1.13
MSBF 0.27
- ---------
NSLB 0.97
PWBK 0.71
- ---------
SCCB 0.88
SSB 1.74
- ---------
Maximum 1.74
Minimum (1.50)
Average 0.49
Median 0.64
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
3
<PAGE>
FERGUSON & CO., LLP EXHIBIT VI.1 - COMPARATIVE GROUP SELECTION
- -------------------
<TABLE>
<CAPTION>
ROACE ROACE Borrow-
Before Before NPAs/ Loans/ Loans/ Deposits/ ings/
Extra Extra Merger Current Assets Deposits Assets Assets Assets
(%) (%) Target? Pricing (%) (%) (%) (%) (%)
Ticker LTM MRQ (Y/N) Date MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 2.33 2.52 N 11/15/96 0.76 99.30 81.64 82.21 5.69
ATSB 2.45 (4.96) N 11/15/96 NA 110.63 72.47 65.51 23.44
BRFC 3.38 0.97 Y 11/15/96 0.21 62.36 36.80 59.01 9.50
- ----------- ---------- -----------
CKFB 4.70 5.34 N 11/15/96 0.57 121.74 88.39 72.60 0.44
CLAS NA 3.30 N 11/15/96 0.64 102.14 68.96 67.51 3.64
- -----------
CRZY 3.10 1.29 N 11/15/96 0.12 88.95 50.73 57.03 11.87
CSBF NA 3.29 N 11/15/96 NA 80.78 55.38 68.55 -
FLKY NA 1.63 N 11/15/96 0.52 148.21 85.37 57.60 5.22
- -----------
GLBK 4.97 4.87 N 11/15/96 0.30 48.20 40.48 83.98 -
- ----------- -----------
GUPB 4.88 5.73 N 11/15/96 0.20 84.88 53.29 62.78 14.82
GWBC 3.30 0.07 N 11/15/96 0.09 35.39 26.22 74.09 -
- ----------- -----------
HBBI (2.37) (11.12) N 11/15/96 0.35 86.38 66.22 76.66 9.34
- -----------
HWEN NA (0.86) N 11/15/96 0.96 118.25 73.68 62.31 17.32
- -----------
JOAC 1.49 (1.90) N 11/15/96 0.33 95.75 65.53 68.44 -
LONF NA 5.63 N 11/15/96 0.21 94.92 73.45 77.39 0.81
- -----------
LXMO NA NA N 11/15/96 0.98 97.20 66.91 68.83 -
- -----------
MCBN 3.83 (6.07) N 11/15/96 0.41 108.15 82.43 76.22 14.19
MFSB 1.84 0.45 Y 11/15/96 0.01 85.97 73.89 85.94 1.69
- ----------- ----------
MIVI 6.73 6.04 N 11/15/96 0.46 76.83 62.05 80.77 -
MSBF 6.19 1.30 N 11/15/96 0.24 142.13 93.01 65.44 12.73
- -----------
NSLB 4.08 4.14 N 11/15/96 - 69.21 51.94 75.05 -
PWBK NA NA N 11/15/96 2.21 62.01 54.86 88.47 -
- ----------- ------------
SCCB 3.77 3.12 N 11/15/96 NA 107.54 76.14 70.80 -
SSB NA 4.81 N 11/15/96 - 105.04 62.10 59.12 4.26
- -----------
Maximum 6.73 6.04 2.21 148.21 93.01 88.47 23.44
Minimum (2.37) (11.12) - 35.39 26.22 57.03 -
Average 3.42 1.35 0.46 93.00 65.08 71.10 5.62
Median 3.58 2.08 0.33 95.34 66.57 69.82 2.67
<CAPTION>
Loans
Loans Serviced/
Serviced Assets Reasons
($000) (%) for
Ticker MRQ MRQ Excluding
<S> <C> <C> <C>
ALBC 11,183 19.35
ATSB NA NA
BRFC - - C, E
- -----------
CKFB - -
CLAS - - G
- -----------
CRZY 81 0.16
CSBF NA NA
FLKY - - B
- -----------
GLBK NA NA A, E
- -----------
GUPB - -
GWBC - - E
- -----------
HBBI - - B
- -----------
HWEN - - B
- -----------
JOAC - -
LONF - - B
- -----------
LXMO NA NA B
- -----------
MCBN 6,993 12.50
MFSB 11,546 21.66 C
- -----------
MIVI - -
MSBF 33,586 53.45 F
- ----------- ---------
NSLB - -
PWBK NA NA B, D
- -----------
SCCB NA NA
SSB - - B
- -----------
Maximum 33,586 53.45
Minimum - -
Average 3,522 5.95
Median - -
</TABLE>
Source: SNL & F&C CALCULATIONS
4
<PAGE>
FERGUSON & CO., LLP EXHIBIT VI.2 - COMPARATIVE GROUP SELECTED
- -------------------
<TABLE>
<CAPTION>
Deposit Current Current
Insurance Stock Market
Agency Price Value
Ticker Short Name City State Region (BIF/SAIF) Exchange IPO Date ($) ($M)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC Albion Banc Corp. Albion NY MA SAIF NASDAQ 07/26/93 16.875 4.18
ATSB AmTrust Capital Corp. Peru IN MW SAIF NASDAQ 03/28/95 10.000 5.28
CKFB CKF Bancorp, Inc. Danville KY MW SAIF NASDAQ 01/04/95 19.750 18.59
CRZY Crazy Woman Creek Bancorp Buffalo WY WE SAIF NASDAQ 03/29/96 11.750 12.43
CSBF CSB Financial Group, Inc. Centralia IL MW SAIF NASDAQ 10/09/95 10.063 10.42
GUPB GFSB Bancorp, Inc. Gallup NM SW SAIF NASDAQ 06/30/95 14.313 12.90
JOAC Joachim Bancorp, Inc. De Soto MO MW SAIF NASDAQ 12/28/95 15.000 11.41
MCBN Mid-Coast Bancorp, Inc. Waldoboro ME NE SAIF NASDAQ 11/02/89 19.500 4.49
MIVI Mississippi View Holding Co. Little Falls MN MW SAIF NASDAQ 03/24/95 11.875 10.42
NSLB NS&L Bancorp, Inc. Neosho MO MW SAIF NASDAQ 06/08/95 13.500 11.39
SCCB S. Carolina Community Bancshrs Winnsboro SC SE SAIF NASDAQ 07/07/94 15.000 11.03
Maximum 19.750 18.59
Minimum 10.000 4.18
Average 14.330 10.23
Median 14.313 11.03
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
5
<PAGE>
FERGUSON & C., LLP EXHIBIT V1.2 - COMPARATIVE GROUP SELECTED
- ------------------
<TABLE>
<CAPTION>
Price/ Tang. ROAA ROAA
LTM Price/ Current Current Current Total Equity/ Equity/ Core Core Before Before
Core Core Price/ Price/ T Price/ Div Assets Assets T Assets EPS EPS Extra Extra
EPS EPS B Value B Value Assets Yield ($000) (%) (%) ($) ($) (%) (%)
Ticker (x) (x) (%) (%) (%) (%) MRQ MRQ MRQ LTM MRQ LTM MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 31.8 28.1 71.3 71.3 7.4 1.82 57,784 10.3 10.3 0.53 0.15 0.24 0.27
ATSB 66.7 17.9 73.9 NA 7.3 - 72,108 9.9 NA 0.15 0.14 0.26 (0.49)
CKFB 24.4 22.4 117.6 117.6 31.0 2.23 59,898 25.2 25.2 0.81 0.22 1.28 1.38
CRZY NA 17.3 80.4 80.4 24.1 3.40 51,517 30.0 30.0 NA 0.17 0.79 0.39
CSBF NA 22.9 81.2 81.2 25.1 - 41,524 30.9 30.9 NA 0.11 0.89 1.02
GUPB 16.5 14.9 88.4 88.4 18.5 2.80 73,251 21.0 21.0 0.87 0.24 1.23 1.26
JOAC NA 46.9 106.8 106.8 31.6 3.33 36,127 29.6 29.6 NA 0.08 0.41 (0.56)
MCBN 14.6 14.8 91.3 91.3 8.0 2.67 55,956 8.8 8.8 1.34 0.33 0.34 (0.53)
MIVI 13.1 12.4 84.7 84.7 15.6 1.35 69,322 18.4 18.4 0.91 0.24 1.31 1.13
NSLB 22.9 19.9 85.3 85.3 19.9 3.70 57,288 23.3 23.3 0.59 0.17 0.97 0.97
SCCB 22.4 26.8 89.7 89.7 25.0 4.00 44,172 27.9 27.9 0.67 0.14 1.11 0.88
Maximum 66.7 46.9 117.6 117.6 31.6 4.00 73,251 30.9 30.9 1.34 0.33 1.31 1.38
Minimum 13.1 12.4 71.3 71.3 7.3 - 36,127 8.8 8.8 0.15 0.08 0.24 (0.56)
Average 26.5 22.2 88.2 89.6 19.4 2.30 56,268 21.4 22.5 0.73 0.18 0.80 0.52
Median 22.6 19.9 85.3 86.8 19.9 2.67 57,288 23.3 24.3 0.74 0.17 0.89 0.88
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
6
<PAGE>
FERGUSON & CO., LLP EXHIBIT VI.2 - COMPARATIVE GROUP SELECTED
- -------------------
<TABLE>
<CAPTION>
ROACE ROACE Borrow- Loans
Before Before NPAs/ Loans/ Loans/ Deposits/ ings/ Loans Serviced/
Extra Extra Merger Current Assets Deposits Assets Assets Assets Serviced Assets
(%) (%) Target? Pricing (%) (%) (%) (%) (%) ($000) (%)
Ticker LTM MRQ (Y/N) Date MRQ MRQ MRQ MRQ MRQ MRQ MRQ
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALBC 2.33 2.52 N 11/15/96 0.76 99.30 81.64 82.21 5.69 11,183 19.35
ATSB 2.45 (4.96) N 11/15/96 NA 110.63 72.47 65.51 23.44 NA NA
CKFB 4.70 5.34 N 11/15/96 0.57 121.74 88.39 72.60 0.44 - -
CRZY 3.10 1.29 N 11/15/96 0.12 88.95 50.73 57.03 11.87 81 0.16
CSBF NA 3.29 N 11/15/96 NA 80.78 55.38 68.55 - NA NA
GUPB 4.88 5.73 N 11/15/96 0.20 84.88 53.29 62.78 14.82 - -
JOAC 1.49 (1.90) N 11/15/96 0.33 95.75 65.53 68.44 - - -
MCBN 3.83 (6.07) N 11/15/96 0.41 108.15 82.43 76.22 14.19 6,993 12.50
MIVI 6.73 6.04 N 11/15/96 0.46 76.83 62.05 80.77 - - -
NSLB 4.08 4.14 N 11/15/96 - 69.21 51.94 75.05 - - -
SCCB 3.77 3.12 N 11/15/96 NA 107.54 76.14 70.80 - NA NA
Maximum 6.73 6.04 0.76 121.74 88.39 82.21 23.44 11,183 19.35
Minimum 1.49 (6.07) - 69.21 50.73 57.03 - - -
Average 3.74 1.69 0.36 94.89 67.27 70.91 6.40 2,282 4.00
Median 3.80 3.12 0.37 95.75 65.53 70.80 0.44 - -
</TABLE>
SOURCE: SNL & F&C CALCULATIONS
7
<PAGE>
EXHIBIT VII
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT VII
PRO FORMA ASSUMPTIONS
1. Net proceeds from the conversion were invested at the beginning of the period
at 5.70%, which was the approximate rate on the one-year treasury bill on
September 30, 1996. This rate was selected because it is considered more
representative of the rate the Association is likely to earn.
2. Rocky Ford Federal's ESOP will acquire 8% of the conversion stock with loan
proceeds obtained from the Holding Company; therefore, there will be no interest
expense. We assumed that the ESOP expense is 10% annually of the initial
purchase.
3. Rocky Ford Federal's RP will acquire 4% of the stock through open market
purchases at $10 per share and the expense is recognized ratably over five years
as the shares vest.
4. All pro forma income and expense items are adjusted for income taxes at a
combined state and federal rate of 35%.
5. In calculating the pro forma adjustments to net worth, the ESOP and RP are
deducted in accordance with generally accepted accounting principles.
6. Earnings per share ("EPS") calculations have ignored AICPA SOP 93-6.
Calculating EPS under SOP 93-6 and assuming 10% of the ESOP shares are committed
to be released and allocated to the individual accounts at the beginning of the
period would yield EPS of $.97, $.86, $.78, and $.71, and price to earnings
ratios of 10.31, 11.64, 12.85, and 14.13, at the minimum, midpoint, maximum, and
supermaximum of the range, respectively.
1
<PAGE>
FERGUSON & CO., LLP
EXHIBIT VII
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MINIMUM OF THE CONVERSION VALUATION RANGE
VALUATION DATE AS OF DECEMBER 13, 1996
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION, ROCKY FORD, COLORADO
- ---------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Value $ 2,720,000
Less: Estimated Expenses (340,000)
-------------------
Net Conversion Proceeds $ 2,380,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 2,380,000
Less: ESOP Contributions (217,600)
RP Contributions (108,800)
-------------------
Net Conversion Proceeds after ESOP & RP $ 2,053,600
Estimated Incremental Rate of Return(1) 3.71%
-------------------
Estimated Additional Income $ 76,086
Less: ESOP Expense (14,144)
RP Expense (14,144)
-------------------
$ 47,798
===================
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
--------------------------------------------------------------
<S> <C> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
September 30, 1996 $ 197,000 $ 47,798 $ 244,798
b. Pro Forma Net Worth
September 30, 1996 $ 2,778,000 $ 2,053,600 $ 4,831,600
c. Pro Forma Net Assets
September 30, 1996 $ 20,388,000 $ 2,053,600 $ 22,441,600
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.70 percent and earnings taxed at a
rate of 35.0 percent.
2
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT VII
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MIDPOINT OF THE CONVERSION VALUATION RANGE
VALUATION DATE AS OF DECEMBER 13, 1996
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION, ROCKY FORD, COLORADO
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 3,200,000
Less: Estimated Expenses (350,000)
----------------
Net Conversion Proceeds $ 2,850,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 2,850,000
Less: ESOP Contributions (256,000)
RP Contributions (128,000)
----------------
Net Conversion Proceeds after ESOP & RP $ 2,466,000
Estimated Incremental Rate of Return(1) 3.71%
----------------
Estimated Additional Income $ 91,365
Less: ESOP Expense (16,640)
RP Expense (16,640)
----------------
$ 58,085
-----------------
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-----------------------------------------------------
<S> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
September 30, 1996 $ 197,000 $ 58,085 $ 255,085
b. Pro Forma Net Worth
September 30, 1996 $ 2,778,000 $ 2,466,000 $ 5,244,000
c. Pro Forma Net Assets
September 30, 1996 $ 20,388,000 $ 2,466,000 $ 22,854,000
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.70 percent and earnings taxed at a
rate of 35.0 percent.
3
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT VII
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE MAXIMUM OF THE CONVERSION VALUATION RANGE
VALUATION DATE AS OF DECEMBER 13, 1996
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION, ROCKY FORD, COLORADO
- ---------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 3,680,000
Less: Estimated Expenses (350,000)
-----------------
Net Conversion Proceeds $ 3,330,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 3,330,000
Less: ESOP Contributions (294,400)
RP Contributions (147,200)
-----------------
Net Conversion Proceeds after ESOP & RP $ 2,888,400
Estimated Incremental Rate of Return(1) 3.71%
-----------------
Estimated Additional Income $ 107,015
Less: ESOP Expense (19,136)
RP Expense (19,136)
-----------------
$ 68,743
-----------------
</TABLE>
3. Pro Forma Calculations
<TABLE>
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
-------------------------------------------------------
<S> <C> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
September 30, 1996 $ 197,000 $ 68,743 $ 265,743
b. Pro Forma Net Worth
September 30, 1996 $ 2,778,000 $ 2,888,400 $ 5,666,400
c. Pro Forma Net Assets
September 30, 1996 $ 20,388,000 $ 2,888,400 $ 23,276,400
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.70 percent and earnings taxed at a
rate of 35.0 percent.
4
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT VII
PRO FORMA EFFECT OF CONVERSION PROCEEDS
AT THE SUPERMAX OF THE CONVERSION VALUATION RANGE
VALUATION DATE AS OF DECEMBER 13, 1996
ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION, ROCKY FORD, COLORADO
- ---------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1. Conversion Proceeds
Pro Forma Market Valuation $ 4,232,000
Less: Estimated Expenses $ (350,000)
-----------------------
Net Conversion Proceeds $ 3,882,000
2. Estimated Additional Income From Conversion Proceeds
Net Conversion Proceeds $ 3,882,000
Less: ESOP Contributions $ (338,560)
RP Contributions $ (169,280)
----------------------
Net Conversion Proceeds after ESOP & RP $ 3,374,160
Estimated Incremental Rate of Return(1) 3.71%
----------------------
Estimated Additional Income $ 125,013
Less: ESOP Expense $ (22,006)
----------------------
RP Expense $ (22,006)
$ 81,000
======================
3. Pro Forma Calculations
<CAPTION>
Before Conversion After
Period Conversion Results Conversion
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
a. Pro Forma Earnings
Twelve Months Ended
September 30, 1996 $ 197,000 $ 81,000 $ 278,000
b. Pro Forma Net Worth
September 30, 1996 $ 2,778,000 $ 3,374,160 $ 6,152,160
c. Pro Forma Net Assets
September 30, 1996 $ 20,388,000 $ 3,374,160 $ 23,762,160
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.70 percent and earnings taxed at a
rate of 35.0 percent.
5
<PAGE>
FERGUSON & CO., LLP
- -------------------
<TABLE>
<CAPTION>
EXHIBIT VII
PRO FORMA ANALYSIS SHEET
Name of Association: ROCKY FORD FEDERAL SAVINGS AND LOAN ASSOCIATION, ROCKY FORD, COLORADO
Date of Market Prices: December 13, 1996 Colorado Publicly All Publicly
Comparatives Held Thrifts Held Thrifts
------------- ------------ ------------
SYMBOLS VALUE Mean Median Mean Median Mean Median
---------------------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-Earnings Ratio P/E
- -----------------------------------------
Last Twelve Months N/A
At Minimum of Range 11.11
At Midpoint of Range 12.54 32.60 20.20 13.40 13.40 14.80 14.20
At Maximum of Range 13.85
At Supermax of Range 15.22
Price-Book Ratio P/B
- ---------------------------
At Minimum of Range 56.30%
At Midpoint of Range 61.02% 89.20 89.20 120.40 120.40 126.00 120.30
At Maximum of Range 64.94%
At Supermax of Range 68.79%
Price-Asset Ratio P/A
- ---------------------------
At Minimum of Range 12.12%
At Midpoint of Range 14.00% 19.40 20.20 16.80 16.80 12.40 11.50
At Maximum of Range 15.81%
At Supermax of Range 17.81%
Twelve Mo. Earnings Base Y $ 197,000
Period Ended September 30, 1996
Book Value B $ 2,778,000
As of September 30, 1996
Total Assets A $ 20,388,000
As of September 30, 1996
Return on Money (1) R 3.71%
Conversion Expense X $ 350,000
Underwriting Commission C 0.00%
Percentage Underwritten S 0.00%
Estimated Dividend
Dollar Amount DA $ 96,000
Yield DY 3.00%
ESOP Contributions P $ 256,000
RP Contributions I $ 128,000
ESOP Annual Expense E $ 16,640
RP Annual Contributions M $ 16,640
Cost of ESOP Borrowings F 0.00%
</TABLE>
(1) Assumes Proceeds can be reinvested at 5.70 percent and earnings taxed at a
rate of 35.0 percent.
6
<PAGE>
FERGUSON & CO., LLP
- -------------------
EXHIBIT VII
PRO FORMA ANALYSIS SHEET
<TABLE>
<CAPTION>
Calculation of Estimated Value (V) at Midpoint Value
<S> <C> <C>
1. V= P/A(A-X-P-I) $ 3,200,000
-----------------
1-P/A(1-(CxS))
2. V= P/B(B-X-P-I) $ 3,200,000
-----------------
1-P/B(1-(CxX))
3. V= P/E(Y-R(X+P+I)-(E+M)) $ 3,200,000
-----------------------
1-P/E(R(1-(CxX))
Estimated Value
Value Per Share Total Shares Date
---------------- -------------- ---------------- --------------------
$3,200,000 $10.00 320,000 December 13, 1996
</TABLE>
Range of Value
$3.2 million x 1.15 = $3.68 million or 368,000 shares at $10.00 per share
$3.2 million x 0.85 = $2.72 million or 272,000 shares at $10.00 per share
7
