<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 1998
REGISTRATION NO. 333-58179
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HARRIS FINANCIAL, INC.
----------------------
(Exact name of registrant as
specified in its charter)
PENNSYLVANIA 23-2889833
------------ ----------
(State of Incorporation (I.R.S. Employer
or Organization) Identification Number)
235 NORTH SECOND STREET
P.O. BOX 1711
HARRISBURG, PENNSYLVANIA 17105
(717) 236-4041
--------------------------------------------------
(Address, including ZIP Code, and telephone number
including area code, of registrants' principal
executive offices)
CHARLES C. PEARSON, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HARRIS FINANCIAL, INC.
235 NORTH SECOND STREET
P.O. BOX 1711
HARRISBURG, PENNSYLVANIA 17105
(717) 236-4041
------------------------------
(Name, address, including ZIP Code, and telephone number,
including area code, of agent for service)
Copies to:
KENNETH R. LEHMAN, ESQ.
NED QUINT, ESQ.
LUSE LEHMAN GORMAN POMERENK & SCHICK, P.C.
5335 WISCONSIN AVENUE, N.W., SUITE 400
WASHINGTON, D.C. 20015
(202) 274-2000
- -----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC. As soon
as practicable after the effective date of this Registration Statement.
<PAGE>
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box [ ].
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box [x].
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>
TITLE OF EACH CLASS OF SECURITY AMOUNT TO PROPOSED PROPOSED AMOUNT OF
TO BE REGISTERED BE REGISTERED MAXIMUM MAXIMUM REGISTRATION
OFFERING PRICE AGGREGATE FEE
PER SHARE OFFERING PRICE
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.10 per share 2,300,000 $26.00 $59,800,000 $17,641*
- --------------------------------------------------------------------------------------------------------
</TABLE>
*Previously paid
The amount of registration fee is calculated pursuant to Rule 457(o) under the
Securities Act of 1933.
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 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 SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
<PAGE>
PROSPECTUS
HARRIS FINANCIAL, INC.
2,000,000 SHARES OF COMMON STOCK
Harris Financial, Inc. (the "Company") a Pennsylvania corporation, which
owns 100% of the common stock of Harris Savings Bank ("Bank"), a Pennsylvania-
chartered savings bank headquartered in Harrisburg, Pennsylvania, is offering
2,000,000 shares of its common stock, par value $.01 per share (the "Common
Stock") for a purchase price of between $19.00 and $26.00 (the "Offering Price
Range"). The Company is a majority-owned subsidiary of Harris Financial, MHC
(the "Mutual Company"), a Pennsylvania-chartered mutual holding company, which
as of May 31, 1998, owned 25,500,000 shares, or approximately 75.1%, of the
33,963,450 outstanding shares of Common Stock. At the conclusion of the
Offering, the Mutual Company will contribute to the Company 2,000,000 shares of
Common Stock, and the total number of shares of Common Stock owned by the Mutual
Company will decrease to 23,500,000 shares, or 69.2% of the Company's
outstanding shares as of May 31, 1998. The Company will cancel the contributed
shares, and in the Offering will issue 2,000,000 shares of authorized but
unissued Common Stock. ACCORDINGLY, THE OFFERING WILL NOT RESULT IN A CHANGE IN
THE NUMBER OF ISSUED AND OUTSTANDING SHARES OF COMMON STOCK. At the conclusion
of the Offering, in the sole discretion of the Company, the total number of
shares sold in the Offering (and contributed to the Company by the Mutual
Company) may be increased by up to 15% due to market and general financial and
economic conditions. Such increase is not dependent upon whether shares are sold
at the minimum, mid-point or maximum of the Offering Price Range.
The shares are being offered pursuant to the Company's Stock Issuance Plan,
which provides that non-transferable rights to subscribe for Common Stock in a
subscription offering (the "Subscription Offering") have been granted, in the
following order of priority, to: (i) Eligible Account Holders, which includes
all depositors of the Bank with aggregate account balances of $50 or more as of
May 31, 1997 (the "Eligibility Record Date"); (ii) the Bank's employee stock
ownership plan and related trust (the "ESOP") in an amount up to 2% of the
shares of Common Stock to be sold in the Offering (as defined below); and (iii)
Supplemental Eligible Account Holders, which includes all depositors of the Bank
with aggregate account balances of $50 or more as of June 30, 1998 (the
"Supplemental Eligibility Record Date") who are not Eligible Account Holders.
Subscription rights are nontransferable. Persons found to be transferring
subscription rights will be subject to the forfeiture of such rights and
possible further sanctions and penalties. Shares of Common Stock for which
subscriptions are not accepted in the Subscription Offering may be offered for
sale in a community offering (the "Community Offering") and/or in a syndicated
offering to certain members of the general public. The Community Offering
and/or syndicated offering, if any, may commence at any time after the
commencement of the Subscription Offering. The Company retains the right, in
its sole discretion, to accept or reject any order in the Community Offering.
The Subscription Offering, Community Offering and syndicated offering are
referred to collectively as the "Offering."
The minimum purchase is $500 of Common Stock. Except for the ESOP, no
Eligible Account Holder or Supplemental Eligible Account Holder may in their
capacities as such purchase in the Subscription Offering more than $250,000 of
Common Stock, and no person together with associates of and persons acting in
concert with such person may purchase in all categories of the Offering more
than $500,000 of Common Stock; provided, however, that the maximum purchase
limitations may be increased or decreased at the sole discretion of the Company.
See "The Offering--Subscription Offering and Subscription Rights," "--Community
Offering" and "--Limitations on Common Stock Purchases."
THE SUBSCRIPTION OFFERING AND COMMUNITY OFFERING WILL TERMINATE AT 10:00
A.M., PENNSYLVANIA TIME, ON _______________, 1998 UNLESS EITHER OR BOTH ARE
EXTENDED BY THE COMPANY (AS EXTENDED, THE "EXPIRATION DATE"). The Company is not
required to give subscribers notice of any such extension. The Community
Offering must be completed within 45 days after the expiration of the
Subscription Offering unless extended by the Company. ORDERS SUBMITTED ARE
IRREVOCABLE; provided that all subscribers will have their funds returned
promptly, with interest, and all withdrawal authorizations will be canceled if
the Offering is not completed within 45 days after the expiration of the
Subscription Offering, unless such period has been extended. See "The Offering-
- -Subscription Offering and Subscription Rights" and "--Procedure for Purchasing
Shares in Subscription and Community Offerings."
<PAGE>
The Company has retained Ryan, Beck & Co., Inc. ("Ryan Beck"), a registered
broker-dealer, to consult with and advise the Company in connection with the
Offering. Ryan Beck has agreed to use its best efforts to assist the Company in
the solicitation of subscriptions for shares of Common Stock in the Offering.
Ryan Beck is not obligated to take or purchase any shares of Common Stock in the
Offering. See "The Offering--Plan of Distribution and Selling Commissions."
The Common Stock is traded on the Nasdaq National Market under the symbol
"HARS." On _______________, the last reported sale price of the Common Stock
was ______________ per share and the closing bid and asked prices were $______
and $________ per share, respectively.
CALL THE STOCK INFORMATION CENTER AT (717) ________________ IF YOU HAVE ANY
QUESTIONS.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "SPECIAL CONSIDERATIONS" BEGINNING ON PAGE _________.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
PENNSYLVANIA DEPARTMENT OF BANKING, OR ANY OTHER FEDERAL OR STATE AGENCY
OR ANY STATE SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, CORPORATION,
DEPARTMENT, OFFICE OR OTHER AGENCY 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 HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. THE COMMON STOCK IS NOT GUARANTEED BY THE COMPANY, THE
MUTUAL COMPANY OR THE BANK. THERE CAN BE NO ASSURANCE THAT THE TRADING PRICE OF
THE COMMON STOCK WILL NOT DECREASE AT ANY TIME.
<TABLE>
<CAPTION>
==================================================================================
ESTIMATED ESTIMATED FEES ESTIMATED NET
PURCHASE PRICE (1)(2) AND EXPENSES (2)(3) PROCEEDS (2)(4)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
Minimum Per Share..... $ 19.00 $ .64 $ 18.36
- ----------------------------------------------------------------------------------
Midpoint Per Share.... $ 22.50 $ .71 $ 21.79
- ----------------------------------------------------------------------------------
Maximum Per Share..... $ 26.00 $ .78 $ 25.22
- ----------------------------------------------------------------------------------
Minimum Total......... $38,000,000 $1,279,000 $36,721,000
- ----------------------------------------------------------------------------------
Midpoint Total........ $45,000,000 $1,416,000 $43,584,000
- ----------------------------------------------------------------------------------
Maximum Total......... $52,000,000 $1,553,000 $50,447,000
==================================================================================
</TABLE>
(1) Determined by the Board of Directors in consultation with Ryan Beck. Based
on the issuance of 2,000,000 shares at a price of $19.00 per share to $26.00
per share.
(2) The total number of shares sold in the Offering (and contributed to the
Company by the Mutual Company) may be increased by up to 15% to 2,300,000
shares.
(3) Consists of the estimated costs to the Company of the Offering, including
estimated expenses of approximately $560,000, and a marketing fee to Ryan
Beck equal to 2.0% of the aggregate dollar amount of stock sold to
subscribers other than the ESOP and officers, directors and employees of the
Company and the Bank and their immediate family members.
(4) Actual net proceeds may vary substantially from estimated amounts. Includes
the purchase of shares of Common Stock by the ESOP which is intended to be
funded by a loan to the ESOP from the Company. The cost of these shares
is assumed to be deducted from the Company's stockholders' equity. See "Use
of Proceeds" and "Pro Forma Data."
THE DATE OF THIS PROSPECTUS IS ________________, 1998
RYAN, BECK & CO., INC.
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act of 1934 (the "Exchange Act") and, in accordance therewith, files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains an Internet web site that contains reports,
proxy and information statements and other information regarding issuers who
file electronically with the Commission. The address of that site is
http://www.sec.gov. In addition, material filed by the Company can be inspected
at the offices of the National Association of Securities Dealers, Inc., Report
Section, 1735 K Street, N.W., Washington, D.C.
Prior to the completion of the organization of the Company as the Bank's
holding company, the Bank was subject to the information, reporting and proxy
statement requirements of the Exchange Act and, in accordance therewith and with
the rules and regulations of the FDIC, filed reports, proxy statements and other
information with the Federal Deposit Insurance Corporation (the "FDIC"). Copies
of such materials may be obtained at prescribed rates from the FDIC's
Registration, Disclosure and Operations Unit, 550 17th Street, N.W., Washington,
D.C. The statements contained herein as to the contents of any contract or
other document filed as an exhibit hereto are of necessary brief descriptions
thereof and are not necessarily complete. Each such statement is qualified by
reference to such contract or document.
The Company has filed with the Commission a registration statement (the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act. As permitted by the rules and regulations of the SEC, this
Prospectus does not contain all of the information set forth in the Registration
Statement. In addition, certain documents filed by the Company with the
Commission have been incorporated in this Prospectus by reference. See
"Incorporation of Certain Documents by Reference." For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement, including exhibits thereto and the documents
incorporated herein by reference. Any statements contained herein concerning
the provisions of any document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission or incorporated by reference herin are
not necessarily complete, and, in each instance, reference is made to the copy
of such document so filed for a more complete description of the matters
involved. Each such statement is qualified in its entirety by such reference.
The Registration Statement may be inspected without charge at the principal
office of the Commission in Washington, D.C., and copies of all or part of it
may be obtained from the Commission upon the payment of prescribed rates.
The Company will provide a copy of the Stock Issuance Plan and material
incorporated by reference into the Prospectus, without charge, to any person to
whom this Prospectus is delivered, on the written or oral request of any such
person. Such requests, in writing or by telephone, should be directed to:
James L. Durrell, Executive Vice President and Chief Financial Officer, Harris
Financial, Inc., 235 North Second Street, Harrisburg, Pennsylvania 17101,
(717) 236-4041. In addition, the Plan may be inspected at the offices of the
Bank.
3
<PAGE>
SUMMARY
The following summary does not purport to be complete, and is qualified in
its entirety by the more detailed information contained elsewhere in the
Prospectus or in the documents incorporated by reference.
<TABLE>
<CAPTION>
<S> <C>
Harris Financial, Inc. The Company is a Pennsylvania
corporation that was formed to become
the stock holding company of the Bank
in a transaction (the "Two-Tier
Reorganization") that was completed
in September 1997. In the Two-Tier
Reorganization, each share of the
Bank's common stock was converted
into and became a share of Common
Stock of the Company, and the Bank
became a wholly-owned subsidiary of
the Company. The Mutual Company,
which owned a majority of the Bank's
outstanding shares of common stock
immediately prior to completion of
the Two-Tier Reorganization, became
the owner of the same percentage of
the outstanding shares of Common
Stock of the Company immediately
following the completion of the
Two-Tier Reorganization. As of the
date hereof, the sole activity of the
Company is the ownership of all of
the issued and outstanding common
stock of the Bank. At March 31,
1998, the Company had total
consolidated assets of $2.3 billion,
total deposits of $1.1 billion and
shareholders' equity of $183.8
million.
Harris Savings Bank The Bank is a Pennsylvania-chartered
stock savings bank headquartered in
Harrisburg, Pennsylvania. The Bank is a
community-oriented institution offering
traditional deposit and loan products.
The Bank's mutual savings and loan
predecessor was founded in 1886, and
converted to a state-chartered savings
bank in 1991. The Bank in its current
stock form was established in January
1994, as a result of the reorganization
(the "Reorganization") of the Bank's
mutual predecessor into a mutual holding
company structure. At the time of the
Reorganization, the Bank issued a
majority of its to-be outstanding shares
of common stock to the Mutual Company
(which was formed in connection with the
Reorganization) and a minority of its to-
be outstanding shares to stockholders
other than the Mutual Company ("Minority
Stockholders").
Special Considerations Attention should be given to the
matters discussed under "Special
Considerations."
Use of Proceeds Although the actual net proceeds
from the sale of the Common Stock
cannot be determined until the
Offering is completed, it is
presently anticipated that the net
proceeds will be between $36.7
million and $50.4 million, based on
the assumptions set forth in "Pro
Forma Data." The net proceeds of the
Offering will be initially invested
in federal funds and investment
grade, short-term marketable
securities, and/or used for general
corporate purposes.
Dividend Policy The Bank or the Company has paid
quarterly cash dividends every
quarter since the completion of the
Reorganization and minority stock
issuance in January 1994, and it is
the current policy of the Company to
pay a quarterly cash dividend of
$.055 per share of Common Stock.
During 1997, the Bank and/or the
Company paid cash dividends totaling
$.1999 (as adjusted for the
Company's November 18, 1997
three-for-one stock split) per share
of Common Stock. The Company's
ability to pay dividends will depend
largely on its receipt of the
Offering proceeds and cash dividends
from the Bank. Under Pennsylvania
law, the Bank is generally permitted
to pay dividends out of accumulated
net earnings if the Bank's surplus
would not be reduced by the payment
of such dividend. Pennsylvania law
requires the Bank
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
to maintain surplus in an amount that is
at least equal to capital. See "Dividend
Policy."
Dividends paid by the Company will be
determined by the Company's Board of
Directors and will be based upon its
consolidated financial condition,
results of operations, tax
considerations, economic conditions,
regulatory restrictions which affect
the payment of dividends by the Bank
to the Company, business plans and
other factors. In addition, the
Company's ability to pay dividends is
subject to limitations under
Pennsylvania law, and regulations of
the FRB that require the Company to
maintain minimum levels of capital.
There can be no assurance that
dividends will be paid on the Common
Stock or that, if paid, such
dividends will not be reduced or
eliminated in the future. The Mutual
Company has waived the right to
receive dividends paid by the
Company, although its ability to do
so may be restricted in the future.
See "Dividend Policy."
Market for Common Stock The Common Stock is listed on the
Nasdaq National Market under the
symbol "HARS." As of May 31, 1998,
there were 10 registered market
makers in the Common Stock, 3,676
stockholders of record (excluding the
number of persons or entities holding
stock in street name through various
brokerage firms), and 33,963,450
shares outstanding. As of such date,
the Mutual Company held 25,500,000
shares of Common Stock and Minority
Stockholders held 8,463,450 shares.
The Offering and the Plan The Board of Directors of the Company
adopted the Plan on June 16, 1998.
In adopting the Plan, the Company's
Board of Directors determined that
the Plan and the Offering are in the
best interest of the Company's
stockholders, and in the best
interests of Minority Stockholders.
In ratifying the Plan, the Mutual
Company's Board of Trustees
determined that the Plan is in the
best interest of the Mutual Company
and the Bank's depositors. The
Offering will add financial strength
to the consolidated Company, thereby
enhancing the value of the Mutual
Company's primary asset. The increase
in the Company's capital will
increase the Company's ability to
serve as a source of strength to the
Bank, and the increase in the
Company's and the Bank's capital will
provide additional protection to the
Bank's depositors. Certain of the
Bank's depositors will also be given
subscription rights to purchase the
Common Stock in the Offering.
Under the terms of the Plan, at the
conclusion of the Offering, if the
Company has accepted subscriptions
for 2,000,000 shares of Common Stock,
the Mutual Company will contribute to
the Company 2,000,000 shares of
Common Stock owned by the Mutual
Company, which will then be canceled
by the Company. As a result, the
number of shares of Common Stock
owned by the Mutual Company will
decrease to 23,500,000 shares, or
approximately 69.2% of the 33,963,450
shares of Common Stock outstanding as
of May 31, 1998, from 25,500,000
shares, or approximately 75.1% of the
shares of Common Stock outstanding as
of such date. At the conclusion of
the Offering, in the sole discretion
of the Company, the total number of
shares sold in the Offering (and
contributed to the Company by the
Mutual Company) may be increased by
up to 15%, whether shares are sold at
the minimum, mid-point or maximum of
the Offering Price Range. THE TOTAL
NUMBER OF OUTSTANDING SHARES OF
COMMON STOCK WILL NOT CHANGE AS A
RESULT OF THE OFFERING.
Offering Priorities The Plan provides that, subject to
certain purchase limitations,
subscription rights
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
to purchase shares of Common Stock in
the Subscription Offering have been
granted to (i) Eligible Account Holders,
(ii) the ESOP, and (iii) Supplemental
Eligible Account Holders. Any shares of
Common Stock for which subscriptions
have not been accepted in the
Subscription Offering may, at the sole
discretion of the Board of Directors of
the Company, be offered for sale in a
Community Offering. In the Community
Offering, should it be conducted,
unsubscribed shares would be offered
directly to the general public with a
preference to Minority Stockholders as
of ________, 1998, and then to those
natural persons residing in the
Pennsylvania counties of Dauphin,
Cumberland, York, Lancaster, and
Lebanon, and the Maryland county of
Washington (the "Community"). Additional
terms and conditions may be established
at any time prior to the closing of any
Community Offering by the Board of
Directors of the Company.
Purchase Price and Number of Shares The Offering will not be consummated
to be Issued unless subscriptions have been
accepted for at least 2,000,000
shares of Common Stock. The Bank is
offering the Common Stock at an
Offering Price Range of $19.00 to
$26.00 per share, or an aggregate
range of $36.8 million to $50.5
million, as established by the
Company's Board of Directors in
consultation with its financial
advisor. All shares of Common Stock
will be sold at the Actual Purchase
Price. The Actual Purchase Price,
which is expected to be within the
Offering Price Range, will be
determined based on market and
financial considerations. The Board
of Directors has engaged Ryan Beck,
which specializes in bank and thrift
securities, to deliver to the Board
of Directors an opinion (the
"Fairness Opinion"), dated as of the
consummation of the Offering, that
the pricing of the Common Stock is
fair from a financial point of view
to (i) the Mutual Company and the
Bank's depositors, and (ii)
stockholders of the Company including
Minority Stockholders. The Fairness
Opinion is not intended as a
recommendation as to the advisability
of purchasing stock. No assurance
can be given that those who purchase
shares of Common Stock in the
Offering will be able to sell such
shares after the Offering at or above
the Actual Purchase Price. See
"Stock Offering--Stock Pricing,
Number of Shares to be Issued and the
Fairness Opinion."
If the Actual Purchase Price is not
within the Offering Price Range and
the Company determines to continue
the Offering, subscribers will be
offered the opportunity to modify or
withdraw their orders, and, unless
they affirmatively respond within a
designated period of time, their
funds will be returned promptly with
interest, and/or their withdrawal
authorizations canceled. If the
Company determines to terminate the
Offering, subscribers' funds will be
returned promptly with interest,
and/or their withdrawal
authorizations will be canceled.
Community Offering Any shares of Common Stock for which
subscriptions have not been accepted
in the Subscription Offering may, at
the sole discretion of the Board of
Directors of the Company, be offered
for sale in a Community Offering. In
the Community Offering, should it be
conducted, unsubscribed shares would
be offered directly to the general
public with a preference first to
Minority Stockholders as of _______,
1998, and then to natural persons
residing in the Community.
Additional terms and conditions may
be established at any time prior to
the closing of any Community Offering
by the Board of Directors of the
Company. The Community Offering, if
any, shall be for a period of not
more than 45 days unless extended by
the Company, and shall commence
concurrently with, during or promptly
after the Subscription Offering. The
opportunity to subscribe for shares
of Common Stock in the Community
Offering is subject to the right of
the Company in its sole
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
discretion, to accept or reject any such
orders in whole or in part either at the
time of receipt of an order or as soon
as practicable following the Expiration
Date.
Purchase Limitations The minimum amount of Common Stock
for which any person may subscribe in
the Offering is $500. Except for the
ESOP, no Eligible Account Holder or
Supplemental Eligible Account Holder
may in their capacities as such
purchase in the Subscription Offering
more than $250,000 of Common Stock,
and no person together with
associates of and persons acting in
concert with such person may purchase
in all categories of the Offering
more than $500,000 of Common Stock;
provided, however, that the maximum
purchase limitations may be increased
or decreased at the sole discretion
of the Company.
Expiration Date for the Offering The Subscription Offering and the
Community Offering will terminate at
10:00 a.m., Pennsylvania time, on
____________, 1998, unless either or
both are extended by the Company for
up to 45 days, or such additional
periods as may be approved by
Pennsylvania Department of Banking
(the "Department") and, if necessary,
the FRB (as extended, the "Expiration
Date"). Subscription rights which
have not been exercised prior to the
conclusion of the Subscription
Offering will become void. Orders
will not be executed until all shares
of Common Stock have been subscribed
for or otherwise sold. If all shares
have not been subscribed for by the
Expiration Date, unless such period
is extended with the consent of the
Department, all funds will be
returned promptly to the subscribers
with interest and all withdrawal
authorizations will be canceled. If
an extension is granted, subscribers
will be notified of the extension of
time and of any rights of subscribers
to modify or rescind their
subscriptions. If the Offering is
terminated, subscribers' funds will
be returned promptly with interest,
and/or their withdrawal
authorizations will be canceled.
Procedure for Purchasing To purchase shares in the
Shares in the Subscription and Subscription Offering and Community
Community Offering Offering, an executed order form
with the required payment for the
total dollar amount of Common Stock
subscribed for, or with appropriate
authorization for withdrawal from
savings accounts or certificates of
deposit at the Bank, must be received
by the Company by 10:00 a.m.,
Pennsylvania time on the Expiration
Date. Order forms which are not
received by such time or are executed
defectively or are received without
full payment (or appropriate
withdrawal instructions) are not
required to be accepted. In
addition, an order submitted on
photocopied or facsimile order forms
will not be accepted. The Company
has the right to waive or permit the
correction of incomplete or
improperly executed forms, but does
not represent it will do so. Once
received, an executed order form may
not be modified, amended or rescinded
without the consent of the Company
unless the Offering has not been
completed by _____________________,
1998, unless such period has been
extended. IN ORDER TO ENSURE THAT
ELIGIBLE ACCOUNT HOLDERS AND
SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS
ARE PROPERLY IDENTIFIED AS TO THEIR
STOCK PURCHASE PRIORITIES, DEPOSITORS
AS OF THE ELIGIBILITY RECORD DATE AND
THE SUPPLEMENTAL ELIGIBILITY RECORD
DATE MUST LIST ALL ACCOUNTS ON THE
STOCK ORDER FORM GIVING ALL NAMES IN
EACH ACCOUNT AND THE ACCOUNT NUMBER.
All subscribers must subscribe for a
dollar amount of Common Stock. The
total number of shares that will be
issued to a subscriber will be equal
to the total dollar amount of the
subscription divided by the Actual
Purchase Price per share, subject to
the applicable purchase limitations
and allocations in the event of an
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
oversubscription. Fractional shares
will not be issued; instead, the
Company will refund any partial
subscriptions that are insufficient
to purchase a whole share.
Payment for subscriptions must
accompany an order form and may be
made (i) by check or money order, or
(ii) by authorization of withdrawal
from savings accounts or certificates
of deposit maintained with the Bank.
Interest will be paid on payments
made by check or money order at the
Bank's passbook rate of interest from
the date payment is received until
the completion or termination of the
Offering. If payment is made by
authorization of withdrawal, the
funds authorized to be withdrawn from
a deposit account will continue to
accrue interest at the contractual
rates until completion or termination
of the Offering, but a hold will be
placed on such funds, thereby making
them unavailable to the depositor.
Benefits to Management from the The Bank's full-time employees
Offering participate in the Bank's ESOP which
intends to purchase 40,000 shares in
the Offering. In addition, following
the completion of the Offering the
Company intends to award to
employees, officers and directors at
no cost to such persons: (i) a
number of shares of restricted stock
equal to 4% of the shares sold in the
Offering and (ii) options to purchase
a number of shares of Common Stock
equal to 10% of the shares sold in
the Offering. Such awards will be
made pursuant to the Company's
existing stock benefit plans or new
stock benefit plans implemented by
the Company. No such awards will be
made for at least six months after
completion of the Offering, and the
Company will obtain stockholder
approval of any such award made
within one year of the completion of
the Offering.
Restrictions on Transfer of Subscription rights are
Subscription Rights and nontransferable. Persons receiving
Shares subscription rights may not transfer
them or enter into any agreement or
understanding to transfer the legal
or beneficial ownership of the
subscription rights issued under the
Plan or, prior to the completion of
the Offering, the shares of Common
Stock to be issued upon their
exercise. Such rights may be
exercised only by the person to whom
they are granted and only for his
account. Each person exercising such
subscription rights will be required
to certify that he is purchasing
shares solely for his own account and
that he has no agreement or
understanding regarding the sale or
transfer of such shares. In
addition, persons may not offer or
make an announcement of an offer or
intent to make an offer to purchase
such subscription rights or shares of
Common Stock prior to the completion
of the Offering. The Company will
pursue any and all legal and
equitable remedies in the event
management becomes aware of the
transfer of subscription rights and
will not honor orders known by them
to involve the transfer of such
rights.
</TABLE>
8
<PAGE>
SPECIAL CONSIDERATIONS
The following special considerations, in addition to the information
presented in this Prospectus, should be considered by prospective investors in
deciding whether to purchase the Common Stock offered hereby.
POTENTIAL ADVERSE IMPACT OF CHANGES IN INTEREST RATES
Because the Company's primary asset consists of 100% of the outstanding
shares of the Bank's common stock, the Company's profitability depends primarily
on the profitability of the Bank. The Bank's profitability, like that of most
financial institutions, depends to a large extent upon its net interest income,
which is the difference between interest income on interest-earning assets, such
as loans and investments, and interest expense on interest-bearing liabilities,
such as deposits and other borrowings. The Bank's net interest income, for
example, could be adversely affected if changes in market interest rates
resulted in the cost of interest-bearing liabilities increasing faster than any
increase in the yield on the Bank's interest-earning assets. The Bank, like
other financial institutions, uses a methodology that measures its exposure to
interest rate risk based on its interest rate sensitivity gap. A gap is
considered positive when the amount of interest sensitive assets exceeds the
amount of interest sensitive liabilities. A gap is considered negative when the
amount of interest sensitive liabilities exceeds the amount of interest
sensitive assets. At March 31, 1998, the Bank's cumulative one-year interest
sensitivity gap (the difference, based on certain assumptions, between the
amount of interest-earning assets anticipated by the Bank to mature or reprice
within one year and the amount of interest-bearing liabilities anticipated by
the Bank, based on certain assumptions, to mature or reprice within one year) as
a percentage of total assets was 4%. As a result, based upon the methodology
used by the Bank, the yield on interest-earning assets of the Bank may adjust to
changes in interest rates more rapidly than the cost of the Bank's interest-
bearing liabilities. Consequently, the Bank's net interest income could be
adversely affected during periods of rapidly declining interest rates. There
can be no assurance, however, that the changes in the Bank's actual net interest
income will be consistent with those projected in the methodology. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the accompanying 1997 Annual Report for further discussion of the
Bank's exposure to interest rate risk, as well as any shortcomings in the
methodology. Changes in interest rates also may impact the volume of mortgage
loan originations as well as the value of the Bank's loans servicing rights,
investments in mortgage-backed securities, investment securities and other
interest-earning assets.
EXTENSIVE GOVERNMENTAL REGULATION OF THE FINANCIAL INSTITUTION INDUSTRY
The Bank is subject to extensive regulation by the FDIC and is periodically
examined by the FDIC to test compliance with various regulatory requirements.
Such supervision and regulation is intended primarily for the protection of
depositors and the deposit insurance fund, and not for the maximization of
shareholder value. The lending and savings activities of the Bank are also
subject to various "consumer protection" laws that impose significant liability
for noncompliance, whether intentional or not. Accordingly, the operations and
profitability of financial institutions and their holding companies are
significantly affected by legislation and the policies of the various federal
banking agencies. Since 1989, various legislation has been enacted that imposes
increased regulatory restrictions and obligations on the operations of financial
institutions and mandates the development of regulations designed to empower
regulators to take prompt corrective action with respect to institutions that
fall below certain capital standards.
THE POSSIBLE DECLINE IN THE MARKET PRICE OF THE COMMON STOCK AFTER THE OFFERING
The Actual Purchase Price per share may be more or less than the market
price of Common Stock on the date the Offering is consummated. If the Actual
Purchase Price is less than the market price for the Common Stock, some
purchasers in the Offering may be inclined to immediately sell shares of Common
Stock, purchased at the discounted price, in order to attempt to realize any
such profit. Any such sales, depending on the volume and timing, could cause
the market price of Common Stock to decline. Additionally, because stock prices
generally fluctuate over time, there is no assurance that purchasers in the
Offering will be able to sell shares after the Offering at a price that is equal
to or greater than the Actual Purchase Price. Purchasers should consider these
possibilities in determining whether to
9
<PAGE>
purchase Common Stock and, the timing of any sale of Common Stock. The Common
Stock is listed on the Nasdaq National Market. See "Market Information" and "The
Offering--Stock Pricing and Number of Shares to be Issued."
UNCERTAINTY AS TO FUTURE GROWTH OPPORTUNITIES AND ABILITY TO SUCCESSFULLY DEPLOY
OFFERING PROCEEDS
The Company intends to use the net proceeds of the Offering to increase its
loan growth primarily through its commercial business lending program. It may
also seek to expand its banking franchise through de novo branching and by
acquiring other financial institutions or branches. The Company's ability to
grow through selective acquisitions of other financial institutions or branches
will depend on successfully identifying, acquiring and integrating such
institutions or branches. There can be no assurance the Company will be able to
generate internal growth or to identify attractive acquisition candidates,
acquire such candidates on favorable terms, successfully integrate any acquired
institutions or branches into the Bank, or increase profits sufficiently to
offset the increase in expenses that will result from an acquisition. Neither
the Company nor the Bank has any specific plans, arrangements or understandings
regarding any acquisitions at this time.
CREDIT RISK
Virtually all of the Company's credit risk lies with the Bank, which holds
all of the Company's loans and virtually all of its marketable securities. As
part of its effort to become a full-service financial institution. In 1996, the
Bank created a Business Banking Group to offer commercial business loans and
services to small businesses in the Bank's primary service area. Such loans
accounted for 7.8% of net loans receivable at March 31, 1998. This expansion
beyond traditional thrift lending, such as residential mortgage loans and real
estate-secured consumer loans, has the effect of increasing the Bank's credit
risk exposure. To accommodate this exposure, management hired skill and
experienced commercial lenders. In addition, the Bank adopted commercial bank
underwriting, credit management and loan loss provisioning techniques. During
1998, the Bank will increase its loan loss provision relative to 1997 in
anticipation of increased volume of commercial and consumer lending.
POSSIBLE INABILITY TO RESELL THE COMMON STOCK UNTIL THE ISSUANCE AND RECEIPT OF
CERTIFICATES
Until certificates for Common Stock are delivered to purchasers, purchasers
may not be able to sell the shares of Common Stock for which they subscribe.
Accordingly, during such period subscribers will bear the risk of any decline in
the market price in the Common Stock. The Company intends to mail the
certificates representing Common Stock issued in the Offering promptly following
consummation of the Offering. See "The Offering--Procedure for Purchasing
Shares in Subscription and Community Offering."
THE HIGHLY COMPETITIVE ENVIRONMENT IN WHICH THE COMPANY OPERATES
The Bank faces significant competition in its market area both in
attracting deposits and in originating loans. The Bank faces direct competition
from a significant number of financial institutions, as well as other providers
of financial services, operating in its market area, many with a state-wide or
regional presence, and, in some cases, a national presence. This competition
arises from commercial banks, savings institutions, mortgage banking companies,
credit unions, brokerage firms, mutual funds companies and other providers of
financial services, many of which are significantly larger than the Bank, and
therefore have greater financial and marketing resources than those of the Bank.
Because the Bank's business activities are concentrated in its market area, the
Bank's operations are affected by local market and economic conditions.
10
<PAGE>
ANTITAKEOVER PROVISIONS AND THE MUTUAL HOLDING COMPANY STRUCTURE
Because the Mutual Company is required by Pennsylvania law to own a
majority of the outstanding shares of Common Stock for so long as the Mutual
Company remains in existence, an acquisition of the Company could generally not
be consummated without the approval of the Mutual Company, the Trustees of which
are also the Directors of the Company. In addition, regulatory authorities are
unlikely to approve an acquisition of the Company by another institution while
the Bank and the Company are in the mutual holding company structure. Moreover,
the Certificate of Incorporation and the Bylaws of the Bank and the Company
include certain provisions which may be considered to be antitakeover in nature
because they may have the effect of discouraging or making more difficult the
acquisition of control of the Company by means of an unsolicited tender or
exchange offer, proxy contest or similar transaction.
11
<PAGE>
HARRIS FINANCIAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OTHER DATA
Set forth below are selected consolidated financial and other data of the
Company. For additional information about the Company, please refer to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Bank and related
notes included in the 1997 Annual Report and the Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1998, which accompany this Prospectus.
Because the Company had insignificant assets and operations until completion of
the Two-Tier Reorganization on September 17, 1997, information as of and for
periods ending prior to such time is presented for the Bank.
<TABLE>
<CAPTION>
At
March 31, At December 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
SELECTED CONSOLIDATED FINANCIAL CONDITION DATA: (In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Total assets...................................... $2,260,301 $2,207,059 $1,768,122 $1,255,864 $1,058,088 $1,087,006
Loans receivable, net............................. 887,765 890,484 823,916 651,605 574,794 566,550
Loans held-for-sale, net.......................... 20,421 14,886 9,053 0 0 0
Marketable securities............................. 1,209,273 1,199,194 828,910 524,932 409,123 424,181
Deposits.......................................... 1,139,174 1,146,238 1,173,423 1,073,710 910,576 937,903
Escrow............................................ 9,730 8,552 8,203 4,649 5,116 11,643
Advances from FHLB-Pittsburgh and other borrowed
funds........................................... 902,383 852,988 419,146 17,200 0 0
Other borrowings.................................. 495 990 1,485 1,980 2,475 0
Stockholders' equity(1)........................... 183,758 179,034 152,752 151,459 135,036 NA
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- ------- -------- -------- ------- ------- -------
SELECTED CONSOLIDATED OPERATING DATA: (In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income................................ $40,407 $31,454 $141,067 $107,988 $80,625 $73,932 $81,020
Interest expense............................... 26,309 19,921 93,085 67,326 47,696 38,241 41,409
------- ------- -------- -------- ------- ------- -------
Net interest income........................... 14,098 11,533 47,982 40,662 32,929 35,691 39,611
Provision for loan losses................... 830 152 610 1,957 0 0 800
------- ------- -------- -------- ------- ------- -------
Net interest income after provision for
loan losses.................................. 13,268 11,381 47,372 38,705 32,929 35,691 38,811
Noninterest income............................. 4,928 3,275 14,559 3,996 2,564 2,503 4,563
Noninterest expense............................ 9,823 7,657 35,848 42,187 20,776 20,793 17,966
------- ------- -------- -------- ------- ------- -------
Income before income taxes and
cumulative effect of accounting changes........ 8,373 6,999 26,083 514 14,717 17,401 25,408
Income taxes................................... 2,624 2,290 8,312 (517) 5,503 7,348 9,170
------- ------- -------- -------- ------- ------- -------
Income after taxes and before cumulative
effect of accounting changes............... 5,749 4,709 17,771 1,031 9,214 10,053 16,238
Cumulative effect of accounting changes........ 0 0 0 0 0 0 1,420
------- ------- -------- -------- ------- ------- -------
Net income..................................... $ 5,749 $ 4,709 $ 17,771 $ 1,031 $ 9,214 $10,053 $17,658
======= ======= ======== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
At or for the
Three Months
Ended
March 31, At of for the Year Ended December 31,
----------------------------------------------
1998 1997 1996 1995 1994 1993
------------- ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
KEY FINANCIAL RATIOS AND OTHER DATA:
Financial Ratios:
Return on average assets.................................. 1.01% 0.88% 0.07% 0.81% 0.93% 1.67%
Return on average equity.................................. 12.58% 10.73% 0.68% 6.34% 7.59% 17.75%
Average equity to average assets.......................... 8.04% 8.21% 9.88% 12.83% 12.27% 9.42%
Per Share Data (2):
Combined pre- and post-Reorganization earnings per share.. $ .17 $ 0.53 $ 0.03 $ 0.28 $ 0.31 NA
Basic earnings per share.................................. .17 0.53 0.03 0.28 0.28 NA
Diluted earnings per share................................ .17 0.52 0.03 0.28 0.28 NA
Dividends per share....................................... .055 0.20 0.19 0.17 0.09 NA
Book value per share...................................... 5.41 5.29 4.54 4.50 4.03 NA
Dividend payout ratio..................................... 7.60% 8.67% 141.90% 13.70% 6.44% NA
</TABLE>
_________________________
(1) The Bank's retained earnings as of December 31, 1993, prior to the
Reorganization, were $107,886,000. Retained earnings are partially
restricted in connection with regulations related to the insurance of
savings accounts which require the Company to maintain certain statutory
reserves.
(2) All per share values have been adjusted to reflect the 1997 three-for-one
stock split.
12
<PAGE>
HARRIS FINANCIAL, INC.
GENERAL
The Company is a Pennsylvania corporation that was formed to become the
stock holding company of the Bank in the Two-Tier Reorganization, which was
completed in September 1997. In the Two-Tier Reorganization, each share of the
Bank's common stock was converted into and became a share of Common Stock of the
Company, and the Bank became a wholly-owned subsidiary of the Company. The
Mutual Company, which owned a majority of the Bank's outstanding shares of
common stock immediately prior to completion of the Two-Tier Reorganization, and
stockholders other than the Mutual Company, which owned a minority of such
shares, became the owners of the same percentage of the outstanding shares of
Common Stock of the Company immediately following the completion of the Two-Tier
Reorganization. As of the date hereof, the primary activity of the Company is
the ownership of all of the issued and outstanding common stock of the Bank.
The Company through the Bank, presently operates 33 full service offices, a
mortgage banking subsidiary, an operations center and a business center and
serves depositors primarily in the five central Pennsylvania counties of
Dauphin, Cumberland, York, Lancaster, and Lebanon and in the northern Maryland
county of Washington. It serves small business borrowers in the same area. The
Bank offers mortgage loans in its market area. The Bank's mortgage banking
subsidiary headquartered in Blue Bell, Pennsylvania, offers residential
mortgages in Pennsylvania and four other states, most of which are sold in the
secondary market. The Bank provides manufactured housing loans to borrowers
throughout most of the eastern United States.
The Bank's primary lending activity continues to be the origination of
loans secured by first mortgages on owner-occupied one- to four-family
residences. At March 31, 1998, such loans totaled $538.8 million or 60.4% of
total loans. The Company began originating commercial business loans in 1996
and its portfolio totaled $108.4 million at March 31, 1998. At March 31, 1998,
the Company had total assets of $2.3 billion, total deposits of $1.1 billion and
stockholders' equity of $183.8 million.
OPERATING STRATEGY
Over the last several years, the Bank's operating strategy has been to
change its orientation from a traditional savings bank to more closely resemble
a full service commercial bank. In the last two years, management has refined
and accelerated implementation of the strategy, which involves (i) developing a
commercial business lending expertise, (ii) increasing non-interest income
sources and amounts, (iii) developing an incentive-based sales culture in the
branch network and focusing marketing strategies on product management, (iv)
enhancing delivery systems; and (v) expanding the Bank's geographic market area.
Management seeks to implement this business strategy in a controlled manner, in
order to help ensure that the Bank maintains a consistently high asset quality
and strong capital base and preserves its reputation for professional,
community-oriented service.
In order to accomplish the objectives described above, it has been
necessary to acquire staff with the expertise to transition the Bank to a full
service financial institution. It has also been necessary to upgrade the Bank's
computer systems. Management believes that the staff and the technology
infrastructure are now in place and that the necessary initiatives are underway
to allow the Bank to achieve its business goals.
The Bank's strategic initiatives include the following:
. Strengthening the Management Team. In January 1998, Charles Pearson was
named President and CEO of the Company and the Mutual Company. Most
recently, Mr. Pearson served as President and CEO of PNC Bank's central
Pennsylvania region. Prior to that, he was President and CEO of United
Federal Bankcorp, Inc. In April 1998, John Atkinson joined the Company
in the newly-created position of Chief Operating Officer. He previously
served as head of retail banking at PNC Bank central Pennsylvania
region. Additionally, the Bank has augmented its officer-level staff in
the last two years, hiring, among others, loan officers, a chief
information officer, a chief credit officer and
13
<PAGE>
a sales training manager. Management believes that bank mergers in the
Company's market have created opportunities for the Company to recruit a
number of talented, experienced people, including commercial and
consumer loan officers with knowledge about and contacts within the
communities served by the Bank.
. Loan Portfolio Diversification. The Bank has historically focused on
traditional savings bank products and services, and it remains a strong
one- to four-family residential mortgage lender. However, as part of the
transition to a community bank orientation, the concentration of such
loans has declined from 71.5% of the loan portfolio at December 31, 1995
to 60.4% two years later. During the same period, commercial business
loans increased from .3% to 7.3% of the loan portfolio. Although
commercial lending subjects the Bank to more credit risk than single
family residential loans, commercial loans are generally originated with
higher interest rates and shorter maturities than residential loans.
The Business Banking Group was established in early 1996 to originate
commercial business loans to small and mid-sized local businesses. Its
experienced lenders have taken advantage of opportunities presented by
recent bank mergers that have resulted in dissatisfied customers of the
acquired banks.
. Increased Non-Interest Income. The Bank has recently expanded its
sources and amounts of fee income in order to reduce its dependence on
net interest income. Service charge and fee income, a primary
contributor to non-interest income, increased nearly 100% from fiscal
1996 to 1997, as a result of the expansion of the ATM network and
promotion of a "High Performance Checking" program. Net loan servicing
income, also a significant component of non-interest income, increased
by 65.1% over the same time period. The Bank intends to continue to grow
its servicing portfolio, through loans originated by its mortgage
banking subsidiary and through purchased loan servicing. Additionally,
the Bank's non-interest income is expected to benefit to a lesser extent
from the expansion/addition of non-traditional products. For example,
the Bank intends to expand its lines of securities and insurance
products and very recently began offering trust and investment services.
. External Growth. In 1995, the Bank opened its first offices outside of
Pennsylvania through the purchase of two branches in Hagerstown,
Maryland. Recently, efforts have been made to expand the Bank's presence
in that market through a focus on commercial business lending. In April
1996, First Harrisburg Bancor, Inc. ("First Harrisburg") was acquired
and accounted for using the purchase method of accounting for business
combinations. First Harrisburg had assets of approximately $277 million
at the time of the acquisition. The Bank expects to target promising new
geographic markets and expand coverage of existing markets, through de
novo branching and loan production offices, branch acquisitions and
acquisitions of financial institutions and financial services companies.
Consolidation of the financial services industry may present favorable
acquisition opportunities.
. Fostering a Sales Culture. A sales training manager was recently hired
to further management's endeavors to leverage the Bank's extensive
branch network by educating personnel about banking products, training
them regarding cross-selling techniques and rewarding their efforts
through an incentive-based compensation program. The Bank has also begun
a product management program to develop and price products intended for
specific customer segments.
. Enhanced Information and Delivery Systems. In 1997, the Bank replaced
much of its core hardware and software with more sophisticated systems,
including a personal computer network. The upgrade, now substantially
complete, is expected to increase productivity by reducing manual
applications, improving management information and facilitating customer
service. The Bank has recently launched technological enhancements to
increase customer access to banking services. These include corporate
cash management software, an internet web site (loan, and deposit
programs and other information) and telephone voice response banking.
Improvements to these systems are underway,
14
<PAGE>
and internet banking will be introduced shortly. The Bank has also
expanded its ATM network in the last two years to a total of 28, and
intends to expand to 40 ATMs by the end of 1998. Certain branch
locations have been or will be remodeled to improve service.
The Company's principal executive office is located at 235 North Second
Street, Harrisburg, Pennsylvania, and its telephone number at that address is
(717) 236-4041.
REGULATORY CAPITAL COMPLIANCE
At March 31, 1998, the Bank exceeded each of its regulatory capital
requirements. Set forth below is a summary of the Bank's compliance with the
FDIC capital standards as of March 31, 1998, on a historical and pro forma basis
assuming the sale on such date of 2,000,000 shares of Common Stock at the
indicated price per share and receipt by the Bank of 50% of the net proceeds.
For purposes of the table below, the cost of shares expected to be purchased by
the ESOP and the cost of the shares expected to be acquired by the restricted
stock plan are deducted from pro forma regulatory capital. The Federal Reserve
Board has adopted capital adequacy guidelines for bank holding companies (on a
consolidated basis) substantially similar to the FDIC capital requirements for
the Bank. On a pro forma consolidated basis after the Offering, the Company's
pro forma stockholders' equity will continue exceed these requirements.
<TABLE>
<CAPTION>
PRO FORMA AT MARCH 31, 1998, BASED UPON THE SALE OF 2,000,000 SHARES
----------------------------------------------------------------------
HISTORICAL AT MINIMUM OF MIDPOINT OF MAXIMUM OF
MARCH 31, 1998 $19.00 PER SHARE $22.50 PER SHARE $26.00 PER SHARE
------------------------------ -------------------------- -------------------- --------------------
PERCENT PERCENT PERCENT PERCENT
OF OF OF OF
AMOUNT ASSETS (1) AMOUNT ASSETS (1) AMOUNT ASSETS (1) AMOUNT ASSETS (1)
--------------- ------------- ------------ ------------ -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital $173,659 7.72% $189,740 8.37% $192,751 8.49% $195,762 8.61%
Leverage capital:
Capital level (2) $145,733 6.56% $161,814 7.28% $164,825 7.42% $167,837 7.55%
Requirement(3) 89,368 4.00% 89,586 4.00% 89,712 4.00% 89,838 4.00%
Excess $ 56,365 2.56% $ 72,228 3.25% $ 75,114 3.38% $ 77,999 3.51%
Risk-based capital:
Tier 1 capital level (2)(4) $145,733 11.66% $161,814 12.94% $164,625 13.19% $167,837 13.43%
Requirement 50,001 4.00% 50,376 4.00% 50,446 4.00% 50,516 4.00%
Excess $ 95,732 7.66% $111,438 8.91% $114,380 9.15% $117,321 9.39%
Total capital level (2)(4) $154,781 12.38% $170,862 13.67% $173,873 13.91% $176,885 14.15%
Requirement 100,003 8.00% 100,751 8.00% 100,891 8.00% 101,031 8.00%
Excess $ 54,778 4.38% $ 70,111 5.61% $ 72,982 5.84% $ 75,854 6.07%
</TABLE>
- ---------------------------
(1) Leverage capital levels are shown as a percentage of tangible average
assets. Risk-based capital levels are calculated on the basis of a
percentage of risk-weighted average assets.
(2) Pro forma capital levels are calculated assuming that the Company funds the
restricted stock plan to enable the plan to purchase at the assumed price
in the open market a number of shares equal to 4% of the common stock sold
in the Offering and the ESOP purchases 2% of the shares sold in the
Offering.
(3) The current leverage capital requirement is 3% of total adjusted assets for
banks that receive the highest supervisory rating for safety and soundness
and that are not experiencing or anticipating significant growth. The
current leverage capital ratio applicable to all other banks is 4% to 5%.
(4) Assumes net proceeds are invested in assets that carry a risk-weighting
equal to the average risk weighting of the Bank's risk-weighted assets as of
March 31, 1998.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Offering is completed, it is presently anticipated,
based on the assumptions set forth in "Pro Forma Data" that the net proceeds
from the sale of the Common Stock will range from $36.7 million to $50.4
million.
15
<PAGE>
The Company will contribute 50% of the net proceeds of the Offering to the
Bank. Such portion of net proceeds received by the Bank from the Company will
be added to the Bank's general funds which the Bank currently intends to utilize
for general corporate purposes, including investments in short- and medium-term
investments. The Bank also intends to use such funds to increase its loan
originations. The Bank may also use such funds for the expansion of its retail
banking franchise, and to expand operations through acquisitions of other
financial institutions, branch offices or financial services businesses. To the
extent that the expected future awards under the Company's existing or new
stock-based benefit programs are not funded with authorized but unissued shares
of Common Stock, the Company or Bank may use net proceeds from the Offering to
fund the purchase, in the open market, of stock to be awarded under such stock-
based benefit programs.
The Company intends to use a portion of the net proceeds it retains to make
a loan directly to the ESOP to enable the ESOP to purchase 40,000 of the shares
sold in the Offering. The remaining net proceeds retained by the Company will be
invested initially in short- and medium-term investments. The net proceeds
retained by the Company may also be used to support the future expansion of
operations through branch acquisitions, the establishment of branch offices and
the acquisition of financial institutions or their assets, or diversification
into other banking related businesses. However, the Company and the Bank have no
current arrangements, understandings or agreements regarding any such
transactions.
Upon completion of the Offering, the Board of Directors of the Company will
have the authority to repurchase stock, subject to statutory and regulatory
requirements. Based upon facts and circumstances following the Offering and
subject to applicable regulatory requirements, the Board of Directors may
determine to repurchase stock in the future. Such facts and circumstances may
include but not be 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, and the opportunity to improve 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-based benefit plans; and (iii) any other circumstances in
which repurchases would be in the best interests of the Company and its
shareholders. In the event the Company determines to repurchase stock, such
repurchases may be made at market prices which may be in excess of the Actual
Purchase Price in the Offering. To the extent that the Company repurchases
stock at market prices in excess of the per share book value, such repurchases
will have a dilutive effect upon stockholders' equity per share of Common Stock.
16
<PAGE>
CAPITALIZATION
The following table presents the historical capitalization of the Company
at March 31, 1998, and the pro forma consolidated capitalization of the Company
after giving effect to the Offering, based upon the sale of 2,000,000 shares for
the price per share indicated in the table and the other assumptions set forth
under "Pro Forma Data."
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED CAPITALIZATION
BASED UPON THE SALE OF 2,000,000 SHARES
---------------------------------------
MINIMUM MIDPOINT MAXIMUM
PRICE OF PRICE OF PRICE OF
HISTORICAL $19.00 $22.50 $26.00
CAPITALIZATION PER SHARE PER SHARE PER SHARE
-------------- ----------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Deposits (1)..................................... $1,139,174 $1,139,174 $1,139,174 $1,139,174
FHLB advances and other borrowings............... 902,878 902,878 902,878 902,878
Total deposits and borrowed funds................ $2,042,052 $2,042,052 $2,042,052 $2,042,052
Stockholders' equity:
Common Stock, $.01 par value per share:
100,000,000 shares authorized; shares to be
issued as reflected............................ $ 339 $ 339 $ 339 $ 339
Additional paid-in capital (2)................... 28,981 65,702 72,565 79,427
Retained earnings (3)............................ 146,355 146,355 146,355 146,355
Net unrealized gain on marketable securities..... 9,085 9,085 9,085 9,085
Less:
ESOP (4)....................................... (471) (1,231) (1,371) (1,511)
Restricted stock plans(5) (531) (2,051) (2,331) (2,611)
Total stockholders' equity................... $ 183,758 $ 218,199 $ 224,642 $ 231,085
Total stockholders' equity as a percentage of
pro forma total assets......................... 8.13% 9.51% 9.76% 10.01%
</TABLE>
____________________
(1) Does not reflect withdrawals from deposit accounts for the purchase of
Common Stock in the Offering. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
(2) Reflects the sale of shares in the Offering.
(3) The retained earnings of the Company will be substantially restricted after
the Offering.
(4) Assumes that 40,000 of the shares sold in the Offering will be purchased
by the ESOP at the assumed price and that the funds used to acquire the ESOP
shares will be borrowed from the Company. The cost of the Common Stock
acquired by the ESOP is reflected as a reduction of stockholders' equity.
(5) Assumes that, subsequent to the Offering, an amount equal to 4% of the
shares of Common Stock sold in the Offering is purchased in the open market
at the assumed price and awarded pursuant to the Company's restricted stock
plans. The cost of the Common Stock to be purchased by the restricted stock
plans is reflected as a reduction of stockholders' equity.
MARKET INFORMATION
The Common Stock is listed on the Nasdaq National Market under the symbol
"HARS." As of May 31, 1998, the Company had 10 registered market makers, 3,676
stockholders of record (excluding the number of persons or entities holding
stock in street name through various brokerage firms), and 33,963,450 shares
outstanding. As of such date, the Mutual Company held 25,500,000 shares of
Common Stock and Minority Stockholders held 8,463,450 shares.
17
<PAGE>
The following table sets forth market price and dividend information for the
Common Stock or, prior to the completion of the Two-Tier Reorganization, the
Bank's common stock. Information is presented for each quarter of the previous
two calendar years. All information has been revised to reflect the Company's
November 18, 1997 three-for-one stock split.
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW DIVIDENDS
-------------- --------- --------- ---------
<S> <C> <C> <C>
1996
----
March 31 $ 6 48/64 $ 5 59/64 $.0483
June 30 $ 6 16/64 $ 5 $.0483
September 30 $ 5 43/64 $ 4 59/64 $.0483
December 31 $ 6 13/64 $ 5 $.0483
1997
----
March 31 $ 7 37/64 $ 6 5/64 $.0483
June 30 $ 7 11/64 $ 6 3/64 $.0483
September 30 $16 27/64 $ 7 $.0483
December 31 $21 1/2 $15 43/64 $.0550
1998
----
March 31 $27 7/8 $17 5/8 $.0550
June 30 $.0550
</TABLE>
The last trade of the Common Stock on July __, 1998 was at a price of
$_______ per share and the closing bid and asked prices were $______ and
$_______, per share, respectively.
DIVIDEND POLICY
GENERAL
The Bank, or, since the Two-Tier Reorganization, the Company, has paid
quarterly cash dividends every quarter since the completion of the mutual
holding company reorganization and minority stock issuance in January 1994, and
it is the current policy of the Company to pay a quarterly cash dividend of
$.055 per share. The Company's ability to pay dividends will depend largely on
its receipt of Offering proceeds and cash dividends from the Bank. Under
Pennsylvania law, the Bank is generally permitted to pay dividends out of
accumulated net earnings if the Bank's surplus would not be reduced by the
payment of such dividend. Pennsylvania law requires the Bank to maintain
surplus in an amount that is at least equal to capital.
Dividends paid by the Company will be determined by the Company's Board of
Directors and will be based upon its consolidated financial condition, results
of operations, tax considerations, economic conditions, regulatory restrictions
which affect the payment of dividends by the Bank to the Company, business plans
and other factors. In addition, the Company's ability to pay dividends is
subject to limitations under Pennsylvania law, and regulations of the FRB that
require the Company to maintain certain minimum levels of capital. There can be
no assurance that dividends will be paid on Common Stock or that, if paid, such
dividends will not be reduced or eliminated in the future.
DIVIDEND WAIVERS BY THE MUTUAL COMPANY
The Mutual Company has generally waived the receipt of dividends declared
by the Bank, or, subsequent to the Two-Tier Reorganization, dividends paid by
the Company. The Mutual Company has not been required to obtain approval of the
FRB prior to any such waiver, and through the date hereof has not sought or
received FRB approval of any such waiver. In connection with the FRB and FDIC
approvals of the Bank's acquisition of First Harrisburg Bancor, Inc. and its
wholly owned subsidiary, First Federal Savings and Loan Association of
Harrisburg ("First Federal"), the Bank and the Mutual Company made several
commitments to the FDIC and the FRB regarding the waiver of dividends
18
<PAGE>
by the Mutual Company. These commitments include the following: (i) Any
dividends waived by the Mutual Company shall be taken into account in any
valuation of the Bank and the Mutual Company, and factored into the calculation
used in establishing a fair and reasonable basis for exchanging Bank shares for
holding company shares in any subsequent conversion of the Mutual Company to
stock form; (ii) Dividends waived by the Mutual Company shall not be available
for payment to or the value thereof transferred to Minority Stockholders by any
means including through dividend payments or at liquidation; (iii) Beginning
five years after April 19, 1996, the date of consummation of the Bank's
acquisition of First Federal, the Mutual Company will make prior application to
and shall receive the approval of the FRB prior to waiving any dividends
declared on the capital stock of the Bank, and the FRB shall have the authority
to approve or deny any dividend waiver request in its discretion, and after such
date such application may be made on an annual basis with respect to any year in
which the Mutual Company intends to waive dividends paid by the Bank; (iv) After
April 19, 1996, the date of consummation of the Bank's acquisition of First
Federal, the amount of waived dividends that are identified as belonging to the
Mutual Company shall not be available for payment to, or the value transferred
to, Minority Stockholders, either through dividend payments, upon the conversion
of the Mutual Company to stock form, upon the redemption of shares of the Bank,
upon the Bank's issuance of additional shares, at liquidation, or by any other
means; (v) The Mutual Company shall notify the FRB of all such transactions and
will make available to the FRB such information as the FRB determines to be
appropriate; (vi) The Bank will take into account when setting its dividend rate
the declaration rate in relation to net income and the rate's effect on the
Bank's ability to issue capital; and (vii) The dividend rate will be reasonable
and sustainable upon a full conversion to stock form of the Mutual Company;
(vii) In the event that the FRB adopts regulations regarding dividends waivers
by mutual holding companies, the Mutual Company will comply with the applicable
requirements of such regulations. AFTER THE COMPLETION OF THE TWO-TIER
REORGANIZATION, THE COMMITMENTS BECAME APPLICABLE TO DIVIDENDS PAID BY THE
COMPANY THAT ARE WAIVED BY THE MUTUAL COMPANY.
If the Mutual Company decides that it is in its best interest to waive the
right to receive a particular dividend to be paid by the Company, and, if
necessary, the FRB approves such waiver, then the Company pays such dividend
only to Minority Stockholders, and the amount of the dividend waived by the
Mutual Company is treated in the manner described above. The Mutual Company's
decision as to whether or not to waive a particular dividend depends on a number
of factors, including the Mutual Company's capital needs, the investment
alternatives available to the Mutual Company as compared to those available to
the Company, and the receipt of required regulatory approvals. There can be no
assurance that (i) after the Offering the Mutual Company will waive dividends
paid by the Company, (ii) the FRB will approve any dividend waivers by the
Mutual Company after April 2001, or (iii) the terms that may be imposed by the
FRB on any dividend waiver will be favorable to Minority Stockholders.
As of the date hereof, the Mutual Company has waived the right to receive
all dividends paid by the Bank and the Company. As of April 19, 1996, the
Mutual Company had waived $9.1 million of dividends declared by the Bank, and
through June 30, 1998, had waived a total of $19.5 million of dividends paid by
the Bank and the Company.
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Offering is completed. However, net proceeds are currently
estimated to be between $36.7 million and $50.4 million. The estimated net
proceeds have been calculated based upon the following assumptions: (i) the ESOP
will purchase 2% of the shares issued in the Offering; (ii) officers, directors,
and employees of the Company and the Bank and their immediate families will
purchase $1.3 million of Common Stock; (iii) Ryan Beck will receive a fee equal
to 2.0% of the aggregate dollar amount of the shares sold, except that no fees
will be paid on shares sold to the ESOP, officers, directors and employees of
the Company and Bank and their immediate family members; and (iv) fixed expenses
incurred in connection with the Offering will be $560,000.
Pro forma consolidated net income of the Company for the three months ended
March 31, 1998 and the year ended December 31, 1997, has been calculated based
on historical earnings for such periods, and assumes that the investable net
proceeds received by the Company and Bank were invested at 5.37% and 5.48%, the
one year Treasury Bill rate as of March 31, 1998 and December 31, 1997,
respectively. The effect of withdrawals from deposit accounts for the purchase
of Common Stock has not been reflected. The pro forma after-tax yield for the
Company and Bank is
19
<PAGE>
assumed to be 3.71% and 3.78% based on an effective tax rate of 31.0%. No effect
has been given in the pro forma stockholders' equity calculations for the
assumed earnings on the net proceeds.
THE FOLLOWING PRO FORMA INFORMATION MAY NOT BE REPRESENTATIVE OF THE
FINANCIAL EFFECTS OF THE FOREGOING TRANSACTIONS AT THE DATES ON WHICH SUCH
TRANSACTIONS ACTUALLY OCCUR AND SHOULD NOT BE TAKEN AS INDICATIVE OF FUTURE
RESULTS OF OPERATIONS. Pro forma consolidated stockholders' equity represents
the difference between the stated amount of assets and liabilities of the
Company computed in accordance with generally accepted accounting principles
("GAAP") after giving effect to the Offering.
<TABLE>
<CAPTION>
At or For the Three Months Ended At or For the Year Ended
March 31, 1998 December 31, 1997
-------------------------------- -------------------------------
Minimum Midpoint Maximum Minimum Minimum Minimum
Price of Price of Price of Price of Price of Price of
$19.00 $22.50 $26.00 $19.00 $22.50 $26.00
Per Share Per Share Per Share Per Share Per Share Per Share
--------- --------- --------- --------- ---------- ---------
(Dollars in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Gross proceeds..................................... $ 38,000 $ 45,000 $ 52,000 $ 38,000 $45,000 $ 52,000
Less: Offering expenses and commissions............ 1,248 1,380 1,512 1,248 1,380 1,512
Estimated net proceeds....................... 36,752 43,620 50,488 36,752 43,620 50,488
Less: Common Stock purchased by ESOP.............. (760) (900) (1,040) (760) (900) (1,040)
Common Stock purchased by restricted
stock plan.................................. (1,520) (1,800) (2,080) (1,520) (1,800) (2,080)
Investable net proceeds..................... $ 34,472 $40,920 $ 47,368 $ 34,472 $ 40,920 $ 47,368
Consolidated net income:
Historical....................................... $ 5,749 $ 5,749 $ 5,749 $ 17,771 $ 17,771 $17,771
Pro forma income on net proceeds................. 319 379 439 1,303 1,547 1,791
Pro forma ESOP adjustment (1).................... (9) (10) (12) (35) (41) (48)
Pro forma restricted stock plan adjustment (2)... (26) (31) (36) (105) (124) (144)
--------- -------- -------- --------- -------- --------
Pro forma net income (3)........................ $ 6,033 $ 6,087 $ 6,140 $ 18,935 $ 19,153 $ 19,371
Per share net income (4):
Historical....................................... $ 0.17 $ 0.17 $ 0.17 $ 0.53 $ 0.53 $ 0.53
Pro forma income on net proceeds................. 0.01 0.01 0.01 0.04 0.05 0.05
Pro forma ESOP adjustment (1).................... (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Pro forma restricted stock plan adjustment (2)... (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
Pro forma basic net income per share (3)........ $ 0.18 $ 0.18 $ 0.18 $ 0.56 $ 0.57 $ 0.57
Pro forma diluted net income per share (3)...... $ 0.18 $ 0.18 $ 0.18 $ 0.56 $ 0.56 $ 0.57
Stockholders' equity:
Historical:...................................... 183,758 $183,758 $183,758 $179,034 $179,034 $179,034
Estimated net proceeds........................... 36,752 43,620 50,488 36,752 43,620 50,488
Less: Common Stock acquired by ESOP (1).......... (760) (900) (1,040) (760) (900) (1,040)
Less: Common Stock acquired by restricted
stock plan (2)................................. (1,520) (1,800) (2,080) (1,520) (1,800) (2,080)
Pro forma stockholders' equity (3).............. 218,230 $224,678 $231,126 $213,506 $219,954 $226,402
Stockholders' equity per share (4):
Historical....................................... $ 5.41 $ 5.41 $ 5.41 $ 5.30 $ 5.30 $ 5.30
Estimated net proceeds........................... 1.08 1.29 1.49 1.09 1.29 1.49
Less: Common Stock acquired by ESOP (1).......... (0.02) (0.03) (0.03) (0.02) (0.03) (0.03)
Less: Common Stock acquired br restricted
stock plan (2).................................. (0.04) (0.05) (0.06) (0.04) (0.05) (0.06)
Pro forma stockholders' equity per share (3).... $ 6.43 $ 6.62 $ 6.81 $ 6.32 $ 6.51 $ 6.70
Offering price as a percentage of pro forma
stockholders' equity per share (3) (4)........... 295.51% 339.90% 381.82% 300.70% 345.66% 388.05%
Offering price as a multiple of pro forma
basic net income per share (3).................... 26.6x 31.3x 35.8x 33.9x 39.6x 45.3x
Offering price as a multiple of pro forma
diluted net income per share (3).................. 26.9x 31.6x 36.1x 34.2x 40.0x 45.7x
</TABLE>
______________________
(1) Assumes that 40,000 shares of the Common Stock issued in the Offering will
be purchased by the ESOP, and that the funds used to acquire such shares
will be borrowed from the ESOP from the Company. The amount borrowed is
assumed to be repaid in 15 equal annual installments of principal, and the
shares are to be released to plan participants as the ESOP pays the loan.
Statement of Position 93-6 requires that an employer record compensation
expense in an amount equal to the fair value of the shares committed to be
released to the employees. The pro forma net income assumes as follows: (i)
1.67% of the ESOP shares were committed to be released during the three
months ended March 31, 1998, and 6.67% were committed to be released during
1997
20
<PAGE>
at an average fair value assumed to be the price at which the shares are
sold in the Offering (ii) dividends on shares not released to the
participants were used to fund debt service payments and (iii) the Company
made no other contributions to the ESOP. If the shares were to appreciate
in value over time, compensation expense relating to the ESOP would
increase. The cost of the shares issued to the ESOP is reflected as a
reduction of stockholders' equity
(2) Assumes that the Company's restricted stock plans purchase in the open
market a number of shares of Common Stock equal to 4% of shares sold in the
Offering at a purchase price equal to the price at which shares are sold in
the Offering. The shares of restricted stock are assumed to vest ratably
over a 10 year period.
(3) If the number of shares sold in the Offering is increased by 15%, to
2,300,000 shares, then at the minimum, midpoint and maximum of the Offering
Price Range as of and for the three months ended March 31, 1998 pro forma
net income would be $6.1 million, $6.1 million, and $6.2 million, pro forma
diluted net income per share would be $0.18, $0.18, and $0.18, pro forma
stockholders' equity would be $223.6 million, $231.0 million, and $238.4
million, pro forma stockholders' equity per share would be $6.59, $6.80,
and $7.02, the offering price as a percentage of pro forma stockholders'
equity per share would be 288.3%, 330.9%, and 370.4%, and the offering
price as a multiple of pro forma diluted net income per share would be
26.7x, 31.3x, and 35.8x, respectively. As of and for the year ended
December 31, 1997 pro forma net income would be $19.1 million, $19.4
million, and $109.6 million, pro forma diluted net income per share would
be $0.56, $0.57, and $0.58, pro forma stockholders' equity would be $218.8
million, $226.3 million, and $233.7 million, pro forma stockholders' equity
per share would be $6.48, $6.70, and $6.92, the offering price as a
percentage of pro forma stockholders' equity per share would be 293.2%,
335.8%, and 375.7%, and the offering price as a multiple of pro forma
diluted net income per share would be 33.8x, 39.5x, and 45.1x,
respectively.
(4) Historical basic net income per share is based on 33,880,514 and 33,779,379
weighted average shares outstanding during the three months ended March 31,
1998 and the year ended December 31, 1997, respectively. Historical diluted
net income per share is based on 34,180,120 and 34,076,061 weighted average
shares outstanding during the three months ended March 31, 1998 and the
year ended December 31, 1997, respectively. Pro forma adjustments to net
income per share are based on historical weighted average shares
outstanding less ESOP shares assumed not to be committed to be released.
Historical and pro forma stockholders' equity per share is based on
33,941,700 and 33,790,400 total shares outstanding at March 31, 1998, and
December 31, 1997, respectively. No effect has been given to shares that
would be issued as a result of the exercise of existing stock options or
those that may be awarded in the future.
21
<PAGE>
COMMON STOCK TO BE PURCHASED BY MANAGEMENT
The following table sets forth information regarding intended Common Stock
subscriptions by each of the Directors and executive officers of the Company and
the Bank and their associates, and by all such Directors and executive officers
as a group. This table excludes shares and stock options currently owned,
shares to be purchased by the ESOP, and any future restricted stock plan or
stock option plan awards.
<TABLE>
<CAPTION>
As a percentage of the
Number of shares at Offering at
------------------------- ------------------------
Aggregate $19.00 $22.50 $26.00 $19.00 $22.50 $26.00
Purchase Per Per Per Per Per Per
Name Price Share Share Share Share Share Share
- ----------------------------------------- ---------- ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles C. Pearson....................... $ 200,000 10,526 8,888 7,692 0.53% 0.44% 0.38%
Ernest P. Davis.......................... 50,000 2,631 2,222 1,923 0.13 0.11 0.10
Jimmie C. George......................... 100,000 5,263 4,444 3,846 0.26 0.22 0.19
Robert A. Houck.......................... 25,000 1,315 1,111 961 0.07 0.06 0.05
Bruce S. Isaacman........................ 75,000 3,947 3,333 2,884 0.20 0.17 0.14
Robert E. Kessler........................ 45,000 2,368 2,000 1,730 0.12 0.10 0.09
William E. McClure, Jr................... 125,000 6,578 5,555 4,807 0.33 0.28 0.24
William A. Siverling..................... 100,000 5,263 4,444 3,846 0.26 0.22 0.19
Frank R. Sourbeer........................ 100,000 5,263 4,444 3,846 0.26 0.22 0.19
Donald B. Springer....................... 50,000 2,631 2,222 1,923 0.13 0.11 0.10
James L. Durrell......................... 58,000 3,052 2,577 2,230 0.15 0.13 0.11
William M. Long.......................... 25,000 1,315 1,111 961 0.07 0.06 0.05
Lyle B. Shughart......................... 25,000 1,315 1,111 961 0.07 0.06 0.05
John C. Coulson.......................... 100,000 5,263 4,444 3,846 0.26 0.22 0.19
Richard C. Ruben......................... 25,000 1,315 1,111 961 0.07 0.06 0.05
John W. Atkinson......................... 50,000 2,631 2,222 1,923 0.13 0.11 0.10
Jane B. Tompkins......................... 50,000 2,631 2,222 1,923 0.13 0.11 0.10
Andrew S. Samuel......................... 25,000 1,315 1,111 961 0.07 0.06 0.05
---------- ------- ------- ------- ------ ------ ------
All Directors and Executive Officers as
a Group (18 persons).................... $1,228,000 64,622 54,572 47,224 3.23% 2.73% 2.36%
========== ======= ======= ======= ====== ====== ======
</TABLE>
22
<PAGE>
THE OFFERING
THE DEPARTMENT AND THE FRB HAVE APPROVED THE STOCK ISSUANCE PLAN SUBJECT TO
THE SATISFACTION OF CERTAIN CONDITIONS. SUCH APPROVAL DOES NOT CONSTITUTE A
RECOMMENDATION OR ENDORSEMENT OF THE OFFERING OR THE PLAN BY THE DEPARTMENT OR
THE FRB.
GENERAL
On June 16, 1998, the Board of Directors of the Company, by a unanimous
vote, adopted the Plan, pursuant to which the Company is offering additional
shares of common stock to Eligible Account Holders, the ESOP and Supplemental
Eligible Account Holders in a Subscription Offering, and possibly to Minority
Stockholders and certain others in a Community Offering. In adopting the Plan,
the Board of Directors has determined that the Offering is advisable and in the
best interest of the Company and its stockholders and customers. The Plan was
ratified by a unanimous vote of the Mutual Company's Board of Trustees who
determined that the Plan and the Offering is advisable and in the best interest
of the Mutual Company and the Bank's depositors, and was unanimously ratified by
the Bank's Board of Directors who determined that the Plan and the Offering is
advisable and in the best interest of the Bank and its customers.
The Offering will enable the Company and the Bank to increase their
regulatory capital. As of March 31, 1998, the Company's Tier 1 capital was 6.5%
of average assets, and the Bank's Tier 1 capital was 6.9% of average assets. See
"Regulatory Capital Compliance." Management determined to offer 2,000,000
shares rather than a larger number of shares, or a full conversion of the
Mutual Company, because management believes that the proceeds of the Offering
will provide the Company with adequate capital to implement its business
strategy at this time and that in view of its current strategy the additional
capital that would be raised in a larger offering would create pressure to make
investments that would be overly risky. Although management believes the
Offering will, at least in the short term, reduce the Company's return on
average equity, management also believes that the sale of a larger number of
shares would cause an even greater reduction in the Company's return on equity.
In addition, the Offering will provide the Company with greater capital
resources to effect future corporate transactions, including acquisitions, and
otherwise enhance the Company's ability, primarily through the Bank, to render
services to customers and the community. Although there can be no assurances, it
is expected that the Offering will also significantly increase the number of
shares of Common Stock available to trade, which should increase the float and
liquidity of the Common Stock.
Under the terms of the Plan, at the conclusion of the Offering, if the
Company has accepted subscriptions for 2,000,000 shares of Common Stock, the
Mutual Company will contribute to the Company 2,000,000 shares of Common Stock
owned by the Mutual Company, which will then be canceled by the Company. As a
result, the number of shares of Common Stock owned by the Mutual Company will
decrease to 23,500,000 shares, or approximately 69.2% of the 33,963,450
shares of Common Stock outstanding as of May 31, 1998, from 25,500,000 shares,
or approximately 75.1% of the shares of Common Stock outstanding as of such
date. At the conclusion of the Offering, in the sole discretion of the Company,
the total number of shares sold in the Offering (and contributed to the Company
by the Mutual Company) may be increased by up to 15%, whether shares are sold at
the minimum, mid-point or maximum of the Offering Price Range. THE TOTAL NUMBER
OF OUTSTANDING SHARES OF COMMON STOCK WILL NOT CHANGE AS A RESULT OF THE
OFFERING.
The Offering pursuant to the Plan will add financial strength to the
consolidated Company, thereby enhancing the value of the Mutual Company's
primary asset. The increase in the Company's capital will increase the Company's
ability to serve as a source of strength to the Bank, and the increase in the
Company's and the Bank's capital will provide additional protection to the
Bank's depositors. Certain of the Bank's depositors will also be given
subscription rights to purchase the Common Stock issued pursuant to the Plan.
Although the Mutual Company's contribution of shares of Common Stock to the
Company will decrease the percentage of the Company owned by the Mutual Company,
23
<PAGE>
it will increase the aggregate book value of the shares of Common Stock held by
the Mutual Company and will only slightly (or not at all) decrease the aggregate
earnings attributable to the shares of Common Stock held by the Mutual Company.
The Offering does not preclude the Mutual Company from conducting a mutual-to-
stock conversion in the future.
STOCK PRICING, NUMBER OF SHARES TO BE ISSUED AND FAIRNESS OPINION
The Company has determined to offer 2,000,000 shares of Common Stock
(subject to adjustment to up to 2,300,000 shares). In order to consummate the
Offering, at least 2,000,000 shares must be sold. The Company's Board of
Directors, in consultation with its financial advisor, Ryan Beck, has
established an Offering Price Range of $19.00 to $26.00 per share, or an
aggregate offering range of $38.0 million to $52.0 million. All shares of Common
Stock will be sold at the Actual Purchase Price to be determined by the Company.
The Actual Purchase Price is expected to be within the Offering Price Range.
All subscribers must subscribe for a dollar amount of Common Stock. The
total number of shares that will be issued to a subscriber will be equal to the
total dollar amount of the subscription divided by the Actual Purchase Price per
share, subject to the applicable purchase limitations and allocations in the
event of an oversubscription. Fractional shares will not be issued; instead,
the Company will refund partial subscriptions that are insufficient to purchase
a whole share.
Unless authorized by the Company or required by the Department or the FRB,
no resolicitation of subscribers will be made unless the Actual Purchase Price
per share is less than $19.00 or more than $26.00. If the Actual Purchase Price
is not within the Offering Price Range and the Company determines to continue
the Offering, subscribers will be offered the opportunity to modify or withdraw
their order, and, unless an affirmative response is received in a designated
period of time, will have their funds returned promptly with interest, and/or
their withdrawal authorizations canceled.
The Board of Directors will establish the Actual Purchase Price based on
market and financial conditions. The Board of Directors will obtain a written
fairness opinion, dated as of the consummation of the Offering, to the effect
that the pricing of the Common Stock is fair from a financial point of view to
(i) the Mutual Company and the Bank's depositors, and (ii) stockholders of the
Company including stockholders other than the Mutual Company (the "Fairness
Opinion").
The Board has retained Ryan Beck to render the Fairness Opinion. Ryan Beck
was selected by the Company because of its knowledge of, experience with, and
reputation in the financial services industry. Ryan Beck has substantial
experience in the valuation of bank and thrift securities and has knowledge of
the trading markets for such securities as a result of its market-making for the
stocks of financial institutions. Ryan Beck is headquartered in New Jersey, and
has served numerous financial institutions nationwide in the capacities of
market maker, securities offering underwriter or selling agent and merger
consultant.
In arriving at its opinion, Ryan Beck intends to consider relevant market
and financial data, including, but not limited to (1) the Prospectus; (2) the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 and
the Bank's Annual Report on Form F-2 for the years ended December 31, 1996 and
1995; (3) the Company's Annual Report to Stockholders for the year ended
December 31, 1997 and the Bank's Annual Report to Stockholders for the years
ended December 31, 1996 and 1995; (4) the Company's Quarterly Report on Form 10-
Q for the period ended March 31, 1998; (5) certain operating and financial
information including projections provided by management regarding the Company's
business and prospects including the pro forma impact of the Offering; (6)
historical market prices of the Common Stock and the relationship of the market
price to tangible book value per share and earnings per share; (7) the trading
volume in the Common Stock; (8) historical stock market prices associated with
all mutual holding company stocks listed on the Nasdaq National Market in
relation to tangible book value and earnings per share; (9) an analysis of
projected fully converted valuations for savings institutions in the mutual
holding company structure, including the Company; (10) the trading volume of all
Nasdaq National Market listed mutual holding company stocks;
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(11) the market for fully converted thrift equities; and (12) other such
studies, analyses, inquiries and examinations as are deemed appropriate.
THE FAIRNESS OPINION, WHICH IS BASED ON A NUMBER OF PROJECTIONS, IS NOT
INTENDED AS A RECOMMENDATION AS TO THE ADVISABILITY OF PURCHASING SHARES OF
COMMON STOCK IN THE OFFERING. NO ASSURANCE CAN BE GIVEN THAT THOSE WHO PURCHASE
SHARES OF COMMON STOCK IN THE OFFERING WILL BE ABLE TO SELL SUCH SHARES AFTER
THE OFFERING AT OR ABOVE THE ACTUAL PURCHASE PRICE. NO OPINION WILL BE GIVEN AS
TO THE FAIRNESS OF THE ACTUAL PURCHASE PRICE TO PURCHASERS OF STOCK IN THE
OFFERING.
Ryan Beck served as the Bank's selling agent for its initial stock offering
in 1994. Ryan Beck's equity research department follows Pennsylvania bank and
thrift stocks. Since 1994, Ryan Beck has made a market in the Company's stock.
In its capacity as market maker, from time to time, Ryan Beck may own or be
short shares of Common Stock. As of the date of this Prospectus, Ryan Beck
currently does not have a material long or short position in the Common Stock.
SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS
In accordance with the Plan, rights to subscribe for the purchase of Common
Stock in the Subscription Offering have been granted under the Plan in the
following order of descending priority. All subscriptions received will be
subject to the availability of Common Stock after satisfaction of all
subscriptions of all persons having prior rights in the Subscription Offering
and to the maximum, minimum, and overall purchase limitations set forth in the
Plan and as described below under "--Limitations on Common Stock Purchases."
Priority 1: Eligible Account Holders. Each depositor with aggregate deposit
account balances of $50 or more (a "Qualifying Deposit") as of May 31, 1997 (the
"Eligibility Record Date," and such account holders, "Eligible Account Holders")
will receive nontransferable subscription rights to subscribe in the
Subscription Offering for Common Stock equal to up to the greater of $250,000,
or fifteen times the product (rounded down to the next whole number) obtained by
multiplying the aggregate number of shares of Common Stock issued in the
Offering by a fraction of which the numerator is the amount of the Eligible
Account Holder's Qualifying Deposit and the denominator is the total amount of
Qualifying Deposits of all Eligible Account Holders, in each case on the
Eligibility Record Date, subject to the overall purchase limitation. See
"--Limitations on Common Stock Purchases." If there are not sufficient shares
available to satisfy all subscriptions, shares first will be allocated so as to
permit each subscribing Eligible Account Holder to purchase a number of shares
sufficient to make his total allocation equal to the lesser of 100 shares or the
number of shares for which he subscribed. Thereafter, unallocated shares will be
allocated to each subscribing Eligible Account Holder whose subscription remains
unfilled in the proportion that the amount of his aggregate Qualifying Deposit
bears to the total amount of Qualifying Deposits of all subscribing Eligible
Account Holders whose subscriptions remain unfilled. If an amount so allocated
exceeds the amount subscribed for by any one or more Eligible Account Holders,
the excess shall be reallocated among those Eligible Account Holders whose
subscriptions are not fully satisfied until all available shares have been
allocated.
To ensure proper allocation of stock, each Eligible Account Holder must
list on his order form all deposit accounts in which he has an ownership
interest on the Eligibility Record Date. Failure to list an account could
result in fewer shares being allocated than if all accounts had been disclosed.
Neither the Company nor the Bank nor any of their agents shall be responsible
for orders on which all Qualifying Deposit accounts have not been fully and
accurately disclosed. The subscription rights of Eligible Account Holders who
are also directors or officers of the Bank or their associates will be
subordinated to the subscription rights of other Eligible Account Holders to the
extent attributable to increased deposits in the twelve months preceding the
Eligibility Record Date.
Priority 2: Employee Plans. To the extent that there are sufficient shares
remaining after satisfaction of subscriptions by Eligible Account Holders, the
ESOP will receive nontransferable subscription rights to purchase Common Stock
in the Offering on behalf of ESOP participants subject to the purchase
limitations described herein. The ESOP intends to subscribe for 40,000 shares
of the Common Stock issued in the Offering.
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Priority 3: Supplemental Eligible Account Holders. To the extent that
there are sufficient shares remaining after satisfaction of subscriptions by
Eligible Account Holders and the ESOP, each depositor with a Qualifying Deposit
as of June 30, 1998 (the "Supplemental Eligibility Record Date") who is not an
Eligible Account Holder ("Supplemental Eligible Account Holder") will receive
nontransferable subscription rights to subscribe in the Subscription Offering
for Common Stock equal to the greater of $250,000, or fifteen times the product
(rounded down to the next whole number) obtained by multiplying the aggregate
number of shares of Common Stock issued in the Offering, by a fraction of which
the numerator is the amount of the Supplemental Eligible Account Holder's
Qualifying Deposit and the denominator is the total amount of Qualifying
Deposits of all Supplemental Eligible Account Holders, in each case on the
Supplemental Eligibility Record Date, subject to the overall purchase
limitation. See "--Limitations on Common Stock Purchases." If there are not
sufficient shares available to satisfy all subscriptions, shares first will be
allocated so as to permit each subscribing Supplemental Eligible Account Holder
to purchase a number of shares sufficient to make his total allocation equal to
the lesser of 100 shares or the number of shares for which he subscribed.
Thereafter, unallocated shares will be allocated to each subscribing
Supplemental Eligible Account Holder and whose subscription remains unfilled in
the proportion that the amount of his Qualifying Deposit bears to the total
amount of Qualifying Deposits of all subscribing Supplemental Eligible Account
Holders whose subscriptions remain unfilled.
To ensure proper allocation of stock, each Supplemental Eligible Account
Holder must list on his order form all deposit accounts in which he has an
ownership interest on the Supplemental Eligibility Record Date. Failure to list
an account could result in fewer shares being allocated than if all accounts had
been disclosed. Neither the Company nor the Bank nor any of their agents shall
be responsible for orders on which all Qualifying Deposit accounts have not been
fully and accurately disclosed.
Expiration Date for the Subscription Offering. The Subscription Offering
will expire on ____________, 1998, unless extended for up to 45 days or such
additional periods by the Bank with the approval of the Department and/or the
FRB, if necessary (as so extended, the "Expiration Date"). The Bank and the
Company are not required to give subscribers notice of any such extension.
Subscription rights which have not been exercised prior to the conclusion of the
Subscription Offering will become void.
Members in Nonqualified States or Foreign Countries. 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 stock pursuant to the
Plan reside. However, the Company is not required to offer stock in the
Offering to any person who resides in a foreign country or resides in a state of
the United States with respect to which (i) a small number of persons otherwise
eligible to subscribe for shares of Common Stock reside; or (ii) the Company
determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise, including but not limited to a
request that the Company or its officers or directors, under the securities laws
of such state, register as a broker, dealer, salesman or selling agent or to
register or otherwise qualify the subscription rights or Common Stock for sale
or subject any filing with respect thereto in such state. Where the number of
persons eligible to subscribe for shares in one state is small, the Company will
base its decision as to whether or not to offer the Common Stock in such state
on a number of factors, including the size of accounts being held by account
holders in the state, the cost of registering or qualifying the shares or the
need to register the Company, its officers, directors or employees as brokers,
dealers or salesmen.
COMMUNITY OFFERING
Any shares of Common Stock not subscribed for in the Subscription Offering
may be offered for sale in a Community Offering. If a Community Offering is
conducted, it will be for a period of not more than 45 days and will terminate
on _________, 1998 unless extended by the Company and the Bank, and may commence
anytime subsequent to the commencement of the Subscription Offering. No person,
by himself or herself, or with an associate or group of persons acting in
concert, may subscribe for or purchase more than $500,000 of Common Stock
offered in the Community Offering. Further, the Company may limit total
subscriptions so as to assure that the number of shares available for any
syndicated community offering may be up to a specified percentage of the number
of shares of Common Stock. Finally, the Company may reserve shares offered in
the Community Offering for sales to institutional investors.
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In the event of an oversubscription for shares in the Community Offering,
available shares may be allocated in the sole discretion of the Company first to
cover orders of Minority Stockholders as of _____, 1998 and then natural persons
residing in the Community, then to cover the orders of any other person
subscribing for shares in the Community Offering so that each person in such
category of the Community Offering may receive 1,000 shares, and thereafter, on
a pro rata basis to persons in such category of the Community Offering based on
the amount of their respective subscriptions.
The terms "residence," "reside," "resided" or "residing" as used herein
with respect to any person shall mean any person who occupied a dwelling within
the Bank's Community, has an intent to remain within the Community for a period
of time, and manifests the genuineness of that intent by establishing an ongoing
physical presence within the Community together with an indication that such
presence within the Community is something other than merely transitory in
nature. To the extent the person is a corporation or other business entity, the
principal place of business or headquarters shall be in the Community. To the
extent a 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, the circumstances of the trustee shall be examined for purposes of this
definition. The Bank may utilize deposit or loan records or such other evidence
provided to it to make a determination as to whether a person is a resident. In
all cases, however, such a determination shall be in the sole discretion of the
Bank.
The Bank and the Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any person in the
Community Offering.
SYNDICATED COMMUNITY OFFERING
Any shares of Common Stock not sold in the Subscription Offering or in the
Community Offering, if any, may be offered for sale to the general public by a
selling group of broker-dealers, which may include Ryan Beck, to be managed by
Ryan Beck in a syndicated community offering, subject to terms, conditions and
procedures as may be determined by the Bank and the Company in a manner that is
intended to achieve the widest distribution of the Common Stock subject to the
rights of the Company to accept or reject in whole or in part all orders in the
syndicated community offering. It is expected that the syndicated community
offering, if any, will commence as soon as practicable after termination of the
Subscription Offering and the Community Offering. The syndicated community
offering shall be completed within 45 days after the termination of the
Subscription Offering and no later than 90 days after the receipt of certain
regulatory approvals, unless such period is extended as provided herein. The
Company will pay a fee of up to 6.5% of the total dollar amount of the Common
Stock sold by the selling group, which amount includes a management fee to Ryan
Beck of 1.5%.
If for any reason a syndicated community offering of unsubscribed shares of
Common Stock is not advisable or cannot be effected and any shares remain unsold
after the Subscription Offering and any Community Offering, the Boards of
Directors of the Bank and the Company will seek to make other arrangements to
sell the remaining shares. Such other arrangements will be subject to Department
approval and to compliance with applicable state and federal securities laws.
The Bank and the Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any person in the
syndicated community offering.
PLAN OF DISTRIBUTION AND SELLING COMMISSIONS
Offering materials initially have been distributed to depositors with
subscription rights. All prospective purchasers are to send payment along with
a properly completed Order Form directly to the Bank, where such funds will be
held in a segregated savings account and not released until the Offering is
completed or terminated.
To assist in the marketing of the Common Stock, the Bank and the Company
have retained Ryan Beck, a broker-dealer registered with the National
Association of Securities Dealers, Inc. (the "NASD"). Ryan Beck will provide
advisory assistance and assist the Bank in the Offering as follows: (i) in
training and educating the Bank's employees
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regarding the Offering and their roles; (ii) assisting in design and
implementation of a marketing strategy; and (iii) managing a Stock Information
Center and coordinating selling efforts. For these services, Ryan Beck will
receive an advisory and management fee of $50,000, a marketing fee equal to 2.0%
of the total dollar amount of stock sold in the Subscription and Community
Offering to subscribers other than the ESOP and officers, directors, and
employees of the Company and Bank and their immediate family members. Ryan Beck
will also receive a fee equal to 1.5% of the aggregate dollar amount of stock
sold in any syndicated community offering, which fee along with the fee payable
to selected dealers shall not exceed 6.5% in the aggregate. The Bank has made an
advance payment to Ryan Beck in the amount of $15,000. Offers and sales in the
Offering will be on a best efforts basis and, as a result, Ryan Beck is not
obligated to purchase shares of the Common Stock in the Offering.
The Bank also will reimburse Ryan Beck for its reasonable out-of-pocket
expenses associated with its marketing effort, the estimated maximum of which is
$72,500 (including legal fees and expenses up to a maximum of $57,500). The
Bank and the Company will indemnify Ryan Beck against liabilities and expenses
(including legal fees) incurred in connection with certain claims or litigation
arising out of or based upon untrue statements or omissions contained in the
offering material for the Common Stock, including liabilities under the
Securities Act of 1933.
Certain directors and executive officers of the Company and Bank may
participate in the solicitation of offers to purchase Common Stock. Such
persons will be reimbursed by the Company for their reasonable out-of-pocket
expenses, including, but not limited to, de minimis telephone and postage
expenses, incurred in connection with such solicitation. Other regular, full-
time employees of the Bank may participate in the Offering but only in
ministerial capacities, providing clerical work in effecting a sales transaction
or answering questions of a potential purchaser provided that the content of the
employee's responses is limited to information contained in the Prospectus or
other offering documents, and no offers or sales may be made by tellers or at
the teller counter. All sales activity will be conducted in a segregated or
separately identifiable area of the Bank's offices apart from the area
accessible to the general public for the purpose of making deposits or
withdrawals. Other questions of prospective purchasers will be directed to
executive officers or registered representatives. Such other employees have
been instructed not to solicit offers to purchase Common Stock or provide advice
regarding the purchase of Common Stock. The Company will rely on Rule 3a4-1
under the Exchange Act, and sales of Common Stock will be conducted within the
requirements of Rule 3a4-1, so as to permit officers, directors and employees to
participate in the sale of Common Stock. No officer, director or employee of
the Company or the Bank will be compensated in connection with his participation
by the payment of commissions or other remuneration based either directly or
indirectly on the transactions in the Common Stock.
PROCEDURE FOR PURCHASING SHARES
Expiration Date. The Offering will terminate at 10:00 a.m., Pennsylvania
time, on _________, 1998, unless extended by the Company, with prior approval of
the Department and/or the FRB, if required, for up to an additional 45 days (as
extended, the "Expiration Date"). The Company may extend the Offering without
further approval or additional notice to purchasers in the Offering. Any
extension of the Offering beyond _______, 1998 would be subject to Department
and, if necessary FRB approval and subscribers would be given the right to
increase, decrease, or rescind their orders for Common Stock. If 2,000,000
shares are not sold by the Expiration Date the Company may terminate the
Offering and promptly refund all orders for Common Stock. If the Actual
Purchase Price per share is outside the Offering Price Range, purchasers will be
given an opportunity to increase, decrease, or rescind their orders.
To ensure that each purchaser receives a Prospectus at least 48 hours
before the Expiration Date in accordance with Rule 15c2-8 of the Exchange Act,
no Prospectus will be mailed any later than five days prior to such date or hand
delivered any later than two days prior to such date. Execution of an order
form will confirm receipt or delivery in accordance with Rule 15c2-8. Order
forms will be distributed only with a Prospectus.
The Company reserves the right in its sole discretion to terminate the
Offering at any time and for any reason, in which case the Company will promptly
return all purchase orders, plus interest at its current passbook rate from the
date of receipt and cancel all authorized withdrawals from deposit accounts.
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Use of Order Forms. In order to purchase the Common Stock, each purchaser
must complete an order form, except for persons purchasing in the syndicated
community offering. Any person receiving an order form who desires to purchase
Common Stock must do so by delivering (by mail or in person) to the Company a
properly executed and completed order form, together with full payment for the
shares purchased, which must be received by the Company prior to 10:00 a.m.,
Pennsylvania time on _________, 1998. Photo-copied or facsimile order forms
will not be accepted. ONCE TENDERED, AN ORDER FORM CANNOT BE MODIFIED OR REVOKED
WITHOUT THE CONSENT OF THE COMPANY UNLESS THE OFFERING IS NOT COMPLETED BY
____________, 1998. THE COMPANY RESERVES THE ABSOLUTE RIGHT, IN ITS SOLE
DISCRETION, TO REJECT ORDERS RECEIVED IN THE COMMUNITY OFFERING, IN WHOLE OR IN
PART, AT THE TIME OF RECEIPT OR AT ANY TIME PRIOR TO COMPLETION OF THE OFFERING.
EACH PERSON ORDERING SHARES IS REQUIRED TO REPRESENT THAT HE IS PURCHASING SUCH
SHARES FOR HIS OWN ACCOUNT AND THAT HE HAS NO AGREEMENT OR UNDERSTANDING WITH
ANY PERSON FOR THE SALE OR TRANSFER OF SUCH SHARES. THE INTERPRETATION BY THE
COMPANY OF THE TERMS AND CONDITIONS OF THE PLAN AND OF THE ACCEPTABILITY OF THE
ORDER FORMS WILL BE FINAL.
All subscribers must subscribe for a dollar amount of Common Stock. The
total number of shares that will be issued to a subscriber will be equal to the
total dollar amount of stock for which such subscription has been accepted
divided by the Actual Purchase Price per share, subject to the applicable
purchase limitations and allocations in the event of an oversubscription.
Fractional shares will not be issued; instead, the Company will refund any
partial subscription that is insufficient to purchase a whole share.
Payment for Shares. Payment for all shares will be required to accompany
all completed order forms for the purchase to be valid. Payment for shares may
be made by (i) check or money order made payable to the Company, or (ii)
authorization of withdrawal from savings accounts and certificates of deposit
maintained with the Bank. Appropriate means by which such withdrawals may be
authorized are provided in the order forms. Once such a withdrawal amount has
been authorized, a hold will be placed on such funds, making them unavailable to
the depositor. All funds authorized for withdrawal will continue to earn
interest at the contract rate until the Offering 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
withdrawal results in a certificate account with a balance less than the
applicable minimum balance requirement, the certificate shall be canceled at the
time of withdrawal without penalty, and the remaining balance will earn interest
at the passbook rate. In the case of payments made by check or money order,
such funds will be placed in a segregated savings account and interest will be
paid by the Bank at the current passbook rate, from the date payment is received
until the Offering is completed or terminated.
A depositor interested in using his or her IRA funds to purchase Common
Stock must do so through a self-directed IRA. Since the Bank does not offer
self-directed accounts, it will allow a depositor to make a trustee-to-trustee
transfer of Bank IRA funds to a trustee offering a self-directed IRA program
without early withdrawal penalties with the agreement that such funds will be
used to purchase the Common Stock in the Offering. There will be no early
withdrawal or IRS interest penalties for such transfers. The new trustee would
hold the Common Stock in a self-directed account in the same manner as the Bank
now holds the depositor's IRA funds. An annual administrative fee may be
payable to the new trustee. Depositors interested in using funds in a Bank IRA
to purchase Common Stock should contact the Stock Information Center at the Bank
as soon as possible so that the necessary forms may be forwarded for execution
and returned prior to the Expiration Date.
In addition, the provisions of ERISA and Internal Revenue Service
("Service") regulations require that executive officers, directors and 10%
stockholders who use self-directed IRA funds to purchase shares of Common Stock
in the Offering, make such purchase for the exclusive benefit of the IRA
participant.
The ESOP will not be required to pay for shares purchased until
consummation of the Offering, provided that there is in force from the time the
order is received a loan commitment from an unrelated financial institution or
the Company to lend to the ESOP the necessary amount to fund the purchase.
Delivery of Stock Certificates. Certificates representing Common Stock
issued in the Offering and checks representing interest paid on subscriptions
made by check or money order will be mailed to the persons entitled thereto at
the address noted on the order form, as soon as practicable following
consummation of the Offering and receipt of
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all necessary regulatory approvals. Any certificates returned as undeliverable
will be held by the Bank until claimed by persons legally entitled thereto or
otherwise disposed of in accordance with applicable law. Until certificates for
the Common Stock are available and delivered to purchasers, purchasers may not
be able to sell the shares of stock which they ordered. Regulations prohibit the
Bank from lending funds or extending credit to any persons to purchase Common
Stock in the Offering.
Other Restrictions. Notwithstanding any other provision of the Plan, no
person is entitled to purchase any Common Stock to the extent such purchase
would be illegal under any federal or state law or regulation (including state
"blue-sky" registrations), or would violate regulations or policies of the NASD,
particularly those regarding free riding and withholding. The Bank and/or its
agents may ask for an acceptable legal opinion from any purchaser as to the
legality of such purchase and may refuse to honor any such purchase order if
such opinion is not timely furnished.
RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES
SUBSCRIPTION RIGHTS ARE NONTRANSFERABLE. PERSONS RECEIVING SUCH RIGHTS ARE
NOT PERMITTED TO TRANSFER OR ENTER INTO ANY AGREEMENT OR UNDERSTANDING TO
TRANSFER THE LEGAL OR BENEFICIAL OWNERSHIP OF THE SUBSCRIPTION RIGHTS ISSUED
UNDER THE PLAN OR PRIOR TO THE COMPLETION OF THE OFFERING, THE SHARES OF COMMON
STOCK TO BE ISSUED UPON THEIR EXERCISE. SUCH RIGHTS MAY BE EXERCISED ONLY BY THE
PERSON TO WHOM THEY ARE GRANTED AND ONLY FOR HIS ACCOUNT. EACH PERSON EXERCISING
SUCH SUBSCRIPTION RIGHTS WILL BE REQUIRED TO CERTIFY THAT HE IS PURCHASING
SHARES SOLELY FOR HIS OWN ACCOUNT AND THAT HE HAS NO AGREEMENT OR UNDERSTANDING
REGARDING THE SALE OR TRANSFER OF SUCH SHARES. IN ADDITION, PERSONS MAY NOT
OFFER OR MAKE AN ANNOUNCEMENT OF AN OFFER OR INTENT TO MAKE AN OFFER TO PURCHASE
SUCH SUBSCRIPTION RIGHTS OR SHARES OF COMMON STOCK PRIOR TO THE COMPLETION OF
THE OFFERING. THE COMPANY WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE REMEDIES
IN THE EVENT MANAGEMENT BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS AND
WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE TRANSFER OF SUCH RIGHTS.
THE BANK AND THE COMPANY WILL PURSUE ANY AND ALL LEGAL AND EQUITABLE
REMEDIES IN THE EVENT THEY BECOME AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS
AND WILL NOT HONOR ORDERS KNOWN BY THEM TO INVOLVE THE TRANSFER OF SUCH RIGHTS.
LIMITATIONS ON COMMON STOCK PURCHASES
The following additional limitations have been imposed upon purchases of
shares of Common Stock. Defined terms used in this section and not otherwise
defined in this Prospectus shall have the meaning set forth in the Plan. In all
cases, the Bank shall have the right, in its sole discretion, to determine
whether prospective purchasers are "Associates," or "Acting in Concert" as
defined by the Plan and in interpreting any and all other provisions of the
Plan. All such determinations are in the sole discretion of the Bank, and may be
based on whatever evidence the Bank chooses to use in making any such
determination.
(1) The aggregate amount of outstanding Common Stock of the Company owned
or controlled by persons other than Mutual Company at the close of the Offering
shall be less than 50% of the Company's total outstanding Common Stock.
(2) Except for the ESOP, no Eligible Account Holder or Supplemental
Eligible Account Holder may in their capacities as such purchase in the
Subscription Offering more than $250,000 of Common Stock, and no person or group
of persons Acting in Concert may purchase more than $500,000 of Common Stock
issued in the Offering, except that: (i) the Company may, in its sole
discretion and without further notice to or solicitation of subscribers or other
prospective purchasers, increase such maximum purchase limitations to up to 5%
of the number of shares issued in the Offering or decrease them to 1% of the
number of shares issued in the Offering; (ii) Tax-Qualified Employee Plans may
purchase up to 10% of the shares issued in the Offering; and (iii) for purposes
of this paragraph shares to be held by any Tax-Qualified Employee Plan and
attributable to a person shall not be aggregated with other shares purchased
directly by or otherwise attributable to such person.
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(3) The aggregate amount of Common Stock acquired in the Offering, plus all
prior issuances by the Bank and the Company, by all Management Persons and their
Associates, and non-tax qualified employee benefit plans, exclusive of any stock
acquired by such persons in the secondary market, shall not exceed 25% of the
outstanding shares of Common Stock of the Company held by persons other than the
Mutual Company at the close of the Offering. In calculating the number of shares
held by Management Persons and their Associates under this paragraph or under
the provisions of paragraph 4 below, shares held by any Tax-Qualified Employee
Benefit Plan or any Non-Tax-Qualified Employee Benefit Plan of the Bank that are
attributable to such persons shall not be counted.
(4) The aggregate amount of Common Stock acquired in the Offering plus all
prior issuances by the Bank and the Company, by all Management Persons and their
Associates, and non-tax qualified employee benefit plans, exclusive of any
common stock acquired by such persons in the secondary market, shall not exceed
25% of the stockholders' equity of the Bank. In calculating the number of shares
held by Management Persons and their Associates under this paragraph or under
the provisions of paragraph 3 of this section, shares held by any Tax-Qualified
Employee Benefit Plan or any Non-Tax-Qualified Employee Benefit Plan of the Bank
that are attributable to such persons shall not be counted.
(5) The aggregate amount of Common Stock acquired in the Offering, plus all
prior issuances by the Bank or the Company, by any non-tax-qualified employee
plan of the Company or the Bank or Management Person and their Associates,
exclusive of any shares of Common Stock acquired by such plan or persons in the
secondary market, shall not exceed 10% of the outstanding shares of Common Stock
held by persons other than the Mutual Company at the conclusion of the Offering.
In calculating the number of shares held by Management Persons and their
Associates under this paragraph, shares held by any tax-qualified employee plans
or non-tax-qualified employee plans of the Company or the Bank that are
attributable to such persons shall not be counted.
(6) The aggregate amount of Common Stock acquired in the Offering, plus all
prior issuances by the Bank or the Company, by any non-tax-qualified employee
plan of the Company or the Bank or Management Person and their Associates,
exclusive of any shares of Common Stock acquired by such plan or persons in the
secondary market, shall not exceed 10% of the stockholders' equity of the
Company held by persons other than the Mutual Company at the conclusion of the
Offering.
(7) The aggregate amount of Common Stock acquired in the Offering, plus all
prior issuances by the Bank or the Company, by any one or more tax-qualified
employee plan of the Company, exclusive of any shares of Common Stock acquired
by such plans in the secondary market, shall not exceed 10% of the outstanding
Common Stock held by persons other than the Mutual Company at the conclusion of
the Offering.
(8) The aggregate amount of Common Stock acquired in the Offering, plus all
prior issuances by the Bank or the Company, by any one or more tax-qualified
employee plan of the Company, exclusive of any shares of Common Stock acquired
by such plans in the secondary market, shall not exceed 10% of the stockholders'
equity of the Company held by persons other than the Mutual Company at the
conclusion of the Offering.
(9) The Boards of Directors of the Bank and the Company may, in their sole
discretion, increase the maximum purchase limitations to up to 9.9%, provided
that orders for Common Stock in excess of 5% of the number of shares of Common
Stock issued in the Offering shall not in the aggregate exceed 10% of the total
shares of Common Stock issued in the Offering (except that this limitation shall
not apply to purchases by Tax-Qualified Employee Plans). If such 5% limitation
is increased, subscribers for the maximum amount will be, and certain other
large subscribers in the sole discretion of the Company and the Bank may be,
given the opportunity to increase their subscriptions up to the then applicable
limit. Requests to purchase additional shares of Common Stock under this
provision will be determined by the Board of Directors of the Company, in its
sole discretion.
(10) Notwithstanding any other provision of the Plan, no person shall be
entitled to purchase any Common Stock to the extent such purchase would be
illegal under any federal law or state law or regulation or would violate
regulations or policies of the NASD, particularly those regarding free riding
and withholding. The Company and/or
31
<PAGE>
its agents may ask for an acceptable legal opinion from any purchaser as to the
legality of such purchase and may refuse to honor any purchase order if such
opinion is not timely furnished.
(11) The Board of Directors of the Company has the right in its sole
discretion to reject any order submitted by a person whose representations the
Board of Directors believes to be false or who it otherwise believes, either
alone or acting in concert with others, is violating, circumventing, or intends
to violate, evade or circumvent the terms and conditions of the Plan.
THE COMPANY, IN ITS SOLE DISCRETION, MAY MAKE REASONABLE EFFORTS TO COMPLY
WITH THE SECURITIES LAWS OF ANY STATE IN THE UNITED STATES IN WHICH ITS
DEPOSITORS RESIDE, AND WILL ONLY OFFER AND SELL THE COMMON STOCK IN STATES IN
WHICH THE OFFERS AND SALES COMPLY WITH SUCH STATES' SECURITIES LAWS. HOWEVER,
NO PERSON WILL BE OFFERED OR ALLOWED TO PURCHASE ANY COMMON STOCK UNDER THE PLAN
IF THEY RESIDE IN A FOREIGN COUNTRY OR IN A STATE OF THE UNITED STATES WITH
RESPECT TO WHICH ANY OF THE FOLLOWING APPLY: (I) A SMALL NUMBER OF PERSONS
OTHERWISE ELIGIBLE TO PURCHASE SHARES UNDER THE PLAN RESIDE IN SUCH STATE OR
FOREIGN COUNTY; (II) THE OFFER OR SALE OF SHARES OF COMMON STOCK TO SUCH PERSONS
WOULD REQUIRE THE BANK OR ITS EMPLOYEES TO REGISTER, UNDER THE SECURITIES LAWS
OF SUCH STATE OR FOREIGN COUNTRY, AS A BROKER OR DEALER OR TO REGISTER OR
OTHERWISE QUALIFY ITS SECURITIES FOR SALE IN SUCH STATE OR FOREIGN COUNTRY; OR
(III) SUCH REGISTRATION OR QUALIFICATION WOULD BE IMPRACTICABLE FOR REASONS OF
COST OR OTHERWISE.
The Plan defines "acting in concert" as follows: (i) knowing participation
in a joint activity or interdependent conscious parallel action towards a common
goal whether or not pursuant to an express agreement; (ii) a combination or
pooling of votes 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; or (iii) a person or company
which acts in concert with another persons or company ("other party") shall also
be deemed to be acting in concert with any person or company who is also acting
in concert with the other party, except that any Tax-Qualified Employee Benefit
Plan or Non-Tax-Qualified Employee Benefit Plan will not be deemed to be acting
in concert with any other Tax-Qualified Employee Benefit Plan or Non-Tax-
Qualified Employee Benefit Plan or 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 plan will be aggregated. The determination of
whether a group is acting in concert shall be made solely by the Board of
Directors of the Company or officers delegated by such Board, and may be based
on any evidence upon which the Board or such delegatee chooses to rely.
Under the Plan, the term "Associate," when used to indicate a relationship
with any Person, means: (i) any corporation or organization (other than the
Bank, the Company, the Mutual Company or a majority-owned subsidiary of any
thereof) of which such Person is a director, 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; (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, trustees, or officer of the Bank, the Mutual Company, the Company or
any subsidiary of the Mutual Company or the Company or any affiliate thereof;
and (iv) any person acting in concert with any of the persons or entities
specified in clauses (i) through (iii) above; provided, however, that any Tax-
Qualified or Non-Tax-Qualified Employee Plan shall not be deemed to be an
associate of any trustee, director or officer of the Mutual Company, the Company
or the Bank, to the extent provided in Section 9 of the Plan. When used to
refer to a Person other than an officer or director of the Bank, the Bank in its
sole discretion may determine the Persons that are Associates of other Persons.
Directors are not treated as Associates of one another solely because of
their board membership. Compliance with the foregoing limitations does not
necessarily constitute compliance with other regulatory restrictions on
acquisitions of the Common Stock. For a further discussion of limitations on
purchases of the common stock during and subsequent to the Offering, see "--
Certain Restrictions on Purchases or Transfer of Shares After the Offering."
BENEFITS TO MANAGEMENT IN THE OFFERING
The Bank's full-time employees participate in the Bank's ESOP which
intends to purchase 40,000 shares in the Offering. In addition, following the
completion of the Offering the Company intends to award to employees, officers
32
<PAGE>
and directors at no cost to such persons: (i) a number of shares of restricted
stock equal to 4% of the shares sold in the Offering and (ii) options to
purchase a number of shares of Common Stock equal to 10% of the shares sold in
the Offering. Such awards will be made pursuant to the Company's existing stock
benefit plans or new stock benefit plans implemented by the Company. No such
awards will be made for at least six months after completion of the Offering,
and the Company will obtain stockholder approval of any such award made within
one year of the completion of the Offering.
TAX EFFECTS OF THE OFFERING
Management believes that no gain or loss will be recognized to the Company
or the Mutual Company as a result of the Offering for federal or Pennsylvania
income tax purposes.
Management believes that the Offering will not result in any federal or
Pennsylvania income tax consequences to the Company or the Mutual Company,
except to the extent discussed below. Management believes that the Mutual
Company's contribution of a portion of its shares of Common Stock, and the
subsequent cancellation of those shares by the Company, qualifies as a tax-free
contribution of capital by the Mutual Company under section 118 of the Code.
Management believes that the Mutual Company's contribution of shares to the
Company is analogous to the situation in Commissioner v. Fink, 483 U.S. 89
(1987), in which the U.S. Supreme Court ruled that where majority stockholders
voluntarily surrender a portion of their stock to a corporation in an
unsuccessful attempt to increase the corporation's attractiveness to outside
investors, and where the majority stockholders retained control of the
corporation even after the surrender, they made a non-taxable capital
contribution.
Concurrently with the Mutual Company's capital contribution, the Company
will issue and sell shares of Common Stock to the public in the Offering.
Generally, a sale of shares for cash is a non-taxable event under Section 1032
of the Code. Management is not aware of any authority under current law which
would hold that the two concurrent transactions would be taxable.
There is, however, the possibility that the receipt and/or exercise of the
subscription rights by Eligible Account Holders and Supplemental Eligible
Account Holders could result in taxable gain or income to the extent that such
purchase rights are determined to have a fair market value. See "RISK FACTORS--
Possible Adverse Income Tax Consequences of the Distribution of Subscription
Rights." ELIGIBLE ACCOUNT HOLDERS AND SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS ARE
ENCOURAGED TO CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES IN
THE EVENT THAT SUCH PURCHASE RIGHTS ARE DEEMED TO HAVE ASCERTAINABLE VALUE.
CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER THE OFFERING
All Common Stock purchased in the Offering by a director or an executive
officer of the Bank or the Company and their Associates will be subject to a
restriction that the shares not be sold for a period of one year following the
Offering, except in the event of the death of such director or executive
officer. Each certificate for restricted shares will bear a legend giving
notice of this restriction on transfer, and instructions will be issued to the
effect that any transfer within such time period of any certificate or record
ownership of such shares other than as provided above is a violation of the
restriction. Any shares of Common Stock issued at a later date as a stock
dividend, stock split, or otherwise, with respect to such restricted stock will
be subject to the same restrictions. The directors and executive officers of
the Bank and the Company and certain other persons in receipt of material non-
public information will also be subject to the insider trading rules promulgated
pursuant to the Exchange Act.
Purchases of outstanding shares of Common Stock of the Company by
directors, executive officers (or any person who was an executive officer or
director of the Bank after adoption of the Plan) and their associates during the
three-year period following the Offering may be made only through a broker or
dealer registered with the SEC, except with the prior written approval of the
Department. This restriction does not apply, however, to negotiated
transactions involving more than 1% of the Company's outstanding Common Stock or
to the purchase of stock pursuant to a stock option plan or any tax qualified
employee stock benefit plan of or non-tax qualified employee stock benefit plan
of the Bank or Company (including any employee plan, recognition plan or
restricted stock plan).
33
<PAGE>
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The Company is authorized to issue capital stock consisting of 100,000,000
shares of common stock, par value $.01 per share, and 10,000,000 shares of
preferred stock, which may be issued in series and classes having such rights,
preferences, privileges and restrictions as the Company's Board of Directors may
determine. Each share of Common Stock will have the same relative rights as,
and will be identical in all respects with, each other share of Common Stock.
The Board of Directors of the Company is authorized to approve the issuance of
Common Stock up to the amount authorized by the Articles of Incorporation
without the approval of the Company's stockholders. A majority of the issued
and outstanding voting stock of the Company must be held at all time by the
Mutual Company. THE COMMON STOCK REPRESENTS NONWITHDRAWABLE CAPITAL, IS NOT AN
ACCOUNT OF AN INSURABLE TYPE, AND IS NOT INSURED BY THE FDIC, THE SAIF OR ANY
OTHER GOVERNMENT AGENCY. THE COMMON STOCK IS NOT GUARANTEED BY THE COMPANY OR
THE BANK. Upon payment of the purchase price for the shares of Common Stock
issued in the Offering, all such shares will be fully-paid, duly issued and
nonassessable.
COMMON STOCK
Voting Rights. The holders of the Common Stock 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. Each holder of the Common
Stock is entitled to one vote for each share held, except that the Articles of
Incorporation eliminates voting rights with respect to those shares that are
beneficially owned by any person in excess of 10% of the Common Stock then
outstanding excluding the Mutual Company and tax-qualified employee benefit
plans. Stockholders will not be permitted to cumulate their votes in the
election of directors.
Dividends. The holders of the Common Stock will be entitled to receive and
to share equally in such dividends as may be declared by the Board of Directors
out of funds legally available therefor.
Liquidation. In the unlikely event of any liquidation, dissolution, or
winding up of the Company, the holders of Common Stock (and the holders of any
class or series of stock entitled to participate with the Common Stock in the
distribution of assets) will be entitled to receive all assets of the Company
available for distribution in cash or in kind after the payment of all debts and
liabilities, the satisfaction of obligations to depositors having an interest in
any liquidation account maintained by the Bank, and the payment of any accrued
dividend claims. If the Company issues preferred stock, the holders thereof may
also have priority over the holders of the Common Stock in the event of
liquidation or dissolution.
Preemptive Rights; Redemption. Holders of the Common Stock will not be
entitled to preemptive rights with respect to any additional shares which may be
issued except that under current Pennsylvania law and policy, persons who are
depositors of the Bank at the time of any subsequent stock offering may be
entitled to receive preemptive rights to purchase stock in such offering. The
Common Stock is not subject to call for redemption. If the Company determined
to issue authorized but unissued shares in the future to persons other than, or
in addition to the existing stockholders, the interests of existing stockholders
would be diluted to the extent of the additional issuance.
SERIAL PREFERRED STOCK
None of the 10,000,000 authorized shares of serial preferred stock of the
Company will be issued in the Offering. The Board of directors is authorized,
without stockholder approval, to issue serial preferred stock and to fix and
state voting powers, designations, preferences or other special rights of such
shares. If and when issued, the serial preferred stock may rank senior to the
Common Stock as to dividend rights, liquidation preferences, or both, and may
have full, limited or no voting rights. Accordingly, the issuance of preferred
stock could adversely affect the voting and other rights of holders of Common
Stock.
34
<PAGE>
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
as of December 31, 1997 and for the year then ended, incorporated by reference
in this Prospectus and the Registration Statement, to the extent and for the
period indicated in their report, have been audited by Arthur Andersen LLP,
independent public accountants, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in giving said report.
The consolidated financial statements of the Bank and its subsidiaries as
of December 31, 1996 and for the two year period ended December 31, 1996,
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement, to the extent and for the period indicated in their report, have been
audited by KPMG Peat Marwick LLP, independent public accountants, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report.
LEGAL OPINIONS
The legality of the Common Stock will be passed upon for the Company by
Luse Lehman Gorman Pomerenk & Schick, P.C., Washington, D.C., special counsel to
the Company. Certain legal matters will be passed upon for Ryan Beck by Elias,
Matz, Tiernan & Herrick, LLP Washington, D.C.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated in this
Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1997, filed with the Commission on March 30, 1998.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, filed with the Commission on May 14, 1998.
3. The Company's current reports on Form 8-K filed on March 13, 1998
and May 7, 1998
All documents filed by the Company subsequent to the date hereof pursuant
to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act prior to the termination of
the Offering shall be deemed to be incorporated by reference into this
Prospectus and to be a part of the Prospectus from the date of filing thereof.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
the Registration Statement and this Prospectus to the extent that a statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Registration Statement or this Prospectus.
The Company will provide without charge to any person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all documents incorporated herein by reference (except exhibits
thereto). Such requests, in writing or by telephone, should be directed to:
James L. Durrell, Executive Vice President and Chief Financial Officer, Harris
Financial, Inc., 235 North Second Street Harrisburg, Pennsylvania 17101,
(717) 236-4041.
35
<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 other information or representation must not be relied upon as having been
authorized by Harris Financial, Inc. or Harris Savings Bank. 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 whom it is unlawful
to make such offer or solicitation in such jurisdiction. 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 Harris Financial,
Inc. or Harris Savings Bank since any of the dates as of which information is
furnished herein or since the date hereof.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION..................................................... 3
SUMMARY................................................................... 4
SPECIAL CONSIDERATIONS.................................................... 9
HARRIS FINANCIAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OTHER DATA................................. 11
HARRIS FINANCIAL, INC. ................................................... 12
REGULATORY CAPITAL COMPLIANCE............................................. 14
USE OF PROCEEDS........................................................... 15
CAPITALIZATION............................................................ 16
MARKET INFORMATION........................................................ 16
DIVIDEND POLICY........................................................... 17
PRO FORMA DATA............................................................ 18
THE OFFERING.............................................................. 22
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY............................... 33
EXPERTS................................................................. . 34
LEGAL OPINIONS............................................................ 34
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 34
</TABLE>
2,000,000 SHARES
HARRIS FINANCIAL, INC.
COMMON STOCK
PAR VALUE $.01 PER SHARE
------------------------------
PROSPECTUS
------------------------------
____________, 1998
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
Amount
------
<S> <C>
* Legal fees and expenses.............................. $ 125,000
* Printing and mailing................................. 150,000
* Accounting fees and expenses......................... 50,000
** Marketing fees and expenses.......................... 1,162,500
* EDGARization fees.................................... 20,000
* Data processing fees................................. 30,000
* Filing fees.......................................... 25,340
Nasdaq listing fee................................... 17,500
* Other expenses....................................... 19,660
----------
* Total................................................ $1,600,000
==========
</TABLE>
- ----------
* Estimated
** The Company has retained Ryan, Beck & Co., Inc. ("Ryan Beck") to assist in
the sale of Common Stock on a best efforts basis. Ryan Beck will be paid a
marketing fee of $50,000 plus a fee of 2% of all Common Stock sold in the
Offering, excluding shares sold to the Company's officers and directors or
employee benefit plans. Includes Ryan Beck's legal fees and legal counsel
expenses of $57,500.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ARTICLE VI of the Bylaws of Harris Financial, Inc. (the "Corporation")
provides for indemnification of directors and officers of the Company as
follows:
6.1 THIRD PARTY ACTIONS. The Corporation shall indemnify any person who
-------------------
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
representative of another domestic or foreign corporation for profit or not-for-
profit, partnership, joint venture, trust or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the action 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 proceeding, had no reasonable cause to believe his
conduct was unlawful, provided that the Corporation shall not be liable for any
amounts which may be due to any such person in connection with a settlement of
any action or proceeding effected without its prior written consent or any
action or proceeding initiated by any such person (other than an action or
proceeding to enforce rights to indemnification hereunder).
6.2 DERIVATIVE AND CORPORATE ACTIONS. The Corporation shall indemnify any
--------------------------------
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a representative of another domestic or foreign corporation
for profit or not-for-profit, partnership, joint venture, trust or other
enterprise, against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the defense or settlement of the action 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, provided that the Corporation
shall not be liable for any amounts which may be due to any such person in
connection with a settlement of any action or proceeding affected without its
prior written consent. Indemnification shall not be made under this Section 6.2
in respect of any claim, issue or matter as to which the person has been
adjudged to be liable to the Corporation unless and only to the extent that the
court of common pleas of the judicial district embracing the county in which the
registered office of the Corporation is located or the court in which the action
was brought determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the person
<PAGE>
is fairly and reasonably entitled to indemnity for the expenses that the court
of common pleas or other court deems proper.
6.3 MANDATORY INDEMNIFICATION. To the extent that a representative of the
-------------------------
Corporation has been successful on the merits or otherwise in defense of any
action or proceeding referred to in Section 6.1 or Section 6.2 or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
6.4 PROCEDURE FOR EFFECTING INDEMNIFICATION. Unless ordered by a court,
---------------------------------------
any indemnification under Section 6.1 or Section 6.2 shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the representative is proper in the circumstances because he
has met the applicable standard of conduct set forth in those sections. The
determination shall be made:
(1) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the action or proceeding;
(2) if such a quorum is not obtainable, or if obtainable and a majority
vote of a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion; or
(3) by the stockholders.
6.5 ADVANCING EXPENSES. Expenses (including attorneys' fees) incurred in
------------------
defending any action or proceeding referred to in this Article VI shall be paid
by the Corporation in advance of the final disposition of the action or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article VI
or otherwise.
6.6 INSURANCE. The Corporation shall have the power to purchase and
---------
maintain insurance on behalf of any person who is or was a representative of the
Corporation or is or was serving at the request of the Corporation as a
representative of another domestic or foreign corporation for profit or not-for-
profit, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against that liability under the provisions of this
Article VI.
6.7 MODIFICATION. The duties of the Corporation to indemnify and to
------------
advance expenses to a director or officer provided in this Article VI shall be
in the nature of a contract between the Corporation and each such person, and no
amendment or repeal of any provision of this Article VI shall alter, to the
detriment of such person, the right of such person to the advance of expenses or
indemnification related to a claim based on an act or failure to act which took
place prior to such amendment or repeal.
ARTICLE VIII of the Corporation's Articles of Incorporation provides for the
limitation of liability of directors and officers of the Company as follows:
A. PERSONAL LIABILITY FOR MONETARY DAMAGES. The personal liabilities of
the directors and officers of the Corporation for monetary damages for conduct
in their capacities as such shall be eliminated to the fullest extent permitted
by the BCL as it exists on the effective date of these Articles of Incorporation
or as such law may be thereafter in effect, and in no event shall a director be
personally liable, as such, for monetary damages for any action taken unless the
director has breached or failed to perform the duties of his office under the
BCL and the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. This section A of Article VIII shall not apply to
the responsibility or liability of a director pursuant to any criminal statute,
or the liability of a director for the payment of taxes pursuant to Federal,
State, or local law.
B. AMENDMENTS. No amendment, modification or repeal of this Article
VIII, nor the adoption of a provision of these Articles of Incorporation
inconsistent with this Article VIII, shall adversely affect the rights provided
hereby with respect to any claim, issue or matter in any proceeding that is
based in any respect on any alleged action or failure to act prior to such
amendment, modification, repeal or adoption.
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES:
The exhibits and financial statement schedules filed as part of this
registration statement are as follows:
(a) LIST OF EXHIBITS
The list of exhibits immediately precedes the exhibits filed as part
of this registration statement.
(b) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are filed because the required
information is not applicable or is included in the consolidated financial
statements or related notes.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to include any
additional or changed material information on the plan of distribution;
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering;
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering;
(4) That, for the purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report.
to security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where interim
financial information required to be presented by Article 3 of Regulation
S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the
latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information;
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred
or paid by a director, officer or controlling person of the Registrants 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 Registrants will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the questions whether such
indemnification by
<PAGE>
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue;
(7)(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrants pursuant to Rule 424 (b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective;
(7)(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, Harris
Financial, Inc. certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Harrisburg, Pennsylvania, on the 25th day of June, 1998.
HARRIS FINANCIAL, INC.
By: /s/ Charles C. Pearson, Jr.
-------------------------------------------
Charles C. Pearson, Jr., President and
Chief Executive Officer
We, the undersigned Directors of Harris Financial, Inc. (the "Company")
hereby severally constitute and appoint Charles C. Pearson, Jr. as our true and
lawful attorney and agent, to do any and all things in our names in the
capacities indicated below which said Charles C. Pearson, Jr. may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1933,
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with the registration statement on Form S-3 relating
to the offering of the Company's Common Securities, 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 approve, ratify and
confirm all that said Charles C. Pearson, Jr. shall do or cause to be done by
virtue thereof.
HARRIS FINANCIAL, INC.
<TABLE>
<CAPTION>
<S> <C>
By: /s/ Charles C. Pearson, Jr. By: /s/ James L. Durrell
----------------------------------------- -------------------------------------------
Charles C. Pearson, Jr., President, Chief James L. Durrell, Executive Vice
Executive Officer and Director President and Chief Financial Officer
(Principal Executive Officer) (Principal Financial and Accounting Officer)
Date: June 25, 1998 Date: June 25, 1998
By: /s/ Ernest P. Davis By: /s/ Jimmie C. George
----------------------------------------- -------------------------------------------
Ernest P. Davis, Director Jimmie C. George, Director
Date: June 25, 1998 Date: June 25, 1998
By: /s/ Robert A. Houck By: /s/ Bruce S. Isaacman
----------------------------------------- -------------------------------------------
Robert A. Houck, Director Bruce S. Isaacman, Director
Date: June 25, 1998 Date: June 25, 1998
By: /s/ Robert E. Kessler By: /s/ William E. McClure, Jr.
----------------------------------------- -------------------------------------------
Robert E. Kessler, Director William E. McClure, Jr., Director
Date: June 25, 1998 Date: June 25, 1998
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
By: /s/ William A. Siverling By: /s/ Frank R. Sourbeer
----------------------------------------- -------------------------------------------
William A. Siverling, Director Frank R. Sourbeer, Director
Date: June 25, 1998 Date: June 25, 1998
By: /s/ Donald B. Springer
-----------------------------------------
Donald B. Springer, Director
Date: June 25, 1998
</TABLE>
<PAGE>
EXHIBIT INDEX
1 Agency Agreement with Ryan Beck***
2 Stock Issuance Plan****
4 Form of Common Stock of Harris Financial, Inc.*
5.1 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. as to the legality of
the securities being issued****
5.2 Draft Fairness Opinion from Ryan Beck***
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (set forth in Exhibit
5.1)
23.3 Consent of Arthur Andersen LLP
24 Power of attorney (set forth on the signature pages to this Registration
Statement)
27 Financial Data Schedules**
99.1 Stock Order Form***
- --------------
* Filed as an exhibit to the Registrant's Registration Statement on Form S-4
(Registration No. 333-22415) previously filed with the Securities and
Exchange Commission on February 26, 1997, as amended March 17, 1997.
** Previously filed with the Securities and Exchange Commission on March 30,
1998 and May 14, 1998. Such documents are incorporated herein by reference
pursuant to Rule 601 of Regulation S-K.
*** To be filed supplementally or by amendment.
**** Previously filed
<PAGE>
Exhibit 23.1
KPMG PEAT MARWICK LLP
225 Market Street
Suite 300
P.O. Box 1190
Harrisburg, PA 17108-1190
The Board of Directors
Harris Financial, Inc.
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick
July 8, 1998
<PAGE>
Exhibit 23.3
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 20, 1998,
incorporated by reference in Harris Financial Inc.'s Form 10-K for the year
ended December 31, 1997 and to all references to our Firm included in this
registration statement.
/s/ Arthur Andersen LLP
Lancaster, Pennsylvania
July 7, 1998
