Registration No. 333-______
As filed with the Securities and Exchange Commission on June 10, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AMERICASBANK CORP.
(Name of small business issuer in its charter)
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Maryland 6035 52-1948980
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification Number)
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515 East Joppa Road, Towson, Maryland 21086
(410) 825-5580
(Address and telephone number of principal executive offices)
3621 East Lombard Street, Baltimore, Maryland 21224
(410) 342-8303
(Address of principal place of business or intended principal place of business)
J. Clarence Jameson, III
AmericasBank Corp.
515 East Joppa Road, Towson, Maryland 21086
(410) 825-5580
(Name, address and telephone number of agent for service)
Copies of communications, including copies of all communications sent to
agent for service, should be sent to:
Frank C. Bonaventure, Jr., Esquire,
Ober, Kaler, Grimes & Shriver, a Professional Corporation
120 E. Baltimore Street, 9th Floor, Baltimore, Maryland 21202
(410) 685-1120
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
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, 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, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the 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
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Title of each class of Dollar amount to be Proposed maximum Proposed maximum Amount of
securities to be registered Registered offering price per unit aggregate offering price(1) registration fee
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Common Stock $.01 par value $3,000,000 $10.00 $3,000,000 $909
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(1) Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(a) 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
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Disclosure alternative used (check one): Alternative 1 ; Alternative 2 X
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AMERICASBANK CORP.
CROSS REFERENCE SHEET
BETWEEN FORM SB-1 AND PROSPECTUS
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REGISTRATION STATEMENT ITEM AND
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HEADING LOCATION OR PROSPECTUS CAPTION
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1. Inside Front and Outside Back Cover Pages
of Prospectus...............................................Inside Front and Outside Back Cover
Pages; Additional Information; Reports to
Stockholders
2. Significant Parties.........................................Management
3. Relationship with Issuer of Experts Named in
Registration Statement......................................Not Applicable
4. Legal Proceedings .......................................Not Applicable
5. Changes in and Disagreements with
Accountants.................................................Not Applicable
6. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................................Indemnification of Officers and Directors
MODEL B ITEMS
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1. Cover Page..................................................Front Cover Page
2. Distribution Spread.........................................Front Cover Page
3. Summary Information, Risk Factors and
Dilution....................................................Prospectus Summary; Risk Factors
4. Plan of Distribution........................................Terms of the Offering, Plan of Distribution
5. Use of Proceeds to Issuer...................................Use of Proceeds
6. Description of Business.....................................Organization of the Company and the Bank; The
Acquisition; Business of the Company; Business
of the Bank; Regulation
7. Description of Property.....................................Business of the Company; Business of the Bank
8. Directors, Executive Officers and Significant
Employees...................................................Management
9. Remuneration of Directors and Officers......................Management
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10. Security Ownership of Management and
Certain Security Holders ...................................Management
11. Interest of Management and Others in
Certain Transactions........................................Management
12. Securities Being Offered....................................Description of Capital Stock; Description of
Warrants
PART F/S
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1. Financial Information Required in Prospectus................Financial Statements
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PRELIMINARY PROSPECTUS, DATED JUNE 10, 1997
SUBJECT TO COMPLETION
AMERICASBANK CORP.
A Proposed Holding Company For
AMERICASBANK (In Organization)
OFFERING OF COMMON STOCK
($0.01 par value per share)
240,000 Shares (Minimum); 300,000 Shares (Maximum)
AmericasBank Corp., a Maryland corporation (the "Company"), hereby offers
for sale a minimum of 240,000 shares (the "Minimum Number of Shares"), and a
maximum of 300,000 shares (the "Maximum Number of Shares"), of its common stock,
$0.01 par value per share (the "Common Stock"), at a per share offering price of
Ten Dollars ($10.00) (the "Offering"). Prior to the Offering, there has been no
public market for the Common Stock. See "TERMS OF THE OFFERING; PLAN OF
DISTRIBUTION."
The Company has been organized primarily to own all of the capital stock
of AmericasBank, a federal stock savings bank in organization (the "Bank"). The
Company and the Bank have not yet conducted active business operations, and the
authority to commence such operations is dependent upon, among other things, the
receipt of various regulatory approvals and the sale of the Minimum Number of
Shares in the Offering. As soon as possible after the satisfaction of the
conditions of the Offering, the Bank will purchase certain assets from, and will
assume certain liabilities of, Rushmore Trust & Savings, FSB ("Rushmore"),
including most of the assets and liabilities related to Rushmore's Baltimore,
Maryland branch office, which is located at 3621 East Lombard Street, Baltimore,
Maryland 21224 (the "Acquisition"). See "ORGANIZATION OF THE COMPANY AND THE
BANK" and "THE ACQUISITION."
The Company's executive offices and the Bank's sole banking office will be
located at 3621 East Lombard Street, Baltimore, Maryland 21224, which, as stated
above, is currently occupied by the Baltimore, Maryland branch office of
Rushmore. The telephone number of the Company and the Bank will be (410)
342-8303. The Company's interim address is 515 East Joppa Road, Towson, Maryland
21086 and its interim telephone number is (410) 825-5580.
SEE "RISK FACTORS" BEGINNING ON PAGE ___ OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
AN INVESTMENT IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK AND
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THE OFFERING UNLESS THEY CAN AFFORD TO
LOSE THEIR ENTIRE INVESTMENT. IF THE CONDITIONS OF THE OFFERING ARE MET AND
SUBSCRIPTION FUNDS ARE RELEASED FROM ESCROW BUT FINAL REGULATORY APPROVALS FOR
THE BANK TO COMMENCE BANKING OPERATIONS ARE NOT OBTAINED OR THE BANK DOES NOT
OPEN FOR ANY OTHER REASON OR THE ACQUISITION IS NOT CONSUMMATED FOR ANY REASON,
UPON LIQUIDATION OF THE COMPANY, SUBSCRIBERS COULD BE RETURNED AN AMOUNT LESS
THAN THEIR ORIGINAL SUBSCRIPTION AMOUNT. SEE "RISK FACTORS - RETURN OF LESS THAN
SUBSCRIPTION AMOUNT."
THE SECURITIES BEING OFFERED ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS
AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
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INSURANCE CORPORATION, THE SAVINGS ASSOCIATION INSURANCE FUND, THE BANK
INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "SEC"), NOR HAS THE SEC PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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Price to Underwriting Fees Proceeds
Public(1) and Commissions(2) to Issuer(3)
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Per Share ............ $10.00 $0 $10.00
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Total Minimum ........ $2,400,000.00 $0 $2,400,000.00
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Total Maximum ........ $3,000,000.00 $0 $3,000,000.00
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(1) The offering price of the Common Stock was arbitrarily determined by the
Company. See "RISK FACTORS - Arbitrary Pricing."
(2) The Offering is not underwritten. The Common Stock will be offered by the
Company and sold solely by one of the Company's directors, to whom no
commissions or other compensation will be paid on account of such activity,
although such person will be reimbursed for reasonable expenses incurred in the
Offering. The Company believes such person will not be deemed a broker under the
Securities Exchange Act of 1934 (the "Exchange Act") based on reliance on Rule
3a4-1 of the Exchange Act. See "TERMS OF THE OFFERING; PLAN OF DISTRIBUTION."
(3) Before the deduction of expenses related to the Offering, estimated at
$150,000. See "USE OF PROCEEDS."
Sale of the Common Stock will commence on or about ________________. This
is a "best efforts" offering by the Company, and it will be terminated by the
organizers of the Company and the Bank (the "Organizers") upon the sale of the
Maximum Number of Shares or ___________, whichever occurs first, unless the
Offering is extended, at the discretion of the Company, for additional periods
ending no later than __________________. However, the Organizers reserve the
right to terminate the Offering at any time after the sale of the Minimum Number
of Shares. Subscriptions are binding on subscribers and may not be revoked
without the consent of the Company.
The Company has established a minimum subscription of 2,500 shares and a
maximum subscription of 20,050 shares. However, the Organizers reserve the right
to waive these limits without notifying any subscriber. In addition, the
Organizers reserve the right to reject subscriptions for the purchase of shares
of Common Stock in whole or in part. It is anticipated that the Organizers and
certain other persons who, subject to regulatory approval, will serve as
directors of the Company and the Bank (the "Additional Directors"), together
with their immediate families, will purchase, directly or indirectly, an
aggregate of at least 140,520 shares (including shares which may be issued to
them in full or partial satisfaction of organizational loans made by them to the
Company) of the Common Stock to be sold in the Offering (58.55% if the Minimum
Number of Shares are sold and 46.84% if the Maximum Number of Shares is sold),
which shares have been reserved for their purchase. The Organizers and the
Additional Directors may purchase additional shares in the Offering if necessary
to permit the Company to satisfy the conditions of the Offering, and they may
purchase additional shares even if the Company has satisfied the conditions of
the Offering. Any shares purchased by the Organizers and the Additional
Directors in excess of their original
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commitment will be purchased for investment and not with a view to the resale of
such shares. See "TERMS OF THE OFFERING; PLAN OF DISTRIBUTION," "USE OF
PROCEEDS" and "MANAGEMENT Interest of Management and Others in Certain
Transactions."
Subscription proceeds will be deposited promptly in an interest-earning
escrow account at The First National Bank of Maryland, as escrow agent, pending
satisfaction of the conditions of the Offering, including receipt of
subscriptions and subscription proceeds for the Minimum Number of Shares. If the
Offering is terminated prior to completion, all subscription proceeds will be
returned promptly to subscribers, together with any interest earned thereon. In
the event of the successful completion of the Offering, all interest earned on
subscription funds will be retained by the Company. The Company will use all
interest earned to repay a portion of the expenses incurred in organizing the
Company and the Bank. After the Minimum Number of Shares are sold and the other
condition of the Offering is satisfied, the Company may continue to sell shares
of Common Stock until termination of the Offering, and all subscription proceeds
from those sales will be deposited in a non-escrow Company deposit account at
The First National Bank of Maryland pending acceptance or rejection of
subscriptions. Upon acceptance, such proceeds will be available for immediate
use by the Company to fund Offering and organizational expenses and for working
capital. See "TERMS OF THE OFFERING; PLAN OF DISTRIBUTION."
The date of this Prospectus is _________________.
[Legend on first page of prospectus]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement under the Securities Act of 1933, as amended,
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the Common Stock, reference
is hereby made to the Registration Statement and the exhibits thereto. The
Registration Statement may be examined at, and copies of the Registration
Statement may be obtained at prescribed rates from, the Public Reference Section
of the SEC, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the Company is required to file electronic versions of these documents
with the SEC through the SEC's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The Company and the Organizers have filed various applications with the
Office of Thrift Supervision (the "OTS") and the Federal Deposit Insurance
Corporation (the "FDIC"). As required by the applicable regulatory authorities,
these applications contain financial projections relating to the Bank. These
projections are not a part of this Prospectus and while they are based on
assumptions that the Organizers believe are reasonable, they should not be
relied upon by prospective investors. Prospective investors should rely only on
information contained in this Prospectus and in the Company's related
Registration Statement in making an investment decision. To the extent that
other available information not presented in this Prospectus, including
information available from the Company and information in public files and
records maintained by the OTS and the FDIC is inconsistent with information
presented in this Prospectus, such other information is superseded by the
information presented in this Prospectus.
REPORTS TO STOCKHOLDERS
Upon the effective date of the Registration Statement, the Company will be
subject to the reporting requirements of the Securities Exchange Act of 1934
(the "Exchange Act"), which include requirements to file annual reports on Form
10-KSB and quarterly reports on Form 10-QSB with the SEC. This reporting
obligation will exist for at least one year and will continue for fiscal years
thereafter, except that such reporting obligations may be suspended for any
subsequent fiscal year if at the beginning of such year the Common Stock of the
Company is held of record by less than three hundred persons or if the Common
Stock of the Company is held of record by less than five hundred persons and the
total assets of the Company have not exceeded $10 million on the last day of
each of the Company's three most recent fiscal years.
Regardless of whether the Company is subject to the reporting requirements
of the Exchange Act, the Company intends to furnish its stockholders with annual
reports containing audited financial information for each fiscal year and
intends to distribute quarterly reports for the first three quarters of each
fiscal year containing unaudited summary financial information. The Company's
fiscal year ends on December 31.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED
IN ITS ENTIRETY BY, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
APPEARING ELSEWHERE IN THIS PROSPECTUS. PARTICULAR ATTENTION IS DIRECTED TO THE
SECTION ENTITLED "RISK FACTORS."
Organization of the Company and the Bank
AmericasBank Corp. (the "Company") was incorporated under the laws of the
State of Maryland on June 4, 1996, primarily to own all of the outstanding
shares of capital stock of a federal stock savings bank to be named AmericasBank
(in organization) (the "Bank"). The Company may not acquire the capital stock of
the Bank without the approval of the Office of Thrift Supervision (the "OTS") to
become a savings and loan holding company of the Bank. On June 5, 1996, the
Company filed an application with the OTS to obtain the necessary approvals and
these approvals were granted by the OTS on April 15, 1997. The Company has not
conducted any business activities to date other than those deemed necessary by
the Company to proceed with this Offering. The Company initially will engage in
no business other than owning all of the outstanding shares of capital stock of
the Bank. See "ORGANIZATION OF THE COMPANY AND THE BANK - The Company."
On June 5, 1996, the organizers of the Company and the Bank (the
"Organizers") filed an application with the OTS to organize the Bank as a
federal stock savings bank. On April 15, 1997, the OTS conditionally approved
the application. However, before the Bank obtains final regulatory approval to
commence banking operations, the Bank, among other things, must obtain
membership in the Federal Home Loan Bank System, obtain federal deposit
insurance for its deposit accounts from the Federal Deposit Insurance
Corporation (the "FDIC") and complete the sale to the Company of a minimum of
$2,125,000 of its fully-paid capital stock. On April 23, 1997, the FDIC
conditionally approved the Bank's application for federal deposit insurance. See
"ORGANIZATION OF THE COMPANY AND THE BANK - The Bank."
Transaction with Rushmore Trust and Savings, FSB
On May 31, 1996, the Bank, through its Organizers, entered into a Branch
Purchase and Assumption Agreement, as amended, and a Loan Purchase and
Assumption Agreement, as amended (collectively, the "Agreements"), with Rushmore
Trust & Savings, FSB ("Rushmore"), for the acquisition of certain assets and the
assumption of certain deposit liabilities primarily related to Rushmore's
Baltimore, Maryland branch office located at 3621 East Lombard Street,
Baltimore, Maryland 21224 (the "Baltimore Branch"). The transactions
contemplated by the Agreements are referred to in this Prospectus as the
"Acquisition." It is contemplated that the Acquisition will close as soon as
possible after the satisfaction of the conditions of the Offering. In the event
the Bank fails to consummate the Acquisition for any reason, the Board of
Directors of the Company intends to propose to the Company's stockholders that
the Company be liquidated. See "RISK FACTORS - Return of Less Than Subscription
Amount." Thus, while the closing of the Acquisition is not a condition precedent
to the satisfaction of the conditions of the Offering, it is a condition
precedent to the opening of the Bank.
Upon consummation of the Acquisition, the Bank will assume liabilities
relating to deposits and certificates of deposit booked at the Baltimore Branch
(the "Baltimore Branch Deposits") and the Bank will pay Rushmore a premium for
such deposits. As of March 31, 1997, the Baltimore Branch Deposits totaled
approximately $8,138,000. This amount is subject to change due to the reduction
or growth of deposits occurring prior to the closing date of the Acquisition.
The Bank will acquire all of Rushmore's loans originated at the Baltimore Branch
(the "Baltimore Branch Loans") and certain of Rushmore's loans originated at
Rushmore's Montgomery County, Maryland branch office (the "Montgomery County
Loans") (the Baltimore Branch Loans and the Montgomery County Loans are
collectively referred to in this
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Prospectus as the "Rushmore Loans"), as well as certain assets related to the
operation of the Baltimore Branch (the "Baltimore Branch Assets"), including the
Baltimore Branch's real property, building and improvements (the "Real Estate"),
and all of the Baltimore Branch's fixtures, furnishings, equipment, furniture
and other tangible personal property (the "Furnishings"). As of March 31, 1997,
the Rushmore Loans totaled approximately $7,004,000, at face value, consisting
of approximately $5,846,000 in Baltimore Branch Loans and approximately
$1,158,000 in Montgomery County Loans.
The Bank will acquire the Rushmore Loans for the face value of such loans
on the closing date of the Acquisition, plus accrued interest, plus $50,000 less
aggregate escrow balances. The $50,000 payment will be offset by an equal credit
to the Bank, which the Bank will use to establish an allowance for loan losses.
See "BUSINESS OF THE BANK - Lending Activities - Allowance for Loan Losses." The
Bank will acquire the Real Estate for $50,000 and the Furnishings for $30,000.
The Bank will pay Rushmore $50,000 in exchange for Rushmore's agreement not to
compete with the Bank for a period of three years after the closing date of the
Acquisition (the "Covenant Not to Compete"). The Bank also will pay Rushmore a
deposit premium equal to the Baltimore Branch Deposits (plus accrued interest)
on the closing date of the Acquisition multiplied by 0.035 less $105,000.
Payment of the deposit premium, as well as the payment for the Rushmore Loans,
the Real Estate, the Furnishings and the Covenant Not to Compete, will be
effectuated through an appropriate reduction of the cash to be received by the
Bank from Rushmore to fund the deposits being assumed by the Bank.
Based upon March 31, 1997 estimates, upon consummation of the Acquisition,
the amount of net cash to be received by the Bank from Rushmore would be
approximately $789,000. This estimate is determined as follows: based on March
31, 1997 estimates, the gross amount to be paid to the Bank by Rushmore would be
approximately $8,139,000, consisting of (i) Baltimore Branch Deposits of
$8,138,000 and (ii) accrued interest on Baltimore Branch Deposits of
approximately $1,000. Based on March 31, 1997 estimates, approximately
$7,350,000 is to be netted against this gross amount consisting of (i) a deposit
premium totaling approximately $180,000 on $8,138,000 of Baltimore Branch
Deposits and accrued interest of $1,000; (ii) $7,004,000 of Rushmore Loans;
(iii) accrued interest receivable on the Rushmore Loans of approximately
$56,000; (iv) $130,000 for the Real Estate, the Furnishings and the Covenant Not
to Compete; less (v) a $20,000 deposit that the Bank paid Rushmore upon the
execution of the Agreements.
The parties have agreed that if the Acquisition has not been consummated
by June 30, 1997, the Bank, beginning on July 1, 1997 and continuing on the
first day of each month thereafter until the Acquisition has been consummated,
shall pay Rushmore one or more additional deposits of $20,000 each. Upon the
consummation of the Acquisition, the additional deposits will be added to the
amount of cash to be received by the Bank from Rushmore. In the event the Bank
fails to consummate the Acquisition for any reason other than the ability of
Rushmore to consummate the Acquisition, the Bank shall forfeit all deposits to
Rushmore.
It is currently contemplated that the Bank will employ all of the
Baltimore Branch's employees, including Patricia D'Alessandro, who currently is
a Vice President of Rushmore with managerial responsibilities for the Baltimore
Branch. Subject to regulatory approval, Ms. D'Alessandro will serve as the
President of the Bank and the Vice President of the Company. Ms. D'Alessandro
has over 20 years of experience in the commercial and retail banking industry.
See "THE ACQUISITION" and "MANAGEMENT."
Business to be Conducted by the Bank
The Bank will be a full service community-oriented financial institution.
Its business will be to attract retail deposits and to invest those deposits,
together with funds generated from operations and borrowing, primarily in one-
to four-family mortgage loans. To a lesser extent, the Bank will invest in home
equity loans, multi-family loans, commercial real estate loans, construction
loans (primarily for one- to four-family home construction for the borrower),
commercial business loans and consumer loans. The Bank's deposit
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base will be comprised of traditional deposit products including checking
accounts, NOW accounts, money market accounts, statement savings accounts,
individual retirement accounts and certificates of deposit. Upon the
commencement of its operations, the Bank will be actively engaged in many of
these activities as a result of the Acquisition. See "BUSINESS OF THE BANK -
Lending Activities," "- Sources of Funds" and "THE ACQUISITION."
The Company's executive offices and the Bank's initial banking office will
be located at 3621 East Lombard Street, Baltimore, Maryland 21224 (the "Banking
Office"), which, as stated above, is currently occupied by the Baltimore,
Maryland branch office of Rushmore, and which is located in the eastern portion
of Baltimore City. The telephone number of the Company and the Bank will be
(410) 342-8303. The Company's interim address is 515 East Joppa Road, Towson,
Maryland 21086 and its interim telephone number is (410) 825-5580. See "BUSINESS
OF THE BANK - Description of Property."
The Organizers of the Bank anticipate that the Bank initially will draw
most of its customer deposits and conduct most of its lending transactions from
within the area surrounding its Banking Office as well as from within the
Baltimore metropolitan area. The Baltimore Branch Deposits and the Baltimore
Branch Loans were primarily drawn from these areas. The Organizers intend to
expand the business of the Bank by opening branches. At this time, the
Organizers have not identified any location for a branch of the Bank.
See "BUSINESS OF THE BANK - Location and Service Area."
The liberalization of the interstate banking laws of Maryland and
surrounding states has led to substantial consolidation of the banking industry
in Maryland and particularly the Baltimore metropolitan area. Many of the area's
financial institutions have been acquired by large regional organizations
headquartered outside the Baltimore area. As a result of such consolidation, the
Organizer's believe that the competitive and economic environment is right for a
new, independent, locally owned and managed bank to serve the financial needs of
residents of Eastern Baltimore City as well as the needs of residents of the
Baltimore metropolitan area. The Bank intends to implement a strategy that
focuses on providing a superior level of customer service, close attention to
personal needs and quick response time. The Organizers believe that the
community will react favorably to this new enterprise.
Organizers and Directors
The Organizers of the Company and the Bank are King V. Cheek, Patricia
D'Alessandro, William A. Fogle, Jr., J. Clarence Jameson, III, Kemp Jayadeva,
Norman H. Katz, Larry D. Ohler and Kenneth D. Pezzulla. Subject to regulatory
approval, all of the Organizers, except for Ms. D'Alessandro, will serve as
directors of the Company and the Bank, with Mr. Jameson serving as Chairman of
the Board of each entity. As soon as the Bank commences its operations, subject
to regulatory approval, the Organizers intend to add Garbis Baklayan, Nicholas
J. Belitsos, M.D., Henry A. Berliner, Jr., Cynthia B. Conklin, Constantine
Frank, Shawki N. Malek, M.D., Michael W. Mekalian, Mark D. Noar, M.D., George E.
Rayme, Jr., Ramon F. Roig, Jr., M.D., Russell A. Rourke, Baldev Singh and
Melanie R. Sabelhaus as directors of the Company and the Bank (the "Additional
Directors"). See "MANAGEMENT."
The Organizers and the Additional Directors are recognized and established
individuals in their local communities. As a group, they have significant
banking and business experience and many close personal ties in the Baltimore
metropolitan area. Subject to regulatory approval, Ms. D'Alessandro will serve
as Vice President of the Company and President of the Bank. She has over 20
years of experience in the commercial and retail banking industry and currently
is a Vice President of Rushmore with managerial responsibilities for the
Baltimore Branch. Subject to regulatory approval, Mr. Jameson will serve as
President of the Company, Vice President of the Bank and Chairman of the Board
of the Company and the Bank. Mr. Jameson also has extensive experience in the
banking industry. Jameson and Associates, P.A., a public accounting firm of
which Mr. Jameson is the President and a principal, provides public accounting
services to numerous federal and state financial institutions. Mr. Jameson was
Chairman of the Board of Maryland
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Bank Corp., the savings and loan holding company of MarylandsBank, FSB from
February 1994 to June 1995. Mr. Jameson also was a director of MarylandsBank,
FSB from February 1994 to June 1995. In addition, Mr. Jameson was an organizer
of the Bank of Maryland, a state chartered commercial bank, and its holding
company, Bank Maryland Corp., and he served as Chairman of the Board of both
entities from 1985 to 1990. Mr. Pezzulla, who, subject to regulatory approval,
will serve as a director of the Company and the Bank and as the Secretary of the
Company and the Bank, has been a practicing attorney for almost 40 years,
devoting a substantial part of his practice to banking matters. He has been a
director of Rushmore and its predecessor, LaCorona Building and Loan
Association, since 1963. From 1985 to 1988, Mr. Pezzulla was President of
LaCorona Building and Loan Association.
The Organizers believe that Ms. D'Alessandro's banking experience,
particularly as it relates to her management experience at the Baltimore Branch,
the banking experience of Mr. Jameson and Mr. Pezzulla, and the extensive
business experience and contacts of the Organizers and the Additional Directors
in the Baltimore metropolitan area, should create immediate business
opportunities for the Bank.
Although no assurances can be given that the Bank will open for business,
as of the date of this Prospectus, the Organizers are engaged in completing the
tasks necessary to open the Bank for business by the third quarter of 1997,
assuming the conditions of the Offering are satisfied at such time and the
Acquisition has been consummated at such time.
It is anticipated that the Organizers and the Additional Directors,
together with members of their immediate families, will purchase, directly or
indirectly, an aggregate of at least 140,520 shares (including shares which may
be issued to them in full or partial satisfaction of organizational loans made
by them to the Company) of the Common Stock to be sold in the Offering (58.55%
if the Minimum Number of Shares are sold and 46.84% if the Maximum Number of
Shares is sold), which shares have been reserved for their purchase. The
Organizers and the Additional Directors may purchase additional shares in the
Offering if necessary to permit the Company to satisfy the conditions of the
Offering, and they may purchase additional shares even if the Company has
satisfied the conditions of the Offering. Any shares purchased by the Organizers
and the Additional Directors in excess of their original commitment will be
purchased for investment and not with a view to the resale of such shares. See
"TERMS OF THE OFFERING; PLAN OF DISTRIBUTION," "USE OF PROCEEDS" and "MANAGEMENT
- - Interest of Management and Others in Certain Transactions."
In consideration of services performed on behalf of the Company and the
Bank in preparing the necessary bank regulatory applications, negotiating the
terms of and performing the necessary investigations related to the Acquisition,
upon the closing of the Offering, Organizers Jameson and Pezzulla each will be
paid $25,000 from the proceeds of the Offering, and Jameson and Associates,
P.A., and Pezzulla and Pezzulla, LLC, each will be paid $12,500 from the
proceeds of the Offering. See "USE OF PROCEEDS" and "MANAGEMENT - Remuneration
of Directors and Officers."
The Organizers have established an advisory board of directors (the
"Advisory Board of Directors") for the Bank, which is comprised primarily of
professionals and business persons (the "Advisory Directors"), who will
provide advice to the Board of Directors of the Bank and who will promote the
interests of the Bank. An advisory board of directors is not required by any
Maryland or federal law or regulation and Advisory Directors are not subject to
regulatory approval or supervision. The Advisory Directors will serve at the
pleasure of the Board of Directors of the Bank. See "MANAGEMENT - Advisory Board
of Directors."
In order to assure that expenses related to the Acquisition and the
Offering and organizational expenses of the Company and the Bank are paid, the
Organizers, the Additional Directors and the Advisory Directors (collectively,
the "Lenders") have loaned money to the Company for the benefit of the Company
and the Bank (the "Organizational Loans"). The Organizational Loans are only
repayable from the proceeds of the
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Offering or from unexpended funds loaned to the Company, and the Lenders may
choose to receive repayment in full or in part through their receipt in the
Offering of shares of Common Stock valued at $10.00 per share. See "MANAGEMENT -
Interest of Management and Others in Certain Transactions."
Strategy
The Bank's objective will be to create a customer-driven financial
institution focused on providing value to clients by delivering products and
services matched to the clients' needs. It is believed that clients will be
drawn to a locally owned and managed institution that demonstrates an active
interest in its clients and their business and personal financial needs.
The banking industry in the Bank's market area has experienced substantial
consolidation in recent years. Many of the area's locally owned or managed
financial institutions have either been acquired by large regional bank holding
companies or have been consolidated into branches. This consolidation has been
accompanied by increasing fees for bank services, the dissolution of local
boards of directors, management and personnel changes and, in the perception of
the Organizers, a decline in the level of customer service. With recent changes
in interstate banking regulation, this type of consolidation is expected to
continue.
The Organizers believe that the present competitive and economic
environment is right for a new, independent, locally owned and managed bank to
serve the financial needs of residents of Eastern Baltimore City as well as the
needs of residents of the Baltimore metropolitan area. The Organizers further
believe that the Acquisition provides a unique opportunity for a new bank. Upon
consummation of the Acquisition, assuming the sale of the Minimum Number of
Shares in the Offering, the Bank will have approximately ten million dollars in
total assets, including approximately two million dollars raised through the
Offering and approximately seven million dollars in Rushmore Loans. See
"UNAUDITED PRO FORMA FINANCIAL INFORMATION." This amount of total assets will
immediately enable the Bank to make more loans then it would have been able to
make had it not engaged in the Acquisition. In addition, the Organizers believe
that as a result of the Acquisition the Bank will not experience many of the
growing pains typically experienced by new banks. The Bank will begin operations
from an existing, established facility; will succeed to an existing, established
customer base and will operate with a staff of personnel who are familiar with
the needs of the customers and who are known in the community. See "BUSINESS OF
THE BANK - Market Strategy."
The Offering
Securities Offered Common Stock of the Company, $0.01 par
value per share
Offering Price $10.00 per share
Number of Shares Offered Minimum: 240,000 shares (the "Minimum
Number of Shares") ($2,400,000)
Maximum: 300,000 shares (the "Maximum
Number of Shares") ($3,000,000)
Use of Proceeds The Company will use the net proceeds of
the Offering to capitalize the Bank at
$2,125,000 through the purchase of all
of the capital stock of the Bank,
subject to regulatory approval; to pay
organizational expenses of the Company,
estimated at $25,000, and the expenses
of this Offering, estimated at $150,000,
and to provide working capital to the
Company, estimated at $100,000 in the
event the Minimum Number of Shares are
sold
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in the Offering and $700,000 in the
event the Maximum Number of Shares are
sold in the Offering.
The Bank will use the $2,125,000
received from the Company for the sale
of its stock to pay organizational
expenses of the Bank, estimated at
$110,000, and the legal fees related to
the Acquisition, estimated at $40,000,
and to provide working capital to be
used for banking purposes.
If the conditions of the Offering are
met and subscription funds are released
from escrow but final regulatory
approvals for the Bank to commence
banking operations are not obtained or
the Bank does not open for any other
reason or the Acquisition is not
consummated for any reason, upon
liquidation of the Company, subscribers
could be returned an amount less than
their original subscription amount. See
"RISK FACTORS - Return of Less Than
Subscription Amount."
Conditions to Offering The Offering will be terminated and all
subscription funds will be returned
promptly to subscribers, together with
any interest earned thereon, unless on
or before __________ (or such later date
if the Offering is extended by the
Company for additional periods not to
exceed beyond ___________) (i) the
Company has accepted subscriptions and
payment in full for the Minimum Number
of Shares and (ii) the Organizers have
made adequate provisions for satisfying
(as they determine in their reasonable
discretion) any regulatory or other
conditions that must be satisfied before
the Bank may commence banking operations
and/or before the Bank may consummate
the Acquisition.
Subscription proceeds for shares
subscribed for will be deposited
promptly in an interest-earning escrow
account with The First National Bank of
Maryland, as escrow agent (the "Escrow
Agent"), under the terms of an escrow
agreement (the "Escrow Agreement"),
pending the satisfaction of the
conditions set forth above or the
termination of the Offering. Neither the
Company nor any of its officers or
directors is affiliated with the Escrow
Agent. Subscription funds held in escrow
will be invested in bank accounts,
including savings accounts and bank
money market accounts, short-term
certificates of deposit issued by a bank
or short-term securities issued or
guaranteed by the United States
Government. Subscriptions are binding on
subscribers and may not be revoked by
subscribers except with the consent of
the Company. The Company may, in its
sole discretion, allocate shares among
subscribers in the event of an
oversubscription for the shares. In
determining which subscriptions to
accept, in whole or in part, the Company
may take into account any factors it
considers relevant, including the order
in which subscriptions are received and
a subscriber's potential to do business
with or to direct customers to the Bank.
Upon satisfaction of the conditions set
forth above, all subscription funds held
in escrow, including any interest earned
thereon, shall be released to the
Company for its immediate use. Any
subscription proceeds accepted after
satisfaction of the conditions set forth
above but before termination of the
Offering will be deposited in a
non-escrow Company deposit account at
The First National Bank of Maryland
pending acceptance or rejection of
subscriptions. Upon acceptance, such
proceeds will be available for immediate
use by the Company to fund Offering and
organizational
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<PAGE>
expenses and for working capital. See
"TERMS OF THE OFFERING; PLAN OF
DISTRIBUTION."
Plan of Distribution Offers and sales of the Common Stock
will be made on behalf of the Company
solely by one of the Company's
directors. The director will receive no
commission or other remuneration in
connection with such activities, but
will be reimbursed for reasonable
expenses incurred in the Offering. See
"TERMS OF THE OFFERING; PLAN OF
DISTRIBUTION."
Upon the successful completion of the
Offering, the closing of the Acquisition
and the Bank's commencement of banking
operations, the Company will issue to
each stockholder of the Company, for no
consideration, a warrant to purchase one
share of Common Stock at an exercise
price of $10.00 per share for each share
of Common Stock that the stockholder
purchased in the Offering (the
"Warrants"). The Warrants will not be
callable by the Company nor will they be
redeemable or transferrable by the
holders thereof. The Warrants will
contain anti-dilution provisions
providing for adjustment upon the
occurrence of certain events, including
recapitalizations, reclassifications,
stock dividends, reorganizations or
similar transactions. The Warrants will
become exercisable at any time after
December 31, 1998 and will expire at
5:00 p.m. EST on June 30, 2007. See
"TERMS OF THE OFFERING; PLAN OF
DISTRIBUTION" and "DESCRIPTION OF
WARRANTS."
Risk Factors
An investment in the Common Stock offered hereby involves a high degree of
risk and should be considered only by investors who can afford a loss of their
entire investment. Prospective investors should consider all of the information
set forth herein, particularly the items set forth in the section entitled "Risk
Factors."
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<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND SHOULD BE PURCHASED ONLY BY INVESTORS WHO CAN AFFORD A LOSS OF THEIR
ENTIRE INVESTMENT. PRIOR TO INVESTING IN THE COMMON STOCK, PROSPECTIVE INVESTORS
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AND SPECULATIVE FACTORS INHERENT
IN AND AFFECTING THE BUSINESS OF THE COMPANY AND THE TERMS OF THE OFFERING. THE
ORDER OF THE FOLLOWING IS NOT INTENDED TO BE INDICATIVE OF THE RELATIVE
IMPORTANCE OF ANY DESCRIBED RISK NOR IS THE FOLLOWING INTENDED TO BE INCLUSIVE
OF ALL RISKS OF INVESTMENT IN THE COMMON STOCK. THE SHARES OF COMMON STOCK
OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE SAVINGS
ASSOCIATION INSURANCE FUND, THE BANK INSURANCE FUND OR ANY OTHER GOVERNMENT
AGENCY.
1. Return of Less Than Subscription Amount.
The amounts paid by subscribers in the Offering will be held in escrow
until (i) the Company has accepted subscriptions and payment in full for the
Minimum Number of Shares and (ii) the Organizers have made adequate provisions
for satisfying (as they determine in their reasonable discretion) any regulatory
or other conditions that must be satisfied before the Bank may commence banking
operations and/or before the Bank may consummate the Acquisition. If these
conditions are not met by ______________or by such subsequent date, not beyond
_________________, to which the Offering may be extended by the Company, all
subscriptions will be returned promptly in full, along with all interest earned
thereon. If these conditions are satisfied, the subscription amounts held in
escrow may be paid to the Company, and shares issued to subscribers, and all
interest earned on the subscription proceeds will be retained by the Company.
Any subscription proceeds accepted after satisfaction of the conditions set
forth above but before termination of the Offering will be deposited in a
non-escrow Company deposit account at The First National Bank of Maryland
pending acceptance or rejection of subscriptions. Upon acceptance, such proceeds
will be available for immediate use by the Company to fund Offering and
organizational expenses and for working capital.
If the conditions for releasing subscriptions funds from escrow are met
and such funds are released from escrow but final regulatory approvals for the
Bank to commence banking operations are not obtained or the Bank does not open
for any other reason or the Acquisition is not consummated for any reason, the
Company's Board of Directors intends to propose that the stockholders approve a
plan to liquidate the Company. Upon such a liquidation, the Company would be
dissolved and the Company's net assets (generally consisting of the amounts
received in the Offering plus any interest earned thereon, less the amount of
all costs and expenses incurred by the Company and the Bank) would be
distributed to stockholders. In such event, the Company will have incurred
numerous expenses related to the Offering and the organization of the Company
and the Bank, and the amounts distributed in liquidation to stockholders may be
substantially less than their subscription amount. See "TERMS OF THE OFFERING;
PLAN OF DISTRIBUTION" and "USE OF PROCEEDS."
2. Lack of Operating History. Both the Company and the Bank are newly formed and
neither has any operating history. Accordingly, prospective investors do not
have access to all of the information that, in assessing their proposed
investment, is available to the purchasers of securities of a financial
institution with a history of operations. Because the primary asset of the
Company will be the capital stock of the Bank, the Company's operating results
and financial position will be dependent upon the operating results and
financial position of the Bank. The business of the Bank is subject to the risks
inherent in the establishment of any new business and, specifically, of a new
federal stock savings bank. As a result of the substantial start-up
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<PAGE>
expenditures that must be incurred by a new bank, the Bank (and therefore the
Company) may not be profitable for several years after commencing business, if
ever.
3. General Risks of the Acquisition. As the Bank is newly formed and without any
operating history, it has never made an acquisition of a branch of another bank.
Nevertheless, the future growth of the Bank and the Company will depend on,
among other things, the Acquisition. The success of the Acquisition will depend
on a number of factors, including, without limitation, the Bank's ability to
limit the reduction of deposits, its success in deploying the cash received in
the Acquisition into assets bearing sufficiently high yields without incurring
unacceptable credit or interest rate risk, and its ability to service the loans
purchased in the Acquisition. There can be no assurance that the Bank will be
successful in performing these tasks.
4. Interest Rate and Lending Risks Associated with the Acquisition. The Rushmore
Loans consist primarily of fixed rate, long-term, single family residential
mortgage loans while the Baltimore Branch Deposits consist of variable rate
short-term accounts. Since the loans will mature more slowly than the deposits,
the net portfolio value and net interest income will tend to decrease during
periods of rising interest rates, but will increase during periods of falling
interest rates. During the past several years, market interest rates have been
relatively lower than in prior years. There is no assurance that such favorable
conditions will continue. Lower market interest rates also have the effect of
causing borrowers to refinance their mortgage loans. The refinancing of the
Rushmore Loans into loans with lower interest rates would negatively impact the
Bank's net interest income as it would be unlikely that the Bank would be able
to make new loans at or above the interest rates of the refinanced loans. Many
of the Rushmore Loans were made prior to the current documentation requirements
of GNMA, FNMA or FHLMC and, therefore, they may not be able to be resold in the
secondary market. During periods of rising interest rates, the Bank's inability
to resell certain of the Rushmore Loans in the secondary market could have a
material adverse effect on the Bank's net portfolio value and its net interest
income. In addition, the Rushmore Loans include non-owner occupied (investor)
residential mortgage loans on townhouses located primarily in Baltimore City.
These loans generally carry a higher degree of credit risk than owner occupied
residential mortgage loans. See "BUSINESS OF THE BANK - Liquidity and Interest
Rate Sensitivity."
5. Risk of Loan Losses. The risk of credit losses on loans varies with, among
other things, general economic conditions, the type of loan being made, the
creditworthiness of the borrower over the term of the loan and, in the case of a
collateralized loan, the value and marketability of the collateral for the loan.
Management of the Bank will maintain an allowance for loan losses based upon,
among other things, historical experience, an evaluation of economic conditions
and regular reviews of delinquencies and loan portfolio quality. Based upon such
factors, management of the Bank will make various assumptions and judgments
about the ultimate collectability of the loan portfolio and will provide an
allowance for loan losses based upon a percentage of the outstanding balances
and for specific loans when their ultimate collectability is considered
questionable. If management's assumptions and judgments prove to be incorrect
and the allowance for loan losses is inadequate to absorb future losses, or if
the bank regulatory authorities require the Bank to increase the allowance for
loan losses as a part of their examination process, the Bank's earnings could be
materially adversely affected . Although the Bank's loans typically will be
secured, certain lending activities may involve greater risks and the percentage
applied to specific loan types may vary.
Upon the commencement of its operations, the Bank's loans will consist of
the loans acquired pursuant to the Acquisition. Because these loans were
originated by Rushmore, the Organizers have made an estimate of what they
believe to be a reasonable initial allowance account for the Bank. In
establishing the Bank's initial allowance for loan losses, the Organizer's have
relied on, among other things, conversations with Rushmore, a review of the
payment history of the Rushmore Loans and current economic conditions. Although
the Organizers' believe that the Bank' initial allowance for loan losses will be
adequate, there can be no assurance that the allowance will prove sufficient to
cover future loan losses. In addition, future adjustments may be necessary if
economic conditions differ substantially from the assumptions used or adverse
developments arise with respect to the Bank's loans. Additions to the Bank's
allowance for loan
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<PAGE>
losses would result in a decrease in the Bank's net income and capital, and
could have a material adverse effect on the Bank and the Company. Upon the
commencement of its operations, the Bank estimates its allowance for loan losses
will be $50,000, which will represent approximately 0.7% of the Bank's
outstanding loans. Upon the commencement of its operations, the Bank does not
anticipate having any non-accrual loans in its loan portfolio.
6. Reliance on Officers of Bank. The Bank's success will be materially dependent
on the performance of each of Patricia D'Alessandro, J. Clarence Jameson, III
and Kenneth D. Pezzulla, who, subject to regulatory approval, will serve as the
President, Vice President and Secretary of the Bank respectively. The loss of
the services of any of these officers for any reason could have a material
adverse effect on the operations of the Bank. Neither Ms. D'Alessandro nor
Messrs. Jameson and Pezzulla will be a party to any employment agreement with
the Bank and each could resign or be terminated at any time and for any reason.
See "MANAGEMENT."
7. No Market for Issuer's Securities. There currently is no trading market for
the Common Stock. The Company anticipates that it will attempt to seek an
agreement with one or more broker-dealers to act as a market maker in the Common
Stock, subject to applicable laws and regulatory requirements. The Company
anticipates that the market maker(s), if any, will submit quotations for the
Common Stock to the National Daily Quotation Sheets, popularly known as the
"Pink Sheets," which are published by the National Daily Quotation Bureau. There
can be no assurance that a broker-dealer will agree to act as a market maker in
the Common Stock. Making a market in securities involves maintaining bid and ask
quotations and being able, as principal, to effect transactions in reasonable
quantities at those quoted prices, subject to various securities laws and other
regulatory requirements. The development of a public trading market depends,
however, upon the existence of willing buyers and sellers, the presence of which
is not within the control of the Company, the Bank or any market maker. Even
with a market maker, factors such as the limited size of this Offering, the lack
of earnings history for the Company and the absence of a reasonable expectation
of dividends within the near future mean that there can be no assurance of the
development in the foreseeable future of an active and liquid market for the
Common Stock. Even if a market develops, there can be no assurance that a market
will continue, or that stockholders will be able to sell their shares at or
above the Offering price. In addition, the development of any trading market for
the Common Stock may be adversely impacted by purchases of large amounts of
shares of Common Stock in the Offering by the Organizers and the Additional
Directors since shares purchased by such persons will generally not be freely
tradeable unless registered for resale under applicable securities laws. If a
market for the Common Stock does not develop, any investment in the Common Stock
will be highly illiquid, and stockholders may not be able to liquidate their
investments in the event of an emergency or for any other reason. Purchasers of
Common Stock should carefully consider the potentially illiquid and long-term
nature of their investment in the shares being offered hereby. See "DESCRIPTION
OF CAPITAL STOCK - Restrictions on Transferability."
8. Arbitrary Pricing. Because the Company and the Bank are in organization, the
Offering price for the Common Stock was arbitrarily determined by the Organizers
without reference to traditional criteria for determining value such as book
value or historical or projected earnings. The price per share was set to enable
the Company to raise gross proceeds of between $2,400,000 and $3,000,000 in the
Offering through the sale of a reasonable number of shares of Common Stock, and
the price per share is essentially equivalent to the initial book value per
share prior to the payment of the Offering expenses and the Company's and the
Bank's organizational expenses and the consummation of the Acquisition. No
assurance can be given that any of the shares could be resold for the Offering
price or any other amount. See "TERMS OF THE OFFERING; PLAN OF DISTRIBUTION" and
"CAPITALIZATION."
9. Government Regulation. The Company and the Bank will operate in a highly
regulated environment and will be subject to examination, supervision and
comprehensive regulation by the OTS and the FDIC. In addition, in certain
respects, the Bank will be subject to regulation by the State of Maryland.
Banking regulations, designed primarily for the safety of depositors, may limit
a federal stock savings bank's growth
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<PAGE>
and the return to its investors by restricting such activities such as the
payment of dividends, mergers with or acquisitions by other institutions,
investments, loans and interest rates, interest rates paid on deposits and the
creation of branch offices. The Bank also will be subject to capitalization
guidelines set forth in federal legislation, and could be subject to enforcement
actions to the extent the Bank is found by regulatory examiners to be
undercapitalized. Laws and regulations applicable to the Company and the Bank
could change at any time, and there can be no assurance that such changes would
not adversely affect the business of the Company and/or the Bank. In addition,
the cost of compliance with regulatory requirements could adversely affect the
Company's and the Bank's ability to operate profitably. See "REGULATION."
10. Competition. The Bank's market area of Eastern Baltimore City, Maryland as
well as the Baltimore metropolitan area are highly competitive markets for
financial services and the Bank will face intense competition both in making
loans and in attracting deposits. The Bank will face direct competition from a
significant number of financial institutions operating in the Bank's market
area, many with a state-wide or regional presence and in some cases a national
presence. Many of these financial institutions have been in business for many
years, have established customer bases, are significantly larger and have
greater financial resources than the Bank will have and are able to offer
certain services that the Bank is not able to offer. In addition, the Bank will
face competition for deposits and loans from non-bank institutions such as
brokerage firms, credit unions, insurance companies, money market mutual funds
and private lenders. See "BUSINESS OF THE BANK - Location and Service Area" and
"- Competition."
11. Effect of Interest Rates. The operations of the Bank will be substantially
dependent on its net interest income, which is the difference between the
interest expense incurred in connection with the Bank's interest-bearing
liabilities, such as interest on deposit accounts, and the interest income
received from its interest-earning assets, such as loans and investment
securities. Volatility in interest rates can result in the flow of funds away
from banks of the type similar to the Bank and into direct investments, such as
corporate securities and other investment vehicles which, because of among other
things the absence of federal deposit insurance, generally pay higher rates of
return. Such volatility could cause the Bank to pay increased interest rates to
obtain deposits, and if the Bank is not able to increase the interest rates on
its loans and the rate of return on its investment portfolio, its net interest
income will suffer. See "BUSINESS OF THE BANK - Liquidity and Interest Rate
Sensitivity."
12. Monetary Policy and Other Economic Factors. Any change in governmental
economic and monetary policy, banking and credit regulations and general
economic conditions could affect the demand for the Bank's services. The rates
of interest payable on deposits and chargeable on loans will be affected by
fiscal policy as determined by various governmental and regulatory authorities,
in particular the Board of Governors of the Federal Reserve System (the "Federal
Reserve"), as well as by national, state and local economic conditions. Through
open market transactions, variations in the discount rate and the establishment
of reserve requirements, the Federal Reserve exerts considerable influence over
the cost and availability of funds obtainable for lending or investing. These
actions may at times result in significant fluctuations in interest rates, which
could have adverse effects on the operations of the Bank. See BUSINESS OF THE
BANK - Competition."
13. Control by Organizers and Additional Directors. It is anticipated that the
Organizers and the Additional Directors, together with their immediate families,
will purchase, directly or indirectly, an aggregate of at least 140,520 shares
(including shares which may be issued to them in full or partial satisfaction of
organizational loans made by them to the Company) of the Common Stock to be sold
in the Offering. If the Organizers and the Additional Directors purchase such
number of shares of Common Stock, the Organizers and the Additional Directors
would own approximately 58.55% of the Company's outstanding shares of Common
Stock in the event the Minimum Number of Shares are sold and 46.84% of the
Company's outstanding shares of Common Stock in the event the Maximum Number of
Shares are sold. In addition, the Organizers and the Additional Directors may
purchase additional shares in the Offering if necessary to permit the Company to
satisfy the conditions of the Offering, and they may purchase additional shares
even
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<PAGE>
if the Company has satisfied the conditions of the Offering. Any shares
purchased by the Organizers and the Additional Directors in excess of their
original commitment will be purchased for investment and not with a view to the
resale of such shares. As a result of the anticipated stock ownership in the
Company by the Organizers and Additional Directors as described above, together
with the influence that may be exerted by such persons due to their positions
with the Company and/or the Bank, as a group such persons will have effective
control of the Company and the Bank following the Offering. Because purchases by
the Organizers and the Additional Directors are expected to be substantial,
investors should not place any reliance on the sale of the Minimum Number of
Shares as an indication of the merits of the Offering or that their investment
decision is shared by other unaffiliated investors. See "TERMS OF THE OFFERING;
PLAN OF DISTRIBUTION," "USE OF PROCEEDS" and "MANAGEMENT - Interest of
Management and Others in Certain Transactions."
14. Dividends. The Company is a legal entity separate and distinct from the
Bank. Because the Company initially will engage in no business other than owning
all of the outstanding shares of capital stock of the Bank, the Company's
payment of dividends on the Common Stock will generally be funded only from
dividends received by the Company from the Bank, which dividends are dependent
on, among other things, the Bank's profitability. In addition, the payment of
dividends may be made only if the Bank and the Company are in compliance with
certain applicable regulatory requirements governing the payment of dividends by
each of them. No assurance can be given that dividends on the Common Stock will
ever be paid. The Company expects that earnings, if any, will be used initially
for operating capital and the Company does not foresee payment of any dividends
in the near future. THE COMMON STOCK SHOULD NOT BE PURCHASED BY PERSONS WHO NEED
OR DESIRE DIVIDEND INCOME FROM THIS INVESTMENT. See "REGULATION - Federal
Savings Institution Regulation - Limitation on Capital Distributions." and
"DIVIDEND POLICY."
15. Risk of Expansion Strategies. The Organizers intend to expand the business
of the Bank by opening branches. At this time, the Organizers have not
identified any location for a branch of the Bank. The Bank's success in
expanding its business through the opening of branches will be dependent upon,
among other things, the Bank's access to capital, its ability to manage the
growth, its ability to attract and train qualified employees and its ability to
obtain regulatory approval. There can be no assurance that the Organizers will
be successful in implementing this expansion strategy or, if they are able to
implement the expansion strategy, that they will be able to manage the resultant
growth. In addition, the Organizers inability to implement the expansion
strategy could negatively impact the Bank's ability to successfully compete in
the marketplace.
16. Ability to Raise Additional Capital. The Organizers believe that the minimum
proceeds of $2,400,000 from the Offering will satisfy the cash requirements of
the Company and the Bank for their respective first three years of operations,
assuming no new branches are opened during this period, but there can be no
assurance that this will be the case. This estimate is based on the level of
expenses commensurate with the estimated number of employees and estimated size
of the operations of the Bank during this period and the amount of capital
normally required for a bank with total assets in the range in which the
Organizers expect the Bank's assets to be during this period. The Company's and
the Bank's future capital requirements, however, will depend on many factors,
including the Bank's ability to successfully originate loans and attract
deposits and the Bank's ability to implement the expansion strategy described
above. To the extent that the funds generated from the Offering are insufficient
to fund the Company and the Bank's future operating requirements, it may be
necessary to raise additional funds, through public or private financings. Any
equity or debt financings, if available at all, may be on terms which are not
favorable to the Company or the Bank and, in the case of equity financings,
could result in dilution to the Company's shareholders. Accordingly, if adequate
capital is not available, the Bank may be required to curtail significantly its
expected operations. See "USE OF PROCEEDS" and "BUSINESS OF THE BANK."
16
<PAGE>
17. Transactions with Related Parties. In order to assure that expenses related
to the Acquisition and the Offering and organizational expenses of the Company
and the Bank are paid, the Organizers, the Additional Directors and the Advisory
Directors (collectively, the "Lenders") have loaned money to the Company for the
benefit of the Company and the Bank (the "Organizational Loans"). The
Organizational Loans are only repayable from the proceeds of the Offering or
from unexpended funds loaned to the Company, and the Lenders may choose to
receive repayment in full or in part through their receipt in the Offering of
shares of Common Stock valued at $10.00 per share. Upon commencement of the
Company's and the Bank's operations, it is anticipated that Jameson and
Associates, P.A., will provide tax and other accounting services to the Company
and the Bank and that Pezzulla and Pezzulla, LLC, will provide legal services to
the Company and the Bank. Organizer J. Clarence Jameson, III is the President
and a principal of Jameson and Associates, P.A. and Organizer Kenneth D.
Pezzulla is a member of Pezzulla and Pezzulla, LLC. Mr. Pezzulla currently
serves as a director of Rushmore and he will resign from that position upon
consummation of the Acquisition. Mr. Pezzulla also currently provides legal
services to the Baltimore Branch. In addition, upon commencement of the
Company's and the Bank's operations, it is anticipated that National Mortgage
Corporation will provide mortgage services to the Bank, which services may
include consulting services and the purchase and/or sale of mortgages.
Additional Director Henry A. Berliner, Jr. is the President and a principal of
National Mortgage Corporation. Although the Organizers believe that the terms of
each of these transactions are or will be as favorable as could be obtained from
unrelated third parties, each of these transactions pose a conflict of interest
for the involved parties. See "MANAGEMENT - Interest of Management and Others in
Certain Transactions."
18. Antitakeover Provision. Certain provisions included in the Charter and
Bylaws of the Company are designed to encourage potential acquirors to negotiate
directly with the Board of Directors of the Company and to discourage takeover
attempts. Such provisions may discourage non-negotiated takeover attempts which
certain stockholders could deem to be in their best interests. These provisions
also tend to perpetuate management. See "DESCRIPTION OF CAPITAL STOCK - Certain
Antitakeover Effects."
19. New Federal Legislation. On September 30, 1996, the Economic Growth and
Regulatory Paperwork Reduction Act of 1996 (the "1996 Act") was enacted. The
1996 Act changed a broad spectrum of prior banking laws. Among other things, the
1996 Act requires the Secretary of the Treasury to present a report to Congress
before March 31, 1997 containing the Secretary of the Treasury's recommendations
for a common depository charter for all federally chartered depository
institutions, and the elimination of separate charters between thrifts and
commercial banks. The Secretary has made two alternative recommendations to
Congress. Under the first alternative, after a two-year conversion period, all
federally chartered thrifts would be required to convert to national banks or
state banks and the OTS would be abolished. Under the second alternative, the
thrift charter would remain intact. In addition, legislation currently is
pending before Congress that is substantially similar to the Secretary's first
alternative described above. If the Bank was required to convert from a federal
stock savings bank to a national bank or a state bank, the Bank's regulatory
structure could significantly change. At this time, however, it is not possible
to determine the effect of the Secretary's recommendations or the extent to
which the Secretary's recommendations, Congress' action on the recommendations
or Congress' actions on the pending legislation would effect the operations of
the Bank. See "REGULATION - New Federal Legislation."
20. Recapitalization of SAIF. The 1996 Act requires institutions the deposits of
which are insured by the Savings Association Insurance Corporation ("SAIF"),
which is administered by the Federal Deposit Insurance Corporation ("FDIC"), to
pay a one-time assessment to increase the capitalization of SAIF. Currently,
SAIF provides deposit insurance for federal savings associations, such as
federal stock savings banks. The purpose of the assessment is to bring SAIF
premiums in line with deposit insurance premiums assessed by the Bank Insurance
Fund ("BIF") (also administered by the FDIC), which is the insurance fund which
insures most commercial bank deposits. The 1996 Act also provides for the
eventual merger of SAIF and BIF into a new insurance fund to be called the
Deposit Insurance Fund ("DIF"). The 1996 Act is unclear with respect to its
effect on institutions like the Bank as the legislation does not address how or
if the one-
17
<PAGE>
time assessment will be applied to federal stock savings banks chartered after
the enactment of the legislation. It is the Organizers' understanding from
conversations with the applicable regulatory authorities that the one-time
assessment will not be assessed against the Bank. However, there can be no
assurance that that will be the case.
21. Dilution. After the Offering, the Company expects to adopt a stock option
plan which will permit the Company to grant options to officers, directors, key
employees, advisors and/or consultants of the Company. The exercise of options
could have a dilutive effect on the stockholders' interest in the Company's
earnings and book value. In addition, the Company may issue additional shares of
Common Stock or preferred stock in the future. Any such stock offering by its
nature could be dilutive to the holdings of purchasers in this Offering.
18
<PAGE>
TERMS OF THE OFFERING; PLAN OF DISTRIBUTION
General
The Company is offering for sale a minimum of 240,000 shares and a maximum
of 300,000 shares of its Common Stock at a purchase price of $10.00 per share to
raise gross proceeds between $2,400,000 and $3,000,000 for the Company. The
Company has established a minimum subscription of 250 shares ($2,500) and a
maximum subscription of 20,050 shares ($200,500). However, the Company reserves
the right to waive these limits without notifying any subscriber. Because the
Company and the Bank are in organization, the Offering price of the Common Stock
was arbitrarily determined by the Organizers without reference to traditional
criteria for determining value such as book value or historical or projected
earnings.
Subscribers should be aware that beneficial ownership of as little as 10%
of the outstanding shares of Common Stock could obligate the beneficial owner to
comply with certain reporting and disclosure requirements of federal banking
laws. The Company will notify any person of which the Company is aware who
subscribes for 10% or more of the outstanding shares of Common Stock in the
Offering that such person may be subject to certain reporting and disclosure
requirements.
It is anticipated that the Organizers and the Additional Directors,
together with their immediate families, will purchase, directly or indirectly,
an aggregate of at least 140,520 shares (including shares which may be issued to
them in full or partial satisfaction of organizational loans made by them to the
Company) of the Common Stock to be sold in the Offering. In addition, the
Organizers and the Additional Directors may purchase additional shares in the
Offering if necessary to permit the Company to satisfy the conditions of the
Offering, and they may purchase additional shares even if the Company has
satisfied the conditions of the Offering. Any shares purchased by the Organizers
and the Additional Directors in excess of their original commitment will be
purchased for investment and not with a view to the resale of such shares.
Because purchases by the Organizers and the Additional Directors are expected to
be substantial, investors should not place any reliance on the sale of the
Minimum Number of Shares as an indication of the merits of the Offering or that
their investment decision is shared by other unaffiliated investors. See
"MANAGEMENT."
The Common Stock will be offered by the Company and sold solely by one of
the Company's directors, to whom no commissions or other compensation will be
paid on account of such activity, although such person will be reimbursed for
reasonable expenses incurred in the Offering. No broker or dealer has been
retained by the Company.
Subscriptions to purchase shares of the Common Stock will be received
until 5:00 p.m. EST, on ______________, unless all of the Common Stock is
earlier sold or the Offering is earlier terminated or extended by the Company.
See "Conditions of the Offering and Release of Funds" below. The Company
reserves the right to terminate the Offering at any time or to extend the
expiration date for additional periods not to extend beyond _________. The date
the Offering expires (as possibly extended) is referred to herein as the
"Expiration Date." No written notice of an extension of the Offering need be
given prior to any extension and any such extension will not alter the binding
nature of subscriptions already accepted by the Company.
Following acceptance by the Company, subscriptions are binding on
subscribers and may not be revoked by subscribers except with the consent of the
Company. In addition, the Company reserves the right to cancel accepted
subscriptions at any time and for any reason until the proceeds of the Offering
are released from escrow (as discussed in greater detail in "Conditions of the
Offering and Release of Funds" below), and the Company reserves the right to
reject, in whole or in part and in its sole discretion, any subscription. The
Company may, in its sole discretion, allocate shares of Common Stock among
subscribers in the event of an oversubscription for the Common Stock. In
determining which subscriptions to accept, in whole or in
19
<PAGE>
part, the Company may take into account the order in which subscriptions are
received and a subscriber's potential to do business with or to direct customers
to the Bank.
In the event the Company rejects all, or accepts less than all, of any
subscription, the Company will refund promptly, without interest or deductions
of any kind, the amount remitted that corresponds to Ten Dollars ($10.00)
multiplied by the number of shares of Common Stock as to which the subscription
was not accepted. If the Company accepts a subscription but in its discretion
subsequently elects to cancel all or part of such subscription, the Company will
refund promptly the amount remitted that corresponds to Ten Dollars ($10.00)
multiplied by the number of shares of Common Stock as to which the subscription
was canceled, together with any interest earned thereon.
After the conditions of the Offering are satisfied and escrowed funds are
delivered to the Company, certificates representing shares of Common Stock duly
subscribed and paid for will promptly be issued by the Company to the
subscribers.
After the successful completion of the Offering, the closing of the
Acquisition and the Bank's commencement of banking operations, the Company will
issue to each stockholder of the Company, for no consideration, a warrant to
purchase one share of Common Stock at an exercise price of $10.00 per share for
each share of Common Stock that the stockholder purchased in the Offering (the
"Warrants"). The Warrants will not be callable by the Company nor will they be
redeemable or transferrable by the holders thereof. The Warrants will contain
anti-dilution provisions providing for adjustment upon the occurrence of certain
events, including recapitalizations, reclassifications, stock dividends,
reorganizations or similar transactions. The Warrants will become exercisable at
any time after December 31, 1998 and will expire at 5:00 p.m. EST on June 30,
2007. See "DESCRIPTION OF WARRANTS."
Conditions of the Offering and Release of Funds
Subscription proceeds for shares subscribed for will be deposited promptly
in an interest-earning escrow account with The First National Bank of Maryland,
as escrow agent (the "Escrow Agent"), under the terms of an escrow agreement
(the "Escrow Agreement"), pending the satisfaction of the conditions of the
Offering or the termination of the Offering. Neither the Company nor any of its
officers or directors is affiliated with the Escrow Agent. The Offering will be
terminated, no shares of Common Stock will be issued, and no subscription
proceeds will be released from escrow to the Company unless on or before the
Expiration Date (i) the Company has accepted subscriptions and payment in full
for the Minimum Number of Shares and (ii) the Organizers have made adequate
provisions for satisfying (as they determine in their reasonable discretion) any
regulatory or other conditions that must be satisfied before the Bank may
commence banking operations and/or before the Bank may consummate the
Acquisition. At the Organizers' discretion, and upon receipt of written
confirmation from a Lender that the Lender will seek payment for his
Organizational Loan through the issuance to him of shares of Common Stock in the
Offering, the Organizers may include the shares to be issued to such person in
determining whether the Company has accepted subscriptions and payment in full
for the Minimum Number of Shares.
If the above conditions are not satisfied by the Expiration Date or the
Offering is otherwise earlier terminated, accepted subscription agreements will
be of no further force or effect. In either event, the Company will return to
all subscribers all subscription funds together with any interest earned
thereon.
The Escrow Agent has not investigated the desirability or advisability of
an investment in the Common Stock by prospective investors and has not approved,
endorsed or passed upon the merits of an investment in the Common Stock.
Subscription funds held in escrow will, at the direction of the Company, be
invested by the Escrow Agent only in bank accounts, including savings accounts
and bank money market accounts, short-term certificates of deposit issued by a
bank or short-term securities issued or guaranteed by the United
20
<PAGE>
States Government. In no event will the subscription proceeds held in escrow be
invested in instruments that would mature after the Expiration Date.
If the above conditions are satisfied, the subscription amounts held in
escrow, including any interest earned thereon, shall be released to the Company
for its immediate use and shares may be issued to subscribers. Any subscription
proceeds accepted after satisfaction of the conditions set forth above but
before termination of the Offering will be deposited in a non-escrow Company
deposit account at The First National Bank of Maryland pending acceptance or
rejection of subscriptions. Upon acceptance, such proceeds will be available for
immediate use by the Company to fund Offering and organizational expenses and
for working capital. See "USE OF PROCEEDS."
If the conditions for releasing subscriptions funds from escrow are met
and such funds are released from escrow but final regulatory approvals for the
Bank to commence banking operations are not obtained or the Bank does not open
for any other reason or the Acquisition is not consummated for any reason, the
Company's Board of Directors intends to propose that the stockholders approve a
plan to liquidate the Company. Upon such a liquidation, the Company would be
dissolved and the Company's net assets (generally consisting of the amounts
received in the Offering plus any interest earned thereon, less the amount of
all costs and expenses incurred by the Company and the Bank) would be
distributed to stockholders. In such event, the Company will have incurred
numerous expenses related to the Offering and the organization of the Company
and the Bank, and the amounts distributed in liquidation to stockholders may be
substantially less than their subscription amount.
How to Subscribe
Shares of Common Stock may be subscribed for by executing and delivering
to the Company the subscription agreement (the "Subscription Agreement")
attached hereto as Exhibit A on or prior to the Expiration Date, and by
delivering to the Company payment of the purchase price for the shares of Common
Stock subscribed. Payment must be made in United States dollars by cash or by
check, bank draft or money order drawn to the order of The First National Bank
of Maryland, Escrow Agent for AmericasBank Corp. An executed Subscription
Agreement together with payment of the purchase price for the Common Stock
subscribed must be received by the Company no later than the close of business
(5:00 p.m. EST) on ______________, unless the Offering is extended by the
Company for additional periods not to extend beyond ________. Subscribers should
retain a copy of the completed Subscription Agreement for their records.
21
<PAGE>
USE OF PROCEEDS
General
Although the amounts set forth below provide an indication of the proposed
use of funds based on the plans and estimates of the Organizers, actual expenses
may vary from the estimates. The Organizers believe that the minimum proceeds of
$2,400,000 from the Offering will satisfy the cash requirements of the Company
and the Bank for their respective first three years of operations, assuming no
new branches are opened during this period, but there can be no assurance that
this will be the case. This estimate is based on the level of expenses
commensurate with the estimated number of employees and estimated size of the
operations of the Bank during this period and the amount of capital normally
required for a bank with total assets in the range in which the Organizers
expect the Bank's assets to be during this period. In order for the Bank to open
additional branches however, the Company and/or the Bank may be required to
raise additional capital.
Depending upon the final allocation of organizational, Offering and
Acquisition expenses between the Company and the Bank, a total of up to $652,000
of the net proceeds of the Offering may be used by the Company and the Bank to
repay organizational loans made to the Company by the Organizers, the Additional
Directors and the Advisory Directors (collectively, the "Lenders"). In order
that expenses related to the Acquisition and the Offering and organizational
expenses of the Company and the Bank are paid, the Lenders loaned money to the
Company for the benefit of the Company and the Bank (the "Organizational
Loans"). The Organizational Loans are only repayable from the proceeds of the
Offering or from unexpended funds loaned to the Company, and the Lenders may
choose to receive repayment in full or in part through their receipt in the
Offering of shares of Common Stock valued at $10.00 per share. See
"MANAGEMENT - Interest of Management and Others in Certain Transactions."
By the Company
Upon satisfaction of the conditions discussed in "TERMS OF THE OFFERING;
PLAN OF DISTRIBUTION - Conditions of the Offering and Release of Funds," all
subscription funds held in escrow will be released and will become capital of
the Company. The gross proceeds to the Company from the sale of the shares of
Common Stock offered hereby will be between $2,400,000 and $3,000,000. The
Company will use at least $2,125,000 of the gross proceeds to acquire all of the
shares of capital stock of the Bank. The Company will use approximately $175,000
of the gross proceeds to pay Offering expenses (estimated at $150,000) and
organizational expenses of the Company (estimated at $25,000), and/or to repay
the Organizational Loans. The Offering expenses include printing costs, legal
and accounting fees, reimbursement of reasonable expenses incurred by a director
of the Company in connection with making offers and sales on behalf of the
Company, filing fees, escrow fees and other miscellaneous costs.
The Company will retain the balance of the proceeds, estimated at $100,000
if the Minimum Number of Shares are sold and $700,000 if the Maximum Number of
Shares are sold, for working capital and other general corporate purposes and/or
for the provision of additional capital for the Bank.
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<PAGE>
The following table sets forth the anticipated use of proceeds by the
Company based on the sale of the Minimum Number of Shares and the Maximum Number
of Shares in the Offering.
Minimum Maximum
Number of Number of
Shares (1) Shares (2)
------------ ------------
Gross proceeds from Offering ................ $2,400,000 $3,000,000
Offering expenses............................ (150,000) (150,000)
Organizational expenses...................... (25,000) (25,000)
Investment in capital stock of the Bank...... (2,125,000) (2,125,000)
----------- -----------
Remaining proceeds........................... $ 100,000(3) $ 700,000(3)
=========== ===========
(1) Assumes that 240,000 shares of Common Stock are sold in this Offering at
$10.00 per share.
(2) Assumes that 300,000 shares of Common Stock are sold in this Offering at
$10.00 per share.
(3) This amount will be used by the Company for working capital and other
general corporate purposes and/or for the provision of additional capital
for the Bank.
By the Bank
The Bank will use the minimum $2,125,000 received from the sale of its
stock to the Company as follows:
The Bank will use approximately $110,000 of the proceeds to pay its
organizational expenses and/or to repay the Company (which, in turn, will repay
the Lenders) for the portion of the Organizational Loans used to pay the Bank's
organizational expenses. The Bank's organizational expenses include attorney,
consulting and accounting fees, and the fees to be paid to Mr. Jameson, Mr.
Pezzulla, Jameson & Associates, P.A., and Pezzulla and Pezzulla, LLC. The Bank
will use approximately $40,000 of the proceeds to pay its legal fees related to
the Acquisition and/or to repay the Company (which, in turn, will repay the
Lenders) for the portion of the Organizational Loans used to pay the Bank's
Acquisition related legal fees.
The balance of the proceeds, estimated at $1,975,000 will be used for
loans to customers, investments and other general banking purposes.
The following table depicts the anticipated use of proceeds by the
Bank. All proceeds received by the Bank will be in the form of an investment by
the Company in the Bank's capital stock.
Investment by the Company in the Bank's
capital stock......................................... $2,125,000
Organizational expenses............................... (110,000)
Acquisition related legal fees........................ (40,000)
Remaining proceeds.................................... $1,975,000(1)
===========
(1) This amount is to be used by the Bank for loans to customers, investments
and other general banking purposes.
23
<PAGE>
CAPITALIZATION
At March 31, 1997, the following table sets forth the unaudited pro
forma consolidated capitalization of the Company based on the sale of the
Minimum Number of Shares and the Maximum Number of Shares at $10 per share in
the Offering (less Offering expenses).
<TABLE>
<CAPTION>
March 31, 1997
--------------
Pro Forma Adjusted
------------------
Minimum Maximum
Stockholder's Equity Actual Number of Shares (1) Number of Shares (2)
- -------------------- ------ -------------------- --------------------
<S> <C>
Common stock, par value $.01 per ...........$ -- $ 2,400 $ 3,000
share; 5,000,000 shares authorized;
240,000 shares (Minimum Number of
Shares) and 300,000 (Maximum Number
of Shares) issued and outstanding ..........
Preferred stock, par value $.01 per ........ -- -- --
share; 5,000,000 shares authorized;
no shares issued or outstanding ............
Additional paid-in capital(3) .............. -- 2,247,600 2,847,000
Retained Earnings .......................... 4,000 4,000 4,000
------ ---------- ----------
Total shareholder's equity .................$4,000 $2,254,000 $2,854,000
====== ========== ==========
</TABLE>
(1) Based on 240,000 shares of Common Stock sold in the Offering.
(2) Based on 300,000 shares of Common Stock sold in the Offering.
(3) The expenses of the Offering, which include printing costs, legal and
accounting, reimbursement of reasonable expenses incurred by a director of
the Company in connection with making offers and sales on behalf of the
Company, filing fees, escrow fees and other miscellaneous costs, will be
charged against this account. Total Offering expenses are estimated to be
$150,000.
24
<PAGE>
DIVIDEND POLICY
The Board of Directors of the Company initially expects to follow a
policy of retaining any earnings to provide funds to operate and expand the
Company. Consequently, there are no plans for any cash dividends to be paid in
the near future. The Company's ability to pay any cash dividends to its
stockholders in the future will depend primarily on the Bank's ability to pay
cash dividends to the Company. The payment of dividends may be made only if the
Bank and the Company are in compliance with certain applicable regulatory
requirements governing the payment of dividends by each of them. In addition,
the payment of cash dividends by the Company is subject to the discretion of the
Company's Board of Directors, which will consider a number of factors, including
the Company's future earnings, financial condition, cash needs and general
business condition. See "REGULATION - Federal Savings Institution Regulation -
Limitation on Capital Distributions."
25
<PAGE>
ORGANIZATION OF THE COMPANY AND THE BANK
The Company
The Company was incorporated under the laws of the State of Maryland on
June 4, 1996, primarily to own all of the outstanding shares of capital stock of
the Bank. The Company has not conducted any business activities to date other
than those deemed necessary by the Company to proceed with the Offering. The
Company initially will engage in no business other than owning all of the
outstanding shares of capital stock of the Bank and, as of the date of this
Prospectus, the Company does not intend to engage in any additional business.
Accordingly, the Company's initial earnings will be dependent upon dividends
received by the Company from the Bank, which dividends are dependent on the
Bank's profitability and the Bank's compliance with certain regulatory
requirements. See "REGULATION - Federal Savings Institution Regulation -
Limitation on Capital Distributions."
The Company may not acquire the capital stock of the Bank without the
approval of the Office of Thrift Supervision (the "OTS"). On June 5, 1996, the
Company filed an application with the OTS to obtain the necessary approvals and
these approvals were granted by the OTS on April 15, 1997. Upon satisfaction of
the conditions of the Offering and the release of escrowed funds to the Company,
the Company will proceed to acquire all of the shares of capital stock of the
Bank and the Company will become, subject to the Bank's compliance with certain
regulatory requirements discussed below, a non-diversified unitary savings and
loan holding company. As such, the Company will be subject to examination and
comprehensive regulation by the OTS. See "REGULATION - Holding Company
Regulation."
The Bank
On June 5, 1996, the organizers of the Company and the Bank (the
"Organizers") filed an application with the OTS to organize the Bank as a
federal stock savings bank. On April 15, 1997, the OTS conditionally approved
the application. However, before the Bank obtains final regulatory approval to
commence banking operations, the Bank, among other things, must obtain
membership in the Federal Home Loan Bank System, obtain federal deposit
insurance for its deposit accounts from the Federal Deposit Insurance
Corporation (the "FDIC") and complete the sale to the Company of a minimum of
$2,125,000 of its fully-paid capital stock. On April 23, 1997, the FDIC
conditionally approved the Bank's application for federal deposit insurance.
As a federal stock savings bank, the Bank will be subject to
examination, supervision and comprehensive regulation by the OTS, the FDIC and,
in certain respects, the State of Maryland. There is no assurance that the Bank
will be successful in satisfying any condition that may be imposed upon it by
the OTS or the FDIC. See "REGULATION - Federal Savings Institution Regulation."
26
<PAGE>
THE ACQUISITION
General
On May 31, 1996, the Bank, through its Organizers, entered into a
Branch Purchase and Assumption Agreement, as amended, and a Loan Purchase and
Assumption Agreement, as amended (collectively, the "Agreements"), with Rushmore
Trust & Savings, FSB ("Rushmore"), for the acquisition of certain assets and the
assumption of certain deposit liabilities primarily related to Rushmore's
Baltimore, Maryland branch office located at 3621 East Lombard Street,
Baltimore, Maryland 21224 (the "Baltimore Branch"). The transactions
contemplated by the Agreements are referred to in this Prospectus as the
"Acquisition." It is contemplated that the Acquisition will close as soon as
possible after the satisfaction of the conditions of the Offering. In the event
the Bank fails to consummate the Acquisition for any reason, the Board of
Directors of the Company intends to propose to the Company's stockholders that
the Company be liquidated. See "RISK FACTORS - Return of Less Than Subscription
Amount." Thus, while the closing of the Acquisition is not a condition precedent
to the satisfaction of the conditions of the Offering, it is a condition
precedent to the opening of the Bank.
Upon consummation of the Acquisition, the Bank will assume liabilities
relating to deposits and certificates of deposit booked at the Baltimore Branch
(the "Baltimore Branch Deposits") and the Bank will pay Rushmore a premium for
such deposits. As of March 31, 1997, the Baltimore Branch Deposits totaled
approximately $8,138,000. This amount is subject to change due to the reduction
or growth of deposits occurring prior to the closing date of the Acquisition.
The Bank will acquire all of Rushmore's loans originated at the Baltimore Branch
(the "Baltimore Branch Loans") and certain of Rushmore's loans originated at
Rushmore's Montgomery County, Maryland branch office (the "Montgomery County
Loans") (the Baltimore Branch Loans and the Montgomery County Loans are
collectively referred to in this Prospectus as the "Rushmore Loans"), as well as
certain assets related to the operation of the Baltimore Branch (the "Baltimore
Branch Assets"), including the Baltimore Branch's real property, building and
improvements (the "Real Estate"), and all of the Baltimore Branch's fixtures,
furnishings, equipment, furniture and other tangible personal property (the
"Furnishings"). As of March 31, 1997, the Rushmore Loans totaled approximately
$7,004,000, at face value, consisting of approximately $5,846,000 in Baltimore
Branch Loans and approximately $1,158,000 in Montgomery County Loans. The
Acquisition will be accounted for as a purchase and the deposit premium (the
"Core Deposit Value") will be amortized over five years on a straight line
basis. For tax purposes, the Core Deposit Value will be amortized over a 15-year
period on a straight-line basis and is expected to be fully deductible under
current law.
The Organizers and/or their agents have reviewed the Rushmore Loans and
found them to be fully performing with acceptable risk ratings. The Agreement
provides that in the event any of the Rushmore Loans are repaid or the
collateral securing any of such loans are sold at a foreclosure sale, the Bank
will not purchase those loans. The Furnishings are being purchased in "as is
where is" condition. The Bank will acquire fee simple title to the Real Estate.
No environmental evaluation has been or will be made of the Real Estate.
It is currently contemplated that the Bank will employ the three
full-time and one part-time Rushmore employees who currently work at the
Baltimore Branch, including Patricia D'Alessandro, who currently is a Vice
President of Rushmore with managerial responsibilities for the Baltimore Branch.
Subject to regulatory approval, Ms. D'Alessandro will serve as the President of
the Bank and the Vice President of the Company. Ms. D'Alessandro has over 20
years of experience in the commercial and retail banking industry. See
"MANAGEMENT." The Bank will pay the former Rushmore employees the same
compensation that they were being paid by Rushmore and they will be eligible to
participate in any employee benefit plans offered by the Bank.
27
<PAGE>
Terms of the Acquisition
The Bank will acquire the Rushmore Loans for the face value of such
loans on the closing date of the Acquisition, plus accrued interest, plus
$50,000 less aggregate escrow balances. The $50,000 payment will be offset by an
equal credit to the Bank, which the Bank will use to establish an allowance for
loan losses. See "BUSINESS OF THE BANK - Lending Activities - Allowance for Loan
Losses." The Bank will acquire the Real Estate for $50,000 and the Furnishings
for $30,000. The Bank will pay Rushmore $50,000 in exchange for Rushmore's
agreement not to compete with the Bank for a period of three years after the
closing date of the Acquisition (the "Covenant Not to Compete"). The Core
Deposit Value will equal the Baltimore Branch Deposits (plus accrued interest)
on the closing date of the Acquisition multiplied by 0.035 less $105,000.
Payment of the Core Deposit Value, as well as the payment for the Rushmore
Loans, the Real Estate, the Furnishings and the Covenant Not to Compete, will be
effectuated through an appropriate reduction of the cash to be received by the
Bank from Rushmore to fund the deposits being assumed by the Bank.
Based upon March 31, 1997 estimates, upon consummation of the
Acquisition, the amount of net cash to be received by the Bank from Rushmore
would be approximately $789,000. This estimate is determined as follows: based
on March 31, 1997 estimates, the gross amount to be paid to the Bank by Rushmore
would be approximately $8,139,000, consisting of (i) Baltimore Branch Deposits
of $8,138,000 and (ii) accrued interest on Baltimore Branch Deposits of
approximately $1,000. Based on March 31, 1997 estimates, approximately
$7,350,000 is to be netted against this gross amount consisting of (i) a deposit
premium totaling approximately $180,000 on $8,138,000 of Baltimore Branch
Deposits and accrued interest of $1,000; (ii) $7,004,000 of Rushmore Loans;
(iii) accrued interest receivable on the Rushmore Loans of approximately
$56,000; (iv) $130,000 for the Real Estate, the Furnishings and the Covenant Not
to Compete; less (v) a $20,000 deposit that the Bank paid Rushmore upon the
execution of the Agreements.
The parties have agreed that if the Acquisition has not been
consummated by June 30, 1997, the Bank, beginning on July 1, 1997 and continuing
on the first day of each month thereafter until the Acquisition has been
consummated, shall pay Rushmore one or more additional deposits of $20,000 each.
Upon the consummation of the Acquisition, the additional deposits will be added
to the amount of cash to be received by the Bank from Rushmore. In the event the
Bank fails to consummate the Acquisition for any reason other than the ability
of Rushmore to consummate the Acquisition, the Bank shall forfeit all deposits
to Rushmore.
Conditions of the Acquisition
As stated above, it is contemplated that the Acquisition will close as
soon as possible after the satisfaction of the conditions of the Offering. The
closing of the Acquisition is conditioned upon, among other things, receipt by
the Bank and Rushmore of all necessary regulatory approvals, including approval
of the Acquisition by the OTS. In making its determination, the OTS is required
under applicable regulations to consider: (i) the capital level of the Bank;
(ii) the financial and managerial resources of the Bank; (iii) the future
prospects of the Bank; (iv) the convenience and needs of the community to be
served; (v) the conformity of the transaction to applicable law, regulation, and
supervisory policy; and (vi) factors relating to the fairness and disclosure
concerning the Acquisition. On April 15, 1997, the OTS conditionally approved
the Acquisition.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information and explanatory
notes have been derived from the historical financial statements of the Company,
adjusted to give effect to the sale of the Minimum Number of Shares and the
Maximum Number of Shares in the Offering and to the Acquisition. The Unaudited
Pro Forma Consolidated Balance Sheet assumes that such transactions occurred on
March 31,
28
<PAGE>
1997 and the Unaudited Pro Forma Income Statements assume that such transactions
occurred at the beginning of the period presented. The unaudited pro forma
financial information is not necessarily indicative of the financial position or
results of operation that would have occurred had the transactions reflected
therein occurred on dates presented, nor are they indicative of the financial
position or results of operation of future periods. The pro forma adjustments
with respect to the Acquisition are subject to change prior to the closing date
of the Acquisition in accordance with the terms of the Agreements. For audited
information regarding the Company and the Baltimore Branch, see the Financial
Statements located elsewhere in this Prospectus.
29
<PAGE>
Pro Forma Balance Sheet
At March 31, 1997
-----------------
<TABLE>
<CAPTION>
Purchase
Baltimore Price
Minimum No. Maximum No. Branch/ Adjustments/
Company of Shares of Shares Acquisitions Acquisition
------- --------- --------- ------------ -----------
<S> <C>
Assets
Cash and Investments $528,000 $1,531,000(a) $2,131,000(a) $ -- $ 789,000(f)
Loans Receivable, net -- -- -- 5,751,000 1,253,000(g)
Accrued Interest Receivable -- -- -- 48,000 8,000(g)
Real Estate Owned, net -- -- -- 10,000 (10,000)(h)
Premises and Equipment -- -- -- 13,000 67,000(f)
Organization Costs 135,000 -- -- -- --
Intangible Assets 40,000 -- -- -- 230,000(f)
Non Refundable Deposit - Purchase of
Deposits, Loans and Branch Facility 20,000 -- -- -- (20,000)(f)
Deferred Offering Costs 65,000 (65,000)(b) (65,000)(b) -- --
Due from Rushmore -- -- -- 2,317,000 (2,317,000)(f)
-------- ---------- ---------- ---------- -----------
Total Assets $788,000 $1,466,000 $2,066,000 $8,139,000 $ --
======== ========== ========== ========== ===========
Liabilities and Stockholders' Equity
Deposits $ -- $ -- $ -- $8,138,000 $ --
Accrued Interest on Deposits -- -- -- 1,000 --
Accrued Liabilities 182,000 (182,000)(c) (182,000)(c) -- --
Advances from Lenders 602,000 (602,000)(d) (602,000)(d) -- --
-------- ----------- ---------- ---------- -----------
Total Liabilities 784,000 (784,000) (784,000) 8,139,000 --
-------- ----------- ---------- ---------- -----------
Stockholders' Equity
Common Stock -- 2,000(e) 3,000(e) -- --
Preferred Stock -- -- -- -- --
Additional Paid-in Capital -- 2,248,000(e) 2,847,000(e) -- --
Retained Earnings 4,000 -- -- -- --
-------- ---------- ---------- ---------- -----------
Total Stockholders' Equity 4,000 2,250,000 2,850,000 -- --
-------- ---------- ---------- ---------- -----------
Total Liabilities and $788,000 $1,466,000 $2,066,000 $8,139,000 $ --
Stockholders' Equity ======== ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Company, Company,
as adjusted as adjusted
Minimum No. Maximum No.
of Shares of Shares
--------- ---------
<S> <C>
Assets
Cash and Investments $2,848,000 $3,448,000
Loans Receivable, net 7,004,000 7,004,000
Accrued Interest Receivable 56,000 56,000
Real Estate Owned, net -- --
Premises and Equipment 80,000 80,000
Organization Costs 135,000 135,000
Intangible Assets 270,000 270,000
Non Refundable Deposit - Purchase of
Deposits, Loans and Branch Facility -- --
Deferred Offering Costs -- --
Due from Rushmore -- --
----------- -----------
Total Assets $10,393,000 $10,993,000
=========== ===========
Liabilities and Stockholders' Equity
Deposits $ 8,138,000 $ 8,138,000
Accrued Interest on Deposits 1,000 1,000
Accrued Liabilities -- --
Advances from Lenders -- --
----------- -----------
Total Liabilities 8,139,000 8,139,000
----------- -----------
Stockholders' Equity
Common Stock 2,000 3,000
Preferred Stock -- --
Additional Paid-in Capital 2,248,000 2,847,000
Retained Earnings 4,000 4,000
----------- -----------
Total Stockholders' Equity 2,254,000 2,854,000
----------- -----------
Total Liabilities and $10,393,000 $10,993,000
Stockholders' Equity =========== ===========
</TABLE>
NOTES TO PRO FORMA BALANCE SHEET @ 3/31/97
(a) Reflects the cash received, after payments are made for certain costs, if
the Minimum Number of Shares or Maximum Number of Shares are sold in the
Offering:
<TABLE>
<CAPTION>
Number of Shares Sold
---------------------
Mininum Maximum
------- -------
<S> <C>
Proceeds from Offering $2,400,000 $3,000,000
Less: Payment for accrued and additional organizational costs (87,000) (87,000)
Payment for accrued Acquisition related legal fees (30,000) (30,000)
Payment for advances from Lenders (602,000) (602,000)
Payment of deferred and additional expected
offering costs ($65,000+$85,000) (150,000) (150,000)
---------- ----------
$1,531,000 $2,131,000
========== ==========
</TABLE>
(b) Reflects the charge off of the deferred Offering costs incurred against
the Offering proceeds.
(c) Reflects the payments of payables outstanding at March 31, 1997 for
Offering and organizational costs and Acquisition related legal fees.
(d) Reflects the repayment of the advances from the Lenders.
30
<PAGE>
(e) Reflects the stockholder's equity, after the payments are made for certain
costs, if the Minimum Number of Shares or Maximum Number of Shares are
sold in the Offering:
<TABLE>
<CAPTION>
Number of Shares Sold
---------------------
Mininum Maximum
------- -------
<S> <C>
Proceeds from Offering $2,400,000 $3,000,000
Less: Offering costs (150,000) (150,000)
---------- ----------
Net proceeds from Offering 2,250,000 2,850,000
Less: Par Value of Common Stock (2,000) (3,000)
---------- ----------
Additional Paid In Capital $2,248,000 $2,847,000
========== ==========
(f) Reflects the effect of the Acquisition:
1) Reflects the cash to be received from Rushmore:
Deposits and accrued interest to be assumed $8,139,000
Loans to be acquired 7,004,000
Property to be acquired 80,000
Premium on loans 50,000
Premium on deposits [($8,139,000x0.035)-$105,000] 180,000
Covenant not to compete 50,000
Discount for loan loss allowance (50,000)
-------
230,000
Accrued interest receivable 56,000
Deposit paid (20,000)
----------
(7,350,000)
----------
$ 789,000
==========
2) Reflects the write-up of the property to the amount
to be paid:
Amount per the Agreements $ 80,000
Less: Amount as of March 31, 1997 (13,000)
----------
$ 67,000
==========
3) Reflects the elimination of the Due From Rushmore of
$2,317,000 that will not be acquired.
4) Intangibles to be acquired or paid:
Covenant not to compete $ 50,000
Premium on deposits 180,000
----------
$ 230,000
==========
</TABLE>
(g) Reflects the additional loans of $1,158,000 to be acquired that were
originated at Rushmore's Montgomery County, Maryland branch office,
origination fees of $45,000 that will not be acquired, premium on Rushmore
Loans of $50,000, and the accrued interest on the loans originated at
Rushmore's Montgomery County, Maryland branch office of $8,000.
(h) Reflects the real estate owned that will not be acquired.
31
<PAGE>
Pro Forma Income Statement
<TABLE>
<CAPTION>
For the Year Ended
December 31, 1996
-----------------
Company, Company,
AmericasBank as adjusted as adjusted
If in Operations Baltimore Pro Forma Minimum No. Maximum No.
Company for the Entire Year Branch Adjustments of Shares of Shares
------- ------------------- ------ ----------- --------- ---------
Minimum Maximum
------- -------
<S> <C>
Interest Income
Interest on loans ............... $ -- $ -- $ -- $ 643,000 $ 95,000(c) $ 738,000 $ 738,000
Interest on Investments ......... 2,000 5,000(a) 35,000(a) -- 138,000(d) 145,000 175,000
------ ------ ------- --------- -------- --------- ---------
Total interest income ....... 2,000 5,000 35,000 643,000 233,000 883,000 913,000
Interest expense deposits ....... -- -- -- 352,000 -- 352,000 352,000
------ ------ ------- --------- -------- --------- ---------
Net interest income ......... 2,000 5,000 35,000 291,000 233,000 531,000 561,000
Provision for loan losses ........... -- -- -- -- 35,000(e) 35,000 35,000
Late charges and other fees ......... -- -- -- 29,000 -- 29,000 29,000
------ ------ ------- --------- -------- --------- ---------
2,000 5,000 35,000 320,000 268,000 595,000 625,000
------ ------ ------- --------- -------- --------- ---------
Salaries and benefits ............ -- -- -- 106,000 26,000(f) 132,000 132,000
Collection and foreclosure ....... -- -- -- 25,000 -- 25,000 25,000
Occupancy ........................ -- -- -- 8,000 4,000(f) 12,000 12,000
Depreciation and amortization .... -- 5,000(b) 5,000(b) 6,000 81,000(g) 92,000 92,000
Deposit insurance premiums ....... -- -- -- 23,000 -- 23,000 23,000
Other expense .................... -- -- -- -- 349,000(f) 349,000 349,000
------ ------ ------- --------- -------- --------- ---------
Total expenses charged to Bank . -- 5,000 5,000 168,000 460,000 633,000 633,000
------ ------ ------- --------- -------- --------- ---------
Income before income taxes ... 2,000 -- 30,000 152,000 (262,000) (108,000) (78,000)
Income tax provision ......... -- -- -- -- -- -- --
Transfer to Rushmore ....... -- -- -- (152,000) 152,000(h) -- --
------ ------ ------- --------- -------- --------- ---------
Net Loss ............. $2,000 $ -- $30,000 $ -- $(110,000) $(108,000) $ (78,000)
====== ====== ======= ========= ========= ========= =========
</TABLE>
NOTES TO PRO FORMA INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1996
(a) Reflects the interest income on net funds received from the Offering
assuming the Minimum Number of Shares or Maximum Number of Shares are
sold:
Number of Shares Sold
----------------------
Mininum Maximum
------- -------
Proceeds from Offering $ 2,400,000 $ 3,000,000
Less: Payment of organizational costs (25,000) (25,000)
Purchase of Bank Stock (2,125,000) (2,125,000)
Payment of Offering costs (150,000) (150,000)
----------- -----------
100,000 700,000
Assumed rate earned on investments 5% 5%
----------- -----------
$ 5,000 $ 35,000
=========== ===========
(b) Reflects one year's amortization of the Company's organizational costs of
$25,000 being amortized over five years.
(c) Reflects the interest income earned on the additional loans to be acquired
that were originated at Rushmore's Montgomery County, Maryland branch
office.
32
<PAGE>
(d) Reflects the interest income on excess Bank funds.
Net cash proceeds from the Acquisition $ 789,000
Proceeds from sale of stock to Company 2,125,000
Less: Organizational costs (110,000)
Acquisition costs (40,000)
----------
Additional cash to invest 2,764,000
Assumed rate earned on investments 5%
----------
Interest Income $ 138,000
==========
(e) Reflects estimated provision for loan losses which would be incurred while
operating between January 1, 1996 and December 31, 1996.
(f) Reflects the estimated additional salary and benefit, occupancy and other
costs that the Baltimore Branch would have incurred, if it were operating
on a stand alone basis.
(g) Reflects estimated additional depreciation and amortization expense which
would be incurred while operating between January 1, 1996 and December 31,
1996 as follows:
<TABLE>
<S> <C>
Depreciation
Real Estate - $50,000 over 15 years $ 3,000
Furnishings - $30,000 over 5 years 6,000
Amortization
Organization Costs - $110,000 over 5 years 22,000
Premium on loans - $50,000 over 15 years 3,000
Premium on deposits - $181,000 over 5 years 36,000
Covenant not to compete - $50,000 over 3 years 17,000
-------
Total Estimated 87,000
Less: Depreciation expense recognized in the Baltimore
Branch income statement (6,000)
-------
Pro Forma Adjustment $81,000
=======
</TABLE>
(h) Reflects the elimination of the transfer to Rushmore.
33
<PAGE>
Pro Forma Income Statement
<TABLE>
<CAPTION>
For the Three Months Ended
March 31, 1997
--------------
AmericasBank
If in Operations Baltimore Pro Forma
Company for the 1st Qtr. 1997 Branch Adjustments
------- --------------------- ------ -----------
Minimum Maximum
------- -------
<S> <C>
Interest Income
Interest on loans $ -- $ -- $ -- $146,000 $ 23,000(c)
Interest on Investments 2,000 1,000(a) 9,000(a) -- 35,000(d)
------ ------ ------ -------- --------
Total interest income 2,000 1,000 9,000 146,000 58,000
Interest expense deposits -- -- -- 91,000 --
------ ------ ------ -------- --------
Net interest income 2,000 1,000 9,000 55,000 58,000
Provision for loan losses -- -- -- -- 9,000(e)
Late charges and other fees -- -- -- 5,000 --
------ ------ ------ -------- --------
2,000 1,000 9,000 60,000 49,000
------ ------ ------ -------- --------
Salaries and benefits -- -- -- 30,000 7,000(f)
Collection and foreclosure -- -- -- 10,000 --
Occupancy -- -- -- 2,000 1,000(f)
Depreciation and amortization -- 1,000(b) 1,000(b) 2,000 20,000(g)
Deposit insurance premiums -- -- -- 2,000 --
Other expense -- -- -- -- 87,000(f)
------ ------ ------ -------- --------
Total expenses charged to Bank -- 1,000 1,000 46,000 115,000
------ ------ ------ -------- --------
Income before income taxes 2,000 -- 8,000 14,000 (66,000)
Income tax provision (benefit) -- -- -- -- --
Transfer to Rushmore -- -- -- (14,000) 14,000(h)
------ ------ ------ -------- --------
Net Loss $2,000 $ -- $8,000 $ -- $(52,000)
====== ====== ====== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Company, Company,
as adjusted as adjusted
Minimum No. Maximum No.
of Shares of Shares
--------- ---------
<S> <C>
Interest Income
Interest on loans $169,000 $169,000
Interest on Investments 38,000 46,000
-------- --------
Total interest income 207,000 215,000
Interest expense deposits 91,000 91,000
-------- --------
Net interest income 116,000 124,000
Provision for loan losses 9,000 9,000
Late charges and other fees 5,000 5,000
-------- --------
Expenses charged to bank 112,000 120,000
-------- --------
Salaries and benefits 37,000 37,000
Collection and foreclosure 10,000 10,000
Occupancy 3,000 3,000
Depreciation and amortization 23,000 23,000
Deposit insurance premiums 2,000 2,000
Other expense 87,000 87,000
-------- --------
Total expenses charged to Bank 162,000 162,000
-------- --------
Income before income taxes (50,000) (42,000)
Income tax provision (benefit) -- --
Transfer to Rushmore -- --
-------- --------
Net Loss $(50,000) $(42,000)
======== ========
</TABLE>
NOTES TO PRO FORMA INCOME STATEMENT FOR THE THREE MONTHS ENDED MARCH 31, 1997
(a) Reflects the interest income on net funds received from the Offering
assuming the Minimum Number of Shares or Maximum Number of Shares are
sold:
Number of Shares Sold
-----------------------
Mininum Maximum
------- -------
Proceeds from Offering $ 2,400,000 $ 3,000,000
Less: Payment of organizational costs (25,000) (25,000)
Purchase of Bank stock (2,125,000) (2,125,000)
Payment of Offering costs (150,000) (150,000)
---------- -----------
100,000 700,000
Assumed rate earned on investments 5% 5%
---------- -----------
5,000 35,000
Portion for three months x 3/12 x 3/12
---------- -----------
$ 1,000 $ 9,000
========== ===========
(b) Reflects three months amortization of the Company's organizational costs
of $25,000 being amortized over five years.
34
<PAGE>
(c) Reflects the interest income earned on the additional loans to be acquired
that were originated at Rushmore's Montgomery County, Maryland branch
office.
(d) Reflects the interest income on excess Bank funds.
Net cash proceeds from the Acquisition $ 789,000
Proceeds from sale of stock to Company 2,125,000
Less: Organizational costs (110,000)
Acquisition costs (40,000)
----------
Additional cash to invest 2,764,000
Assumed rate earned on investments 5%
----------
138,000
Portion for three months 3/12
----------
Interest Income $ 35,000
==========
(e) Reflects estimated provision for loan losses which would be incurred while
operating between January 1, 1997 and March 31, 1997.
(f) Reflects the estimated additional salary and benefits, occupancy and other
costs that the Baltimore Branch would have incurred, if it were operating
on a stand alone basis.
(g) Reflects estimated additional depreciation and amortization expense which
would be incurred while operating, between January 1, 1997 and March 31,
1997 as follows:
<TABLE>
<S> <C>
Depreciation
Real Estate - $50,000 over 15 years $ 3,000
Furnishings - $30,000 over 5 years 6,000
Amortization
Organization Costs - $110,000 over 5 years 22,000
Premium on Loans - $50,000 over 15 years 3,000
Premium on deposits - $180,000 over 5 years 36,000
Covenant not to compete - $50,000 over 3 years 17,000
-------
Total Estimated 87,000
Portion for three months 3/12
-------
1st Quarter 22,000
Less: Depreciation expense recognized in the Baltimore
Branch income statement (2,000)
-------
Pro Forma Adjustment $20,000
=======
</TABLE>
(h) Reflects the elimination of the transfer to Rushmore.
35
<PAGE>
BUSINESS OF THE COMPANY
As stated above, upon satisfaction of the conditions of the Offering
and the release of escrowed funds to the Company, the Company will proceed to
acquire all of the shares of capital stock of the Bank and the Company will
become, subject to the Bank's compliance with certain regulatory requirements, a
non-diversified unitary savings and loan holding company. As a non-diversified
unitary savings and loan holding company, the Company may engage in certain
non-banking activities that the OTS has deemed to be closely related to banking.
See "REGULATION - Holding Company Regulation." Although the Company has no
present intention of engaging in any activity other than owning all of the
outstanding shares of capital stock of the Bank, if circumstances should lead
the Company's management to determine that it would be beneficial for the
Company to engage in other business activities, management of the Company would
have the flexibility to do so.
The Company is not expected to initially own or lease property for
office space. Instead, it intends to utilize the premises and equipment of the
Bank. At the present time, the Company does not intend to have any employees
other than its officers. The Company will utilize the support staff of the Bank
from time to time. If the Company pursues other lines of business, it may hire
employees. Because the Company initially will engage in no business other than
owning all of the outstanding shares of capital stock of the Bank, the
competitive conditions to be faced by the Company will be the same as those
faced by the Bank.
BUSINESS OF THE BANK
General
The Bank will be a full service community-oriented financial institution.
Its business will be to attract retail deposits and to invest those deposits,
together with funds generated from operations and borrowings, primarily in one-
to four-family mortgage loans. To a lesser extent, the Bank will invest in home
equity loans, multi-family loans, commercial real estate loans, construction
loans (primarily for one- to four-family home construction for the borrower),
commercial business loans and consumer loans. The Bank's deposit base will be
comprised of traditional deposit products including checking accounts, NOW
accounts, money market accounts, statement savings accounts, individual
retirement accounts and certificates of deposit. Upon the commencement of its
operations, the Bank will be actively engaged in many of these activities as a
result of the Acquisition. See "- Lending Activities," "- Sources of Funds" and
"THE ACQUISITION."
The Company's executive offices and the Bank's initial banking office
will be located at 3621 East Lombard Street, Baltimore, Maryland 21224 (the
"Banking Office"), which is currently occupied by the Baltimore, Maryland branch
office of Rushmore, and which is located in the eastern portion of Baltimore
City. The telephone number of the Company and the Bank will be (410) 342-8303.
The Company's interim address is 515 East Joppa Road, Towson, Maryland 21086 and
its interim telephone number is (410) 825-5580. See "- Description of Property."
The liberalization of the interstate banking laws of Maryland and
surrounding states has led to substantial consolidation of the banking industry
in Maryland and particularly the Baltimore metropolitan area. Many of the area's
financial institutions have been acquired by large regional organizations
headquartered outside the Baltimore area. As a result of such consolidation, the
Organizer's believe that the competitive and economic environment is right for a
new, independent, locally owned and managed bank to serve the financial needs of
residents of Eastern Baltimore City as well as the needs of residents of the
Baltimore metropolitan area. The Bank intends to implement a strategy that
focuses on providing a superior level of customer service, close attention to
personal needs and quick response time. The Organizers believe that the
community will react favorably to this new enterprise.
Location and Service Area
As stated above, the Banking Office will be located at 3621 East
Lombard Street, Baltimore, Maryland 21224. See "Description of Property." The
Organizers anticipate that the Bank will draw most of its customer deposits and
conduct most of its lending transactions from within the area surrounding its
Banking Office as well as from within the Baltimore metropolitan area. The
Baltimore Branch Deposits and the Baltimore Branch Loans were primarily drawn
from these areas. The Organizers
36
<PAGE>
intend to expand the business of the Bank by opening branches. At this time, the
Organizers have not identified any location for a branch of the Bank.
The area surrounding the Banking Office is comprised of several
thousand, mostly residential, owner-occupied rowhomes, and there are many
schools and churches located within this area. There are several manufacturing
facilities located within a distance of three miles that employ many of the
area's residents. Eastern Avenue, which is a few blocks to the south of the
Banking Office, has extensive retail shopping stretching for a distance of
several miles from the Fells Point area of Baltimore City to well beyond the
Baltimore City/Baltimore County line into Eastern Baltimore County. A major
hospital, Bayview, a division of Johns Hopkins, is approximately two miles from
the Banking Office. Dundalk Community College and Essex Community College are
located nearby in Eastern Baltimore County.
Although the Organizers have not undertaken any study of the
feasibility of a bank at the location where the Banking Office will be located
or of the economic conditions in the area, the Organizers believe, based on
their experience and based on their evaluation of the Baltimore Branch, that the
community will support the Bank.
Competition
The Bank's market area of Eastern Baltimore City as well as the
Baltimore metropolitan area are highly competitive markets for financial
services and the Bank will face intense competition both in making loans and in
attracting deposits. The Bank will face direct competition from a significant
number of financial institutions operating in the Bank's market area, many with
a state-wide or regional presence and in some cases a national presence. Many of
these financial institutions have been in business for many years, have
established customer bases, are significantly larger and have greater financial
resources than the Bank will have and are able to offer certain services that
the Bank is not able to offer. In particular, nine federal savings associations,
including one with approximately $70 million in deposits, and three commercial
bank branches, are all located in the area immediately surrounding the Banking
Office. In addition, the Bank will face competition for deposits and loans from
non-bank institutions such as brokerage firms, credit unions, insurance
companies, money market mutual funds and private lenders.
Any change in governmental economic and monetary policy, banking and
credit regulations and general economic conditions, which changes are beyond the
control of the Bank, also can affect the demand for the Bank's services. The
rates of interest payable on deposits and chargeable on loans will be affected
by fiscal policy as determined by various governmental and regulatory
authorities, in particular the Federal Reserve, as well as by national, state
and local economic conditions. Through open market transactions, variations in
the discount rate and the establishment of reserve requirements, the Federal
Reserve exerts considerable influence over the cost and availability of funds
obtainable for lending or investing. These actions may at times result in
significant fluctuations in interest rates, which could have adverse effects on
the operations of the Bank. The nature or extent of any effects which monetary
policies or economic conditions might have on the business and earnings of the
Bank cannot be predicted.
Market Strategy
The Bank's objective will be to create a customer-driven financial
institution focused on providing value to clients by delivering products and
services matched to the clients' needs. It is believed that clients will be
drawn to a locally owned and managed institution that demonstrates an active
interest in its clients and their business and personal financial needs.
The banking industry in the Bank's market area has experienced
substantial consolidation in recent years. Many of the area's locally owned or
managed financial institutions have either been acquired by large regional bank
holding companies or have been consolidated into branches. This consolidation
has been accompanied by increasing fees for bank services, the dissolution of
local boards of directors, management and personnel changes and, in the
perception of the Organizers, a decline in the level of customer service. With
recent changes in interstate banking regulation, this type of consolidation is
expected to continue.
37
<PAGE>
The Organizers believe that the present competitive and economic
environment is right for a new, independent, locally owned and managed bank to
serve the financial needs of residents of Eastern Baltimore City as well as the
needs of residents of the Baltimore metropolitan area. The Organizers further
believe that the Acquisition provides a unique opportunity for a new bank. Upon
consummation of the Acquisition, assuming the sale of the Minimum Number of
Shares in the Offering, the Bank will have approximately ten million dollars in
total assets, including approximately two million dollars raised through the
Offering and approximately seven million dollars in Rushmore Loans. See
"UNAUDITED PRO FORMA FINANCIAL INFORMATION." This amount of total assets will
immediately enable the Bank to make more loans then it would have been able to
make had it not engaged in the Acquisition. In addition, the Organizers believe
that as a result of the Acquisition the Bank will not experience many of the
growing pains typically experienced by new banks. The Bank will begin operations
from an existing, established facility; will succeed to an existing, established
customer base and will operate with a staff of personnel who are familiar with
the needs of the customers and who are known in the community.
In addition, the Organizers believe that Ms. D'Alessandro's banking
experience, particularly as it relates to her management experience at the
Baltimore Branch, the banking experience of Mr. Jameson and Mr. Pezzulla, and
the extensive business experience and contacts of the Organizers and the
Additional Directors in the Baltimore metropolitan area, should create immediate
business opportunities for the Bank. See MANAGEMENT."
Net Interest Income/Margins
The operations of the Bank will be substantially dependent on its net
interest income, which is the difference between the interest expense incurred
in connection with the Bank's interest-bearing liabilities, such as interest on
deposit accounts, and the interest income received from its interest-earning
assets, such as loans and investment securities. Volatility in interest rates
can result in the flow of funds away from banks of the type similar to the Bank
and into direct investments, such as corporate securities and other investment
vehicles which, because of among other things the absence of federal deposit
insurance, generally pay higher rates of return. Such volatility could cause the
Bank to pay increased interest rates to obtain deposits and, if the Bank is not
able to increase the interest rates on its loans and the rate of return on its
investment portfolio, the Bank's net interest income will suffer.
The level of net interest income is determined primarily by the average
balances ("volume") and the rate spreads between the interest-earning assets and
the Bank's funding sources. The Bank's ability to maximize its net interest
income will depend on increases or decreases in the volume of its
interest-earning assets and interest-bearing liabilities, increases or decreases
in the average rates earned and paid on such assets and liabilities, the ability
to manage the earning-asset portfolio, and the availability of particular
sources of funds, such as non-interest earning deposits.
The following table indicates the average volume of interest-earning
assets and interest-bearing liabilities and average yields and rates for the
Baltimore Branch Deposits and the Rushmore Loans for the years ended December
31, 1996 and 1995. The information in the table has been derived from
information provided by Rushmore.
38
<PAGE>
AVERAGE BALANCES -- YIELDS AND RATES (1)
<TABLE>
<CAPTION>
Year Ended December 31, 1996 Year Ended December 31, 1995
---------------------------- ----------------------------
Interest Earning Assets: Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
<S> <C>
Loans Receivable (net of unearned
income) (2) $7,588,000 $738,000 9.52% $7,852,000 $771,000 9.86%
Allowance for Loan Losses (50,000) (65,000)
---------- ----------
Total Assets $7,538,000 $7,787,000
========== ==========
Interest-Bearing Liabilities:
Statement Savings $1,995,000 $ 50,000 2.50% $2,499,000 $ 64,000 2.50%
Money Market 4,707,000 247,000 5.30 5,332,000 289,000 5.43
Certificates of Deposit 629,000 31,000 4.56 722,000 41,000(4) 3.97
Jumbo CD -- -- -- 206,000 --(4) 5.80
IRA 471,000 24,000(3) 4.06 652,000 27,000(3) 3.95
IRA Money Market 84,000 --(3) 5.30(3) 27,000 --(3) 5.64
---------- -------- ---- ---------- -------- ----
Total Interest-Bearing Liabilities 7,886,000 $352,000 4.45% 9,438,000 $421,000 3.46%
======== ========
Checking Accounts 221,000 230,000
---------- ----------
Total Liabilities $8,107,000 $9,668,000
========== ==========
---- ----
Interest Rate Spread 5.07% 6.40%
==== ====
(Average Rate Earned Less Average
Rate Paid)
Net Interest Income $386,000 $350,000
======== ========
(Interest Earned Less Interest Paid)
Net Interest Margin 5.12% 4.49%
==== ====
(Net Interest Income/Total Earning
Assets)
</TABLE>
(1) Average balances were calculated using month-end balances, except for
money market accounts, where quarter-end balances were used. Daily
averages were not available for the periods presented.
(2) Loans on non-accrual status are included in the calculation of average
balances.
(3) Actual expense for IRA includes both IRA and IRA Money Market Accounts.
(4) Actual expense for Certificates of Deposit includes both Certificates of
Deposit and Jumbo Certificates of Deposit.
Changes in interest income and interest expense can result from
variances in both volume and rates. The Bank will establish an asset and
liability management policy designed to provide a proper balance between rate
sensitive assets and rate sensitive liabilities, to attempt to maximize interest
margins and to provide adequate liquidity for anticipated needs. The
39
<PAGE>
following table indicates the changes in the net interest income as a result of
changes in volume and rates for the Baltimore Branch Deposits and the Rushmore
Loans for the years ended December 31, 1996 and December 31, 1995.
Rate/Volume Analysis
1996 Compared to 1995
(variances in)
--------------------------------
Net
Average Average Increase/
Volume Rate (Decrease)
------ ---- ----------
Interest Income:
Loans ($16,000) ($17,000) ($33,000)
-------- -------- --------
Total Interest Income (16,000) (17,000) (33,000)
-------- -------- --------
Interest Expense:
Statement Savings (14,000) -- (14,000)
Money Market (35,000) (7,000) (42,000)
Certificates of Deposit and
Jumbo CD (14,000) 4,000 (10,000)
IRA and IRA Money Market (4,000) 1,000 ( 3,000)
-------- -------- --------
Total Interest Expense (67,000) (2,000) (69,000)
-------- -------- --------
Change in Net Interest Income 51,000 (15,000) $ 36,000
======== ======== ========
Note: The change in interest income due to both rate and volume has been
allocated proportionally between volume and rate. Loan fees are included
in the interest income computation.
Liquidity and Interest Rate Sensitivity
The primary objective of asset/liability management is to ensure the
steady growth of the Bank's primary earnings component, net interest income. Net
interest income can fluctuate with significant interest rate movements. To
lessen the impact of these rate swings, management of the Bank will endeavor to
structure the Bank's balance sheet so that repricing opportunities exist for
both assets and liabilities in roughly equivalent amounts at approximately the
same time intervals. Imbalances in these repricing opportunities at any point in
time constitutes interest rate sensitivity.
The measurement of the Bank's interest rate sensitivity, or "gap," is
one of the principal techniques used in asset/liability management. The interest
sensitive gap is the dollar difference between assets and liabilities which are
subject to interest-rate pricing within a given time period, including both
floating rate or adjustable rate instruments and instruments which are
approaching maturity.
The following table sets forth the amount of the Baltimore Branch
Deposits and the Rushmore Loans outstanding at December 31, 1996 which are
expected to mature or reprice in each of the time periods shown. The information
in the table has been derived from information provided by Rushmore.
40
<PAGE>
<TABLE>
<CAPTION>
Maturity and Rate Sensitivity Analysis
Maturity or Maturity or Maturity or Maturity or
Repricing Repricing Repricing Repricing
Percent Within Within Within Over
Amount of Total 0-3 Months 4-12 Months 1-5 Years 5 Years
------ -------- ---------- ----------- --------- -------
<S> <C>
Interest-Earning assets:
Loans receivable $7,011,000 100% $ 30,000 $ 9,000 $ 427,000 $6,545,000
---------- ----- ----------- ----------- ----------- ----------
Total Interest-Earning Assets $7,011,000 100% $ 30,000 $ 9,000 $ 427,000 $6,545,000
========== ===== =========== =========== =========== ==========
Interest-Bearing Liabilities:
Statement Savings $1,699,000 21.36% $ 1,699,000 $ -- $ -- $ --
Money Market 5,186,000 65.20% 5,186,000 -- -- --
Certificate of Deposit,
Jumbo CD & IRA 987,000 12.41% 338,000 383,000 266,000 --
IRA Money Market 82,000 1.03% 82,000 -- -- --
---------- ----- ----------- ----------- ----------- ----------
Total Interest-Bearing Liabilities $7,954,000 100% $ 7,305,000 $ 383,000 $ 266,000 $ --
========== ===== =========== =========== =========== ==========
Periodic Repricing Differences
(periodic gap) $(7,275,000) $ (374,000) $ 161,000 $6,545,000
=========== =========== ============ ==========
Cumulative Repricing Differences
(cumulative gap) $(7,275,000) $(7,649,000) $(7,488,000) $ (943,000)
=========== =========== =========== ==========
</TABLE>
Since all interest rates and yields do not adjust at the same velocity,
the gap is only a general indicator of interest rate sensitivity. The analysis
of the Baltimore Branch Deposits and the Rushmore Loans presents only a static
view of the timing of maturities and repricing opportunities, without taking
into consideration the fact that changes in interest rates do not affect all
assets and liabilities equally. Net interest income may be impacted by other
significant factors in a given interest rate environment, including changes in
the volume and mix of interest-earning assets and interest-bearing liabilities.
As indicated by the above table, the Rushmore Loans consist primarily
of fixed rate, long-term loans while the Baltimore Branch Deposits primarily
consist of variable rate short-term accounts. Since the loans will mature more
slowly than the deposits, the net portfolio value and net interest income would
tend to decrease during periods of rising interest rates, but would increase
during periods of falling interest rates. Many of the Rushmore Loans were made
prior to the current documentation requirements of GNMA, FNMA or FHLMC and,
therefore, they may not be able to be resold in the secondary market. During
periods of rising interest rates, the Bank's inability to resell certain of the
Rushmore Loans in the secondary market could have a material adverse effect on
the Bank's net portfolio value and its net interest income.
Bank management will seek to improve the interest rate sensitivity of
the Bank's loan portfolio. Bank management will meet periodically to monitor and
manage the structure of the Bank's balance sheet, control interest rate
exposure, and evaluate pricing strategies for the Bank. Strategies to better
match maturities of interest-earning assets and interest-bearing liabilities may
include call provisions, adjustable rate mortgages, residential construction
lending and other short term products. In the future, the Bank will generally
sell originations of fixed rate mortgages in the secondary market and portfolio
only rate sensitive products. All fixed rate mortgages will be underwritten in
accordance with GNMA, FNMA or FHLMC requirements.
41
<PAGE>
In theory, interest rate risk can be diminished by maintaining a
nominal level of interest rate sensitivity. In practice, this is made difficult
by a number of factors, including cyclical variation in loan demand, different
impacts on interest-sensitive assets and liabilities when interest rates change,
and the availability of funding sources. Bank management will generally attempt
to maintain a balance between rate-sensitive assets and liabilities as the
exposure period is lengthened to minimize the overall interest rate risk to the
Bank.
Lending Activities
The Bank anticipates that its lending activities will be primarily
comprised of the origination of mortgage loans for the purpose of financing and
refinancing one-to-four family residential properties. To a lesser extent, the
Bank anticipates that it will originate home equity loans, commercial real
estate loans, multi-family real estate loans (five units or more), construction
loans (primarily for one- to four-family home construction for the borrower),
commercial business loans and consumer loans. The types of loans the Bank will
originate generally will be subject to federal and state law and regulation.
The Bank's ability to originate loans will be dependent upon the
relative customer demand, which will be affected by the current and expected
future level of interest rates. Interest rates will be affected by the demand
for loans and the supply of money available for lending purposes and the rates
offered by competitors. Among other things, these factors are, in turn, affected
by economic conditions, monetary policies of the federal government, including
the Federal Reserve, and legislative tax policies.
Loan Portfolio Composition
As a result of the Acquisition, the Bank's initial loan portfolio will
be principally comprised of long-term fixed-rate mortgage loans for owner
occupied and non-owner occupied (investor) residential properties. As of
December 31, 1996, the Rushmore Loans were $7,011,000, of which $5,736,000 were
one-to-four-family mortgage loans, or approximately 81.81% of the Rushmore
Loans. At the same date, second trust mortgage loans were $72,000, or
approximately 1.03% of the Rushmore Loans. As of December 31, 1996, commercial
real estate loans were $942,000, or approximately 13.34% of the Rushmore Loans
and consumer loans were $261,000, or approximately 3.72% of the Rushmore Loans.
As of December 31, 1996, none of the Rushmore Loans consisted of loans
with adjustable interest rates. Since all of the Rushmore Loans are fixed-rate,
the Bank does not have the flexibility to adjust the rates of these loans to the
current interest rate environment. Adjustable rate loans allow this flexibility.
See "- Liquidity and Interest Rate Sensitivity."
The following table sets forth the composition of the Rushmore Loans in
dollar amounts and in percentage of the respective portfolio as of December 31,
1996 and 1995. The information in the table has been derived from information
provided by Rushmore.
42
<PAGE>
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
Type of Loans Amount % of Total Amount % of Total
- ------------- ------ ---------- ------ ----------
<S> <C>
Commercial - Real Estate $942,000 13.44% $ 999,000 11.95%
Residential Real Estate
Owner Occupied 4,295,000 61.26 5,317,000 63.58
Investor 1,441,000 20.55 1,737,000 20.77
Second Trust 72,000 1.03 74,000 0.88
Consumer
Deposit Secured 235,000 3.35 219,000 2.62
Unsecured 26,000 0.37 17,000 0.20
------ ---- ------ ----
Total Loans $7,011,000 100.00% $8,363,000 100.00%
---------- ======= ---------- =======
Add:
Unamortized Premiums $ -- $ --
Accrued Interest Receivable $ 57,000 $ 73,000
Less:
Unearned Income 50,000 62,000
Allowance for Loan Losses 50,000 90,000
------ ------
Net Loans $6,968,000 $8,284,000
========== ==========
</TABLE>
The following table sets forth the maturity distribution, classified
according to sensitivity to changes in interest rate, for the Rushmore Loans as
of December 31, 1996. Some of the loans may be renewed or repaid prior to
maturity. Therefore, the following table should not be used as a forecast of
future cash collections. The information in the table has been derived from
information provided by Rushmore.
<TABLE>
<CAPTION>
As of December 31, 1996
(dollars in thousandths)
------------------------
More than
Up to 1 1 Year to 10+
Year 10 Years Years Total
---- -------- ----- -----
<S> <C>
Real Estate (commercial and residential) $30,000 $1,692,000 $5,028,000 $6,750,000
Consumer 9,000 169,000 83,000 261,000
----- ------- ------ -------
Total $39,000 $1,861,000 $5,111,000 $7,011,000
======= ========== ========== ==========
Fixed Interest Rate $39,000 $1,861,000 $5,111,000 $7,011,000
Variable Interest Rate -- -- -- --
------- ---------- ---------- ----------
Total $39,000 $1,861,000 $5,111,000 $7,011,000
======= ========== ========== ==========
</TABLE>
The scheduled repayments as shown above are reported in the maturity
category in which the payment is due.
Residential Real Estate Secured Loans. The Bank intends to offer
fixed-rate and adjustable-rate mortgage loans primarily secured by one- to
four-family residences, with maturities up to 30 years. It is anticipated that
such loans will be secured by properties located in the Bank's market areas. All
one- to four-family loans will be underwritten in accordance with GNMA, FNMA or
FHLMC standards. The Bank will originate loans for both owner occupied and
non-owner occupied
43
<PAGE>
(investor) residential properties. Non-owner occupied residential mortgage loans
generally carry a higher degree of credit risk than owner occupied residential
mortgage loans.
The Bank intends to offer fixed-rate and adjustable-rate home equity
loans, primarily secured by one- to four-family, owner-occupied residences. It
is anticipated that the Bank will employ similar underwriting standards in
making home equity loans as those utilized in making residential mortgage loans.
The Bank also intends, in certain circumstances, to purchase or
participate in adjustable-rate mortgage loans.
As of December 31, 1996, of the $7,011,000 in Rushmore Loans,
$5,736,000 were one-to-four family mortgage loans, or approximately 81.81% of
the Rushmore Loans and $72,000 were second trust mortgage loans, or 1.03% of the
Rushmore Loans.
Commercial and Multi-Family Real Estate Loans. The Bank intends to
offer commercial and multi-family real estate loans (five units or more)
generally secured by property located in the Bank's market areas. The Bank also
intends, in certain circumstances, to purchase or participate in commercial and
multi-family loans. In reaching a decision on whether to make a commercial real
estate or multi-family loan, it is anticipated that the Bank will consider a
number of factors, including market conditions, the net operating income of the
mortgaged premises before debt service and depreciation, the debt service ratio
(the ratio of net operating income to debt service) and the ratio of loan amount
to appraised value.
Commercial real estate and multi-family loans are generally larger and
present a greater degree of risk than loans secured by one- to four-family
residences. Because payments on loans secured by commercial real estate and
multi-family properties are often dependent on the successful operation or
management of the properties, repayment of such loans may be subject to a
greater extent to adverse conditions in the real estate market or in the
economy. It is anticipated that the Bank will seek to minimize these risks
through its underwriting standards.
As of December 31, 1996, of the $7,011,000 in Rushmore Loans, $942,000
were commercial real estate loans, or approximately 13.44% of the Rushmore
Loans. The commercial real estate loans are primarily concentrated in loans
secured by restaurants and taverns. The Bank is not acquiring any multi-family
loans from Rushmore.
Construction Loans. It is anticipated that the Bank will, on a case by
case basis, originate loans for the development of property to customers in its
market areas. It is anticipated that the Bank's construction loans primarily
will be made to finance the construction of one- to four-family, owner-occupied
residential properties.
Construction financing is generally considered to involve a higher
degree of credit risk than long-term financing on improved, owner-occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development compared to the estimated cost (including interest)
of construction. If the estimate of value proves to be inaccurate, the Bank
would be confronted with a project, when completed, having a value which is
insufficient to ensure full repayment.
The Bank is not acquiring any construction loans from Rushmore.
Commercial Business Loans. The Bank intends to pursue opportunities to
offer commercial business loans, primarily to businesses located in the Bank's
market areas. Federally chartered savings institutions such as the Bank are
authorized to make secured or unsecured loans and letters of credit for
commercial, corporate, business and agricultural purposes and to engage in
commercial leasing activities. However, federally chartered savings institutions
generally are limited in the amount of commercial business loans they may hold
in their portfolio to a maximum of 20% of total assets.
Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his or her employment and
other income, and which are secured by real property whose value tends to be
more easily ascertainable, commercial business loans are of higher risk and
typically are made on the basis of the borrower's ability to make repayment from
the cash flow of the borrower's business. As a result, the availability of funds
for the repayment of commercial
44
<PAGE>
business loans may be substantially dependent on the success of the business
itself. Further, the collateral securing the loans may depreciate over time, may
be difficult to appraise and may fluctuate in value based on the success of the
business.
The Bank is not acquiring any business loans from Rushmore.
Consumer Loans. The Bank intends to make a variety of consumer loans
which will primarily consist of fixed rate installment loans secured by
automobiles or by deposits at the Bank.
Consumer loans may entail greater credit risk than do residential
mortgage loans, particularly in the case of consumer loans that are unsecured or
that are secured by rapidly depreciable assets, such as automobiles. In such
cases, any repossessed collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the outstanding loan balance as a result of
the greater likelihood of damage, loss or depreciation. In addition, consumer
loan collections are dependent on the borrower's continuing financial stability,
and therefore are more likely to be affected by adverse personal circumstances.
Furthermore, the application of various federal and state laws, including
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans.
As of December 31, 1996, of the $7,011,000 in Rushmore Loans, $261,000
were consumer loans, or approximately 3.72% of the Rushmore Loans.
Marketing and Procedures for Loan Approvals
The Bank's lending activity will be conducted primarily from its
Banking Office, primarily through contacts with existing and past customers of
the Baltimore Branch, advertising, customer calls and contacts by the Bank's
employees, officers and directors and solicitations to local real estate
brokers, builders and real estate developers. The Bank's lending will be subject
to written underwriting standards and to loan origination procedures. Decisions
on loan applications will be made on the basis of detailed applications and
property valuations. The loan applications will be designed primarily to
determine the borrower's ability to repay and the more significant items on the
applications will be verified through use of credit reports, financial
statements, tax returns and/or confirmations. The Bank generally will sell
originations of fixed rate loans in the secondary market and will retain in its
portfolio only rate sensitive products.
The Bank generally will require title insurance on its real estate
secured loans as well as fire and extended coverage casualty insurance in
amounts at least equal to the principal amount of the loan or the value of
improvements on the property, depending on the type of loan. The Bank also will
require flood insurance to protect the property securing its interest when the
property is located in a flood plain.
Delinquent Loans
Management of the Bank will perform reviews of all delinquent loans.
The procedures taken by the Bank with respect to delinquencies will vary
depending on the nature of the loan and period of delinquency. It is anticipated
that the Bank generally will require that delinquent mortgage loans be reviewed
and that a written late charge notice be mailed shortly after the date of
delinquency. It is anticipated that the Bank's policies will provide that
telephone contact will be attempted to ascertain the reasons for delinquency and
the prospects of repayment. When contact is made with the borrower at any time
prior to foreclosure, the Bank will attempt to obtain full payment or work out a
repayment schedule with the borrower to avoid foreclosure. It is anticipated
that it will be the Bank's policy to place all loans that are delinquent by
three or more payments on non-accrual status, resulting in the Bank no longer
accruing interest on such loans and reversing any interest previously accrued
but not collected. A non-accrual loan may be restored to accrual status when
delinquent principal and interest payments are brought current and future
monthly principal and interest payments are expected to be collected. Any
property acquired by the Bank as a result of foreclosure on a mortgage loan will
be classified as "real estate owned" and will be recorded at the lower of the
unpaid principal balance or fair value at the date of acquisition and
subsequently carried at the lower of cost or net realizable value. Upon
foreclosure, the Bank generally will require an appraisal of the property and,
thereafter, appraisals of the property on an annual basis and external
inspections on at least a quarterly basis.
45
<PAGE>
The following table indicates delinquencies in the Rushmore Loans at
December 31, 1996. The information in the table has been derived from
information provided by Rushmore.
<TABLE>
<CAPTION>
At December 31, 1996
--------------------
30-89 Days 90 Days or More
---------- -------
Number Principal Balance Number Principal Balance
of Loans of Loans of Loans of Loans
-------- -------- -------- --------
<S> <C>
Commercial Real Estate -- $ -- -- $ --
Residential Real Estate 3 97,000 -- --
Consumer -- -- -- --
------- ------ ------
Total Loans 3 $97,000 -- --
=== ======= ====== ======
Delinquent Loans to Total Loans 1.38 % -- %
====== ======
</TABLE>
Classified Assets
Federal regulations require and the Bank's policy will require that the
Bank utilize an internal asset classification system as a means of reporting
problem and potential problem assets. It is anticipated that the Bank will
classify problem and potential problem assets as "Substandard," "Doubtful" or
"Loss." An asset will be considered "Substandard" if it is inadequately
protected by the current net worth and paying capacity of the obligor or of the
collateral pledged, if any. "Substandard" assets will include those
characterized by the "distinct possibility" that the Bank will sustain "some
loss" if the deficiencies are not corrected. Assets classified as "Doubtful"
will have all of the weaknesses inherent in those classified "Substandard" with
the added characteristic that the weaknesses present make "collection or
liquidation in full," on the basis of currently existing facts, conditions and
values, "highly questionable and improbable." Assets classified as "Loss" will
be those considered "uncollectible" and of such little value that their
continuance as assets without the establishment of a specific loss allowance is
not warranted. Assets which do not expose the Bank to sufficient risk to warrant
classification in one of the aforementioned categories but posses weaknesses
will be designated "Special Mention."
When the Bank determines that an asset should be classified, it
generally will not establish a specific allowance for such asset unless it
determines that such asset should be classified as "Loss." When the Bank
classifies one or more assets, or portions thereof, as "Substandard" or
"Doubtful," it will establish a general valuation allowance for loan losses in
an amount deemed prudent by management. General valuation allowances represent
loss allowances which have been established to recognize the inherent risk
associated with lending activities, but which, unlike specific allowances, have
not been allocated to particular problem assets. In determining the amount of
the general valuation allowance, the Bank's management will consider, among
other matters, the net realizable value of the underlying collateral, national
and regional economic conditions, trends in the real estate market in the Bank's
market area, historical loan loss experience and other factors that warrant
recognition in providing for an adequate loan loss allowance. When the Bank
classifies one or more of its assets, or portions thereof, as "Loss," it will
either establish a specific allowance for losses equal to 100% of the amount of
the asset so classified or will charge off such amount.
A savings institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
OTS, which can order the establishment of additional general or specific loss
allowances. The OTS, in conjunction with the other federal banking agencies,
recently adopted an interagency policy statement on the allowance for loan and
lease losses. The policy statement provides guidance for financial institutions
on both the responsibilities of
46
<PAGE>
management for the assessment and establishment of adequate allowances and
guidance for banking agency examiners to use in determining the adequacy of
general valuation guidelines. Generally, the policy statement recommends that
institutions have effective systems and controls to identify, monitor and
address asset quality problems, that management has analyzed all significant
factors that affect the collectability of the portfolio in a reasonable manner,
and that management has established acceptable allowance evaluation processes
that meet the objectives set forth in the policy statement. While the Bank
believes that it will establish an adequate allowance for loan losses, there can
be no assurance that regulators, in reviewing the Bank's loan portfolio, will
not request the Bank to materially increase at that time its allowance for loan
losses, thereby negatively affecting the Bank's financial condition and earnings
at that time.
As of December 31, 1996, Rushmore classified $16,000 of the Rushmore
Loans as "Substandard." As of December 31, 1996, Rushmore did not classify any
Rushmore Loans as "Doubtful" or "Loss."
Allowance for Loan Losses
The Bank will attempt to manage the risk characteristics of its loan
portfolio through various control processes, such as credit evaluations of
borrowers, establishment of lending limits and application of lending
procedures, including the holding of adequate collateral and the maintenance of
compensating balances. However, the Bank will seek to rely primarily on the cash
flow of its borrowers as the principal source of repayment. Although credit
policies are designed to minimize risk, management of the Bank recognizes that
loan losses will occur and that the amount of these losses will fluctuate
depending on the risk characteristics of the loan portfolio as well as general
and regional economic conditions.
The allowance for loan losses represents a reserve for potential losses
in a bank's loan portfolio. The Bank will periodically evaluate the adequacy of
the allowance for loan losses based on a review of all significant loans, with a
particular emphasis on non-accruing, past due and other loans that management
believes requires special attention. For significant problem loans, management's
review will consist of an evaluation of the financial strengths of the borrower
and the guarantor, the related collateral, and the effects of economic
conditions. Specific reserves against the remaining loan portfolio will be based
on an analysis of historical loan loss ratios, loan charge-offs, delinquency
trends and collection experience, along with an assessment of the effects of
external economic conditions.
The following table summarizes the allowance activities for the
Baltimore Branch for the years ended December 31, 1996 and 1995. The information
in the table has been derived from information provided by Rushmore. However,
the determination of the appropriate allowance level was based upon a number of
assumptions by Rushmore about future events, which may or may not prove valid.
Years Ended
December 31, 1996
-----------------
Allowance for loan losses, beginning of period $90,000
Loans charged off 40,000
Recoveries ---
Provision for loan losses ---
-------
Allowance for loan losses, end of period $50,000
=======
Rushmore does not allocate its allowance for loan losses by loan type.
Upon the commencement of its operations, the Bank's loans will consist
of the loans acquired pursuant to the Acquisition. Because these loans were
originated by Rushmore, the Organizers have made an estimate of what they
believe to be a reasonable initial allowance account for the Bank. In
establishing the Bank's initial allowance for loan losses, the Organizer's have
relied on, among other things, conversations with Rushmore, a review of the
payment history of the Rushmore
47
<PAGE>
Loans and current economic conditions. Although the Organizers' believe that the
Bank' initial allowance for loan losses will be adequate, there can be no
assurance that the allowance will prove sufficient to cover future loan losses.
In addition, future adjustments may be necessary if economic conditions differ
substantially from the assumptions used or adverse developments arise with
respect to the Bank's loans. Thus, there can be no assurance that charge-offs in
future periods will not exceed the allowance for loan losses or that additional
increases in the loan loss allowance will not be required. Upon the commencement
of its operations, the Bank estimates its allowance for loan losses will be
$50,000, which will represent approximately 0.7% of the Bank's outstanding
loans.
The Company will adopt the provisions of Statements of Financial
Accounting Standards No. 114 ("SFAS 114"), Accounting by Creditors for
Impairment of Loan, as amended by Statements of Financial Accounting Standards
No. 118 ("SFAS 118), Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosure, effective January 1, 1995. SFAS 114 and 118 require
that impaired loans, which consist of all modified loans and other loans for
which collection of all contractual principal and interest is not probable, be
measured based on the present value of expected cash flows discounted at the
loan's effective interest rate or the fair value of the collateral. The Bank
will acquire one impaired loan from Rushmore with a carrying value of $16,000.
As of December 31, 1996, Rushmore had established a valuation allowance related
to such loan of $4,000.
The Bank will classify loans as non-accrual when collection of full
principal and interest under the original terms of the loan is not expected. The
loans will be classified as non-accrual even though the presence of collateral
or the borrower's financial strength may be sufficient to provide for ultimate
repayment. The Bank will recognize interest on non-accrual loans only when
received. Upon the commencement of its operations, the Bank does not anticipate
having any non-accrual loans in its loan portfolio.
The following table indicates the Rushmore Loans which were 90 days or
more delinquent as of December 31, 1996 and 1995 and which were placed on
non-accrual status by Rushmore. The information has derived from information
provided by Rushmore.
Non-Performing Assets
---------------------
At December 31,
---------------
1996 1995
---- ----
Loans on non-accrual basis ................... $ --- $ 55,000
Accruing loans delinquent 90 days or more..... $ --- $ 72,000
---------- -------
Total non-performing loans ............... $ -- $127,000
========== =======
The following table indicates the amount of interest that would have
been recorded had all loans classified as non-accrual been current in accordance
with their original terms and the amount of interest actually accrued. The
information in the table has been derived from information provided by Rushmore.
Forgone Interest
----------------
For the Year Ended
December 31,
------------
1996 1995
---- ----
48
<PAGE>
Interest income that would have been $ -- $4,000
accrued at original terms.. ..............
Interest recognized................. ...... $ -- $3,000
Based on conversations with Rushmore and a review by the Organizers of
the Rushmore Loans, it is anticipated that the Bank, upon commencement of its
business, will have loans in its portfolio with an aggregate outstanding balance
of approximately $34,000 as of December 31, 1996 with respect to which known
information about the possible credit problems of the borrowers or the cash flow
of the security have caused the Organizers to have some doubts as to the ability
of the borrowers to comply with present loan repayment terms and which may
result in the future inclusion of such items in the non-performing asset
categories.
Securities Portfolio
As a federally chartered savings institutions, the Bank will have the
authority to invest in various types of liquid assets, including United States
Treasury obligations, securities of various federal agencies, certain
certificates of deposit of insured banks and savings institutions, certain
bankers' acceptances, repurchase agreements, mortgage-backed and related
securities and federal funds. Subject to various restrictions, the Bank also may
invest in commercial paper, corporate debt securities and mutual funds whose
assets conform to the investments that a federally chartered savings institution
is otherwise authorized to make directly. Additionally, the Bank will be
required to maintain minimum levels of investments that qualify as liquid assets
under OTS regulations. See "REGULATION - Federal Savings Institution Regulation
- - QTL Test."
While mortgage-backed and related securities carry a reduced credit risk
as compared to whole loans, such securities remain subject to the risk that a
fluctuating interest rate environment, along with other factors such as the
geographic distribution of the underlying mortgage loans, may alter the
prepayment rate of such mortgage loans and so affect the value of such
securities. Specifically, investments in mortgage-backed and related securities
involve risks that actual prepayments may exceed prepayments estimated over the
life of the security that may result in a loss of any premiums paid for such
securities thereby reducing their net yield. Conversely, if interest rates
increase, the market value of such securities may be adversely affected.
The Board of Directors of the Bank will set the investment policy of the
Bank. It is anticipated that the policy will dictate that investments be made
based on the safety of the principal, the liquidity requirements of the Bank and
the return on the investment and capital appreciation. It is anticipated that
all investment decisions will be made by the Bank's investment committee.
Sources of Funds
Deposits will be the primary source of the Bank's funds for use in
lending and for other general business purposes. In addition to deposits, the
Bank may obtain funds from advances from the Federal Home Loan Bank of Atlanta
and other borrowing.
Deposits
It is anticipated that the Bank will offer a variety of deposit accounts
having a range of interest rates and terms. It is intended that the Bank's
deposits will consist of checking accounts, NOW accounts, money market accounts,
statement savings accounts, individual retirement accounts and certificates of
deposit. In addition to the Baltimore Branch Deposits being acquired pursuant to
the Acquisition, the Bank's deposits will be obtained primarily from its market
areas. The Bank will rely on relationships with existing and past customers of
the Baltimore Branch, advertising and customer calls and contacts by the Bank's
employees, officers and directors to attract and retain deposits. The Bank does
not intend to use brokers to obtain deposits. The Bank intends to pay
competitive interest rates on deposits, but other institutions in its area may
offer higher
49
<PAGE>
interest rates. All deposits will be insured by the Savings Account Insurance
Fund ("SAIF") administered by the FDIC up to the maximum amount allowed by law
(generally, $100,000 per depositor subject to aggregation rules).
It is anticipated that the variety of deposit accounts offered by the
Bank will allow it to be competitive in its market area in obtaining funds and
will enable it to respond with flexibility to changes in customer demand. The
ability of the Bank to attract and maintain deposit accounts will be affected by
market conditions.
The following table details the average amount, the average rate paid on
and the total of the following deposit categories for the Baltimore Branch
Deposits for the year ended December 31, 1996. The average balances were
calculated using month-end balances as daily averages were not available for the
period presented. The information in the table has been derived from information
provided by Rushmore.
<TABLE>
<CAPTION>
Year Ended
December 31, 1996
-----------------
Percent
Composition of Deposits Average Balance Average Rate of Total
- ----------------------- --------------- ------------ --------
<S> <C>
Checking $221,000 -----% 2.73%
Total Checking
Savings
Statement savings 1,995,000 2.50 24.60%
Money market 4,707,000 5.30 58.06
Certificates of deposit 629,000 4.56 7.76
Jumbo CD -- --- --
IRA 471,000 4.06 5.81
IRA Money Market 84,000 5.30 1.04
---------- ---- ----
Total Savings $7,886,000 4.45% 97.27%
---------- ----- ------
Total $8,107,000 100%
========== ----
</TABLE>
Based on information provided by Rushmore, none of the Baltimore Branch
Deposits had remaining maturities in amounts of $100,000 or more as of December
31, 1996.
Borrowing
The Federal Home Loan Bank System (the "FHLB System") functions as a
reserve credit capacity for savings associations and certain other home
financing institutions. Members of the FHLB System are required to own capital
stock in a Federal Home Loan Bank (a "FHLB"). The Bank will be a member of the
FHLB System and will be required to own stock in the FHLB of Atlanta.
It is anticipated that the Bank will be able to obtain advances from the
FHLB of Atlanta upon the security of its capital stock in the FHLB of Atlanta
and its mortgage loans and mortgage-backed securities. Such advances may be made
pursuant to several different credit programs, each of which has its own
interest rate and range of maturities. The FHLB of Atlanta will limit the
advances it makes to the Bank based upon its review and analysis of the Bank.
The Bank may use FHLB advances as an alternative source of funds to deposits in
order to fund its lending activities when it determines that it can profitably
invest the borrowed funds over their term. See "REGULATION - Federal Home Loan
Bank System."
50
<PAGE>
Other Services
Other anticipated Bank services include cash management services, safe
deposit boxes, travelers checks, direct deposit of payroll and social security
checks and automatic drafts for various accounts. The Bank plans to become
associated with a network of automated teller machines that may be used by
customers of the Bank throughout Maryland and other regions.
The Bank does not plan to exercise trust powers during its initial years
of operation. The Bank may in the future offer a full-service trust department,
but cannot do so without the prior approval of the OTS. The Bank also currently
does not intend to operate outside the State of Maryland or internationally and
does not intend to offer investment banking services.
Description of Property
The Banking Office will be located at 3621 East Lombard Street,
Baltimore, Maryland 21224. Its telephone number will be (410) 342-8303. The
Banking Office contains approximately 2,000 square feet in a converted two-story
rowhome that has been utilized as a bank since 1927. The Banking Office is
located on the corner of two city streets, and is convenient to walk-in
customers and customers who use readily available street parking nearby.
Pending commencement of banking operations, the Bank's interim address
will be 515 East Joppa Road, Towson, Maryland 21286 and its interim telephone
number will be (410) 825-5580. The interim office will be used only for
administrative purposes.
Employees
It is anticipated that, upon commencement of banking operations, the
Bank will have three full-time employees and two part-time employee. It is
anticipated that all of these employees, except one part-time employee who will
be newly hired, will be former employees of Rushmore, including Patricia
D'Alessandro, who currently is a Vice President of Rushmore with managerial
responsibilities for the Baltimore Branch. Subject to regulatory approval, Ms.
D'Alessandro will serve as the President of the Bank and the Vice President of
the Company. Ms. D'Alessandro has over 20 years of experience in the commercial
and retail banking industry. See "THE ACQUISITION - General" and "MANAGEMENT."
REGULATION
General
As a federal stock savings bank, the Bank will be subject to
examination, supervision and comprehensive regulation by the OTS, as its
chartering agency, and the FDIC, as the deposit insurer. With respect to certain
consumer credit laws, the Bank will be subject to regulation by the Commissioner
of Financial Regulation of the State of Maryland. The Bank will be a member of
the FHLB System and its deposit accounts will be insured up to applicable limits
by the Savings Association Insurance Fund ("SAIF"), administered by the FDIC.
The Bank will be required to file reports with the OTS and the FDIC concerning
its activities and financial condition in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with, or
acquisitions of, other financial institutions. The OTS and the FDIC will perform
periodic examinations to test the Bank's compliance with various regulatory
requirements. This regulation and supervision establishes a comprehensive
framework of activities in which an institution can engage and is intended
primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes.
The Company, as a savings and loan holding company, also will be
required to file certain reports with and otherwise comply with the rules and
regulations of the OTS and of the SEC under the federal securities laws.
51
<PAGE>
On September 30, 1996, the Economic Growth and Regulatory Paperwork
Reduction Act of 1996 (the "1996 Act") was enacted. The 1996 Act changed a broad
spectrum of prior banking laws. Among other things, the 1996 Act requires the
Secretary of the Treasury to present a report to Congress before March 31, 1997
containing the Secretary's recommendations for a common depository charter for
all federally chartered depository institutions, and the elimination of separate
charters between thrifts and commercial banks. The Secretary has made two
alternative recommendations to Congress. Under the first alternative, after a
two-year conversion period, all federally chartered thrifts would be required to
convert to national banks or state banks and the OTS would be abolished. Under
the second alternative, the thrift charter would remain intact. In addition,
legislation currently is pending before Congress that is substantially similar
to the Secretary's first alternative described above. If the Bank was required
to convert from a federal stock savings bank to a national bank or a state bank,
the Bank's regulatory structure could significantly change. At this time,
however, it is not possible to determine the effect of the Secretary's
recommendations or the extent to which the Secretary's recommendations,
Congress' action on the recommendations or Congress' actions on the pending
legislation would effect the operations of the Bank.
The following is intended only as a summary of governmental supervision
and regulation of the Bank and the Company (as a savings and loan holding
company) and does not purport to be a complete analysis of the laws and
regulations which will govern the operations of the Bank and the Company.
Federal Savings Institution Regulation
Business Activities. The activities of federal savings associations are
governed by the Home Owners' Loan Act, as amended (the "HOLA") and, in certain
respects, the Federal Deposit Insurance Act ("FDI Act") and the regulations
issued by the agencies to implement these acts. These laws and regulations
delineate the nature and extent of the activities in which federal savings
associations may engage. For example, these laws and regulations limit to a
specified percentage of the association's capital or assets the types of loans
(commercial, non-residential real property loans and consumer loans) that may be
made by the association.
Loans-to-One Borrower. Under the HOLA, savings associations are
generally required to comply with the loans to one borrower limitations
applicable to national banks. National banks generally may make loans to one
borrower in amounts up to 15% of the bank's unimpaired capital and surplus, plus
an additional 10% of unimpaired capital and surplus, if such loan is secured by
readily-marketable collateral, which is defined to include certain financial
instruments and bullion.
The HOLA provides exceptions under which a savings association may make
loans to one borrower in excess of the generally applicable national bank
limits. A savings association may make loans to one borrower in excess of such
limits under one of the following circumstances: (i) for any purpose, in any
amount not to exceed $500,000; or (ii) to develop domestic residential housing
units, in an amount not to exceed the lesser of $30 million or 30% of the
savings association's unimpaired capital and unimpaired surplus, provided other
conditions are satisfied. The Federal Institutions Reform, Recovery, and
Enforcement Act of 1989 provided that a savings association could make loans to
one borrower to finance the sale of real property acquired in satisfaction of
debts previously contracted in good faith in amounts up to 50% of the savings
association's unimpaired capital and unimpaired surplus. The OTS, however, has
modified this third standard by limiting loans to one borrower to finance the
sale of real property acquired in satisfaction of debts to 15% of unimpaired
capital and surplus. The OTS rule provides, however, that purchase money
mortgages received by a savings association to finance the sale of such real
property do not constitute "loans" (provided no new funds are advanced and the
savings association is not placed in a more detrimental position holding the
note than holding the real estate) and, therefore, are not subject to the loans
to one borrower limitations.
QTL Test. The HOLA requires savings associations to meet a qualified
thrift lender ("QTL") test. Under the QTL test, a savings association is
required to maintain at least 65% of its "portfolio assets" (total assets less:
(i) specified liquid assets up to 20% of total assets; (ii) intangibles,
including goodwill; and (iii) the value of property used to conduct business) in
certain "qualified thrift investments" (primarily residential mortgages and
related investments, including certain mortgage-backed and
52
<PAGE>
related securities) on a monthly average basis in at least 9 months out of each
12 month period. A savings association that fails the QTL test must either
convert to a bank charter or operate under certain restrictions.
Limitation on Capital Distributions. OTS regulations impose limitations
upon all capital distributions by savings associations, such as cash dividends,
payments to repurchase or otherwise acquire its shares, payments to stockholders
of another institution in a cash-out merger and other distributions charged
against capital.
The regulations establish three tiers of institutions, which are based
primarily on an institution's capital level. An institution that exceeds all
fully phased-in regulatory capital requirements before and after a proposed
capital distribution ("Tier 1 Association") and has not been advised by the OTS
that it is in need of more than normal supervision, could after prior notice to,
but without the approval of the OTS, make capital distributions during a
calendar year equal to the greater of: (i) 100% of its net earnings to date
during the calendar year plus the amount that would reduce by one-half its
"surplus capital ratio" (the excess capital over its fully phased-in capital
requirements) at the beginning of the calendar year or (ii) 75% of its net
earnings for the previous four quarters. Any additional capital distributions
would require prior OTS approval. In the event the Bank's capital fell below its
capital requirements or the OTS notified it that it was in need of more than
normal supervision, the Bank's ability to make capital distributions could be
restricted. In addition, the OTS could prohibit a proposed capital distribution
by the Bank, which would otherwise be permitted by the regulation, if the OTS
determines that such distribution would constitute an unsafe or unsound
practice.
Liquidity. Under applicable federal regulations, savings associations
are required to maintain an average daily balance of specified liquid assets
equal to a monthly average of not less than a specified percentage (currently
5%) of the average daily balance of the savings association's net withdrawable
deposit accounts plus short-term borrowing. OTS regulations also require each
savings association to maintain an average daily balance of short-term liquid
assets at a specified percentage (currently 1%) of the total of the average
daily balance of its net withdrawable deposit accounts and short-term borrowing.
Monetary penalties may be imposed for failure to meet these liquidity
requirements.
Assessments. Savings associations are required by regulation to pay
assessments to the OTS to fund the agency's operations. The general assessment
is paid on a semi-annual basis and is computed upon the savings association's
total assets, including consolidated subsidiaries, as reported in the
institution's latest quarterly Thrift Financial Report.
Branching. OTS regulations permit savings associations to branch
nationwide under certain conditions. Generally, savings associations may
establish interstate networks and geographically diversify their loan portfolios
and lines of business. The OTS' authority preempts any state law purporting to
regulate branching by federal savings associations.
Transactions with Related Parties. Transactions engaged in by a savings
association with a related party or an "affiliate" (i.e., any company that
controls or is under common control with the savings association) will be
subject to the restrictions contained in Sections 23A and 23B of the Federal
Reserve Act (the "FRA"). Section 23A of the FRA limits the aggregate amount of
covered transactions with any individual affiliate to 10% of the capital and
surplus of the savings association and also limits the aggregate amount of
transactions with all affiliates to 20% of the savings association's capital and
surplus. Certain transactions with affiliates are required to be secured by
collateral in an amount and of a type described in Section 23A and the purchase
of low quality assets from affiliates is generally prohibited. Section 23B
generally requires that certain transactions with affiliates, including loans
and asset purchases, must be on terms and under circumstances including credit
standards that are substantially the same or at least as favorable to the
institution as those prevailing at the time for comparable transactions with
non-affiliated companies. Notwithstanding Sections 23A and 23B, savings
associations are prohibited from lending to any affiliate that is engaged in
activities that are not permissible for bank holding companies under Section
4(c) of the Bank Holding Company Act ("BHC Act"). Further, no savings
association may purchase the securities of any affiliate other than a
subsidiary.
In addition, a savings association's authority to extend credit to its
executive officers, directors and 10% stockholders, as well as entities
controlled by such persons, is governed by Sections 22(g) and 22(h) of the FRA,
and Regulation O thereunder.
53
<PAGE>
Among other things, these laws and regulations require that such loans be made
on terms and conditions substantially the same as those offered to unaffiliated
individuals and may not involve more than the normal risk of repayment.
Regulation O also places individual and aggregate limits on the amount of loans
that a savings association may make to such persons based, in part, on the
savings association's capital position, and requires that certain board approval
procedures be followed.
Enforcement. Under the FDI Act, the OTS has primary enforcement
responsibility over savings associations and has the authority to bring action
against all "institution-affiliated parties," including stockholders who
participate in the conduct of the affairs of a savings association, and any
attorneys, appraisers and accountants who knowingly or recklessly participate in
wrongful action likely to have an adverse effect on the institution. Formal
enforcement action may range from the issuance of a capital directive or cease
and desist order to removal of officers or directors, receivership,
conservatorship or termination of deposit insurance. Civil penalties cover a
wide range of violations and can amount to $25,000 per day, or $1 million per
day in especially egregious cases. Under the FDI Act, the FDIC has the authority
to recommend to the Director of the OTS that enforcement action be taken with
respect to a particular savings association. If action is not taken by the
Director, the FDIC has authority to take such action under certain
circumstances. Federal law also establishes criminal penalties for certain
violations.
Capital Requirements. OTS regulations require that savings associations
maintain (i) "tangible capital" in an amount of not less than 1.5% of total
assets; (ii) "core capital" in an amount not less than 3.0% of total assets; and
(iii) a level of risk- based (or "total") capital equal to at least 8% of
risk-weighted assets.
Capital standards established by the OTS for savings associations must
generally be no less stringent than those applicable to national banks. Under
OTS regulations, the term "core capital" generally includes common stockholders'
equity, noncumulative perpetual preferred stock and related surplus, and
minority interests in the equity accounts of consolidated subsidiaries less
unidentifiable intangible assets (other than certain amounts of supervisory
goodwill) and certain investments in certain subsidiaries plus 90% of the fair
market value of readily marketable purchased mortgage servicing rights ("PMSRs")
and purchased credit card relationships (subject to certain conditions).
"Tangible capital" generally is defined as core capital minus intangible assets
and investments in certain subsidiaries, except PMSRs.
In determining total risk-weighted assets for purposes of the risk-based
requirement, (i) each off-balance sheet asset must be converted to its
on-balance sheet credit equivalent amount by multiplying the face amount of each
such item by a credit conversion factor ranging from 0% to 100% (depending upon
the nature of the asset); (ii) the credit equivalent amount of each off-balance
sheet asset and each on-balance sheet asset must be multiplied by a risk factor
ranging from 0% to 200% (again depending upon the nature of the asset); and
(iii) the resulting amounts are added together and constitute total
risk-weighted assets. "Total capital," for purposes of the risk-based capital
requirement, equals the sum of core capital plus supplementary capital (which,
as defined, includes the sum of, among other items, perpetual preferred stock
not counted as core capital, limited life preferred stock, subordinated debt and
general loan and lease loss allowances up to 1.25% of risk-weighted assets) less
certain deductions. The amount of supplementary capital that may be counted
towards satisfaction of the total capital requirement may not exceed 100% of
core capital, and OTS regulations require the maintenance of a minimum ratio of
core capital to total risk-weighted assets of 4%.
OTS regulations have been amended to include an interest-rate risk
component to the risk-based capital requirement. Under this regulation, an
institution is considered to have excess interest rate-risk if, based upon a
200-basis point change in market interest rates, the market value of an
institution's capital changes by more than 2%. This new requirement, application
of which has been delayed indefinitely by the OTS, is not expected to have any
material effect on the ability of the Bank to meet the risk-based capital
requirement. The OTS also revised its risk-based capital standards to ensure
that its standards provide adequately for concentration of credit risk, risk
from nontraditional activities and actual performance and expected risk of loss
on multi-family mortgages.
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<PAGE>
Capital requirements higher than the generally applicable minimum may be
established for a particular savings association if the OTS determines that the
institution's capital was or may become inadequate in view of its particular
circumstances.
The following table sets forth the Bank's pro forma level of regulatory
capital and its required level of regulatory capital as of December 31, 1996,
giving effect to the Offering and the consummation of the Acquisition.
<TABLE>
<CAPTION>
Actual Capital Required Capital Excess Capital
-------------------------- ---------------------------- ------------------------
Amount Percentage Amount Percentage Amount Percentage
------ ---------- ------ ---------- ------ ----------
<S> <C>
Tangible...... $1,745,000 20.7% $126,000 1.5% $1,619,000 19.3%
Core.......... $1,745,000 20.7% $252,000 3.0% $1,493,000 17.8%
Risk-based.... $1,745,000 37.3% $374,000 8.0%* $1,371,000 29.3%
</TABLE>
*Based on Risk Weighted Assets of $4,673,000.
Prompt Corrective Regulatory Action. Pursuant to the FDI Act, the federal
banking agencies established for each capital measure levels at which an insured
institution is deemed to be well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Federal banking agencies are required to take prompt
corrective action with respect to insured institutions that fall below minimum
capital standards. The degree of required regulatory intervention for
institutions that are not at least adequately capitalized is tied to an insured
institution's capital category, with increasing scrutiny and more stringent
restrictions being imposed as an institution's capital declines.
The prompt corrective action regulations generally are based upon an
institution's capital ratios. Under the prompt corrective action regulations
adopted by the OTS, an institution will be considered (i) "well capitalized" if
the institution has a total risk-based capital ratio of 10% or greater, a Tier 1
or core capital to risk-weighted assets ratio of 6% or greater, and a leverage
ratio of 5% or greater (provided that the institution is not subject to an
order, written agreement, capital directive or prompt corrective action
directive to meet and maintain a specific capital level for any capital
measure); (ii) "adequately capitalized" if the institution has a total
risk-based capital ratio of 8% or greater, a Tier 1 or core capital to
risk-weighted assets ratio of 4% or grater, and a leverage ratio of 4% or grater
(3% or greater if the institution is rated composite 1 in its most recent report
of examination); (iii) "undercapitalized" if the institution has a total
risk-based capital ratio that is less than 8%, a Tier 1 or core capital to
risk-weighted assets ratio of less than 4%, or a leverage ratio that is less
than 4% (3% if the institution is rated composite 1 in its most recent report of
examination); (iv) "significantly undercapitalized" if the institution has a
total risk-based capital ratio that is less than 6%, a Tier 1 or core capital to
risk-weighted assets ratio that is less than 3%, or a leverage ratio that is
less than 3%; and (v) "critically undercapitalized" if the institution has a
ratio of tangible equity to total assets that is less than or equal to 2%. The
regulations also permit the OTS to determine that a savings institution should
be classified in a lower category based on other information, such as the
institution's examination report, after written notice and an opportunity for a
hearing.
Subject to a narrow exception, the regulations require the OTS to
appoint a receiver or conservator for an institution that is "critically
undercapitalized." The regulations also provide that a capital restoration plan
must be filed with the OTS within 45 days of the date an institution receives
notice that it is "undercapitalized," "significantly undercapitalized" or
"critically undercapitalized." Compliance with the plan must be guaranteed by
any parent holding company. In addition, numerous mandatory supervisory actions
may become immediately applicable to the institution depending upon its
category, including, but not limited to, increased monitoring by regulators,
restrictions on growth and capital distributions and limitations on expansion.
The OTS also could take any one of a number of discretionary supervisory
actions, including the issuance of a capital directive and the replacement of
senior executive officers and directors.
55
<PAGE>
Standards for Safety and Soundness. The FDI Act requires each federal
banking agency to prescribe standards relating to, among other things, internal
controls, information systems and audit systems, loan documentation, credit
underwriting, interest rate risk exposure, asset growth, and compensation, fees
and benefits and such other operational and managerial standards as the agency
deems appropriate. The federal banking agencies recently adopted a final
regulation and Interagency Guidelines Prescribing Standards for Safety and
Soundness ("Guidelines") to implement these safety and soundness standards.
The Guidelines set forth the safety and soundness standards that the
federal banking agencies use to identify and address problems at insured
depository institutions before capital becomes impaired. Institutions are
required to establish and maintain a system to identify problem assets and
prevent deterioration of those assets in a manner commensurate with its size and
the nature and scope of their operations. In addition, institutions must
establish and maintain a system to evaluate and monitor earnings and ensure that
earnings are sufficient to maintain adequate capital and reserves in a manner
commensurate with their size and the nature and scope of their operations.
If the appropriate federal banking agency determines that an institution
fails to meet any standard prescribed by the Guidelines, the agency may require
the institution to submit to the agency an acceptable plan to achieve compliance
with the standard, as required by the FDI Act. The final regulation establishes
deadlines for the submission and review of such safety and soundness compliance
plans.
Community Reinvestment Act. Under the Community Reinvestment Act (the
"CRA") and the implementing OTS regulations, the Bank will have a continuing and
affirmative obligation to help meet the credit needs of its local community,
including low and moderate-income neighborhoods, consistent with the safe and
sound operation of the institution. The CRA requires the board of directors of
financial institutions, such as the Bank, to adopt a CRA statement for each
assessment area that, among other things, describes its efforts to help meet the
communities credit needs and the specific types of credit that the institution
is willing to extend. The Bank's Board of Directors will be required to review
the appropriateness of the delineation of its community at least annually.
Insurance of Deposit Accounts. Federal deposit insurance is required for
all federally chartered savings associations. Deposits at the Bank will be
insured up to a maximum of $100,000 for each depositor by the SAIF, which
currently provides deposit insurance for federally chartered savings
associations. As a result of the 1996 Act, however, SAIF eventually will cease
to be the deposit insurer for federal savings associations. The 1996 Act
provides that SAIF and BIF, which is the insurance fund which insures most
commercial bank deposits, shall be merged into a new insurance fund to be called
the Deposit Insurance Fund ("DIF"). Like SAIF and BIF, DIF will be administered
by the FDIC. The 1996 Act provides that the SAIF/BIF merger shall occur by
January 1, 1999, provided that no federally chartered savings associations exist
as of such date.
The 1996 Act requires SAIF insured institutions to pay a one-time
assessment to increase the capitalization of SAIF. The purpose of the assessment
is to bring SAIF premiums in line with deposit insurance premiums assessed by
BIF. The 1996 Act is unclear with respect to its effect on institutions like the
Bank as the legislation does not address how or if the one-time assessment will
be applied to federal savings associations chartered after the enactment of the
legislation. It is the Organizers' understanding from conversations with the
applicable regulatory authorities that the one-time assessment will not be
assessed against the Bank. However, there can be no assurance that that will be
the case.
Under either SAIF or BIF, to evaluate a financial institution's deposit
insurance assessment, the FDIC has adopted a risk-based insurance assessment
system. Based on the institution's financial condition, the FDIC assigns an
institution to one of three capital categories: (i) well capitalized, (ii)
adequately capitalized or (iii) or less than adequately capitalized, as such
terms are defined under the OTS' prompt corrective regulatory action regulations
(discussed above), except that "less than adequately capitalized" includes any
institution that is not well capitalized or adequately capitalized. Within each
capital category, institutions are assigned to one of three supervisory
subgroups - "healthy" (institutions that are financially sound with only a few
minor weaknesses), "supervisory concern" (institutions with weaknesses which, if
not corrected, could result in
56
<PAGE>
significant deterioration of the institution and increased risk to the deposit
insurer) or "substantial supervisory concern" (institutions that pose a
substantial probability to the deposit insurer unless corrective action is
taken). An institution's assessment rate depends on the capital category and
supervisory subgroup to which it is assigned. The FDIC has raised deposit
insurance premiums several times in the past and may raise insurance premiums in
the future. If such action is taken by the FDIC, it could have an adverse effect
on the earnings of the Bank.
Under the FDI Act, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound practices,
is in an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
OTS.
Holding Company Regulation
The Company will be a non-diversified unitary savings and loan holding
company within the meaning of the HOLA. As such, the Company will be required to
register with the OTS and will be subject to OTS regulations, examinations,
supervision and reporting requirements. In addition, the OTS will have
enforcement authority over the Company and its non-savings association
subsidiaries. Among other things, this authority permits the OTS to restrict or
prohibit activities that are determined to be a serious risk to the subsidiary
savings association. The Bank will be required to notify the OTS thirty days
before declaring any dividend to the Company.
As a unitary savings and loan holding company, the Company generally
will not be restricted under existing laws as to the types of business
activities in which it may engage, provided that the Bank is a QTL. See
REGULATION - Federal Savings Institution Regulation" for a discussion of the QTL
requirements. Upon any non-supervisory acquisition by the Company of another
savings association, the Company would become a multiple savings and loan
holding company (if the acquired institution is held as a separate subsidiary)
and would become subject to extensive limitations on the types of business
activities in which it could engage. The HOLA limits the activities of a
multiple savings and loan holding company and its non-insured institution
subsidiaries primarily to activities permissible for bank holding companies
under Section 4(c)(8) of the BHC Act, subject to the prior approval of the OTS
and to other activities authorized by OTS regulation.
The HOLA prohibits a savings and loan holding company from acquiring
control of another savings association, or holding company thereof, without
prior written approval of the OTS. Control includes acquisition of more than 25%
of any class of voting stock or 10% of any class of voting stock if certain OTS
defined control criteria are present. In evaluating applications by holding
companies to acquire savings associations, the OTS must consider the financial
and managerial resources and future prospects of the company and association
involved, the effect of the acquisition on the risk to the insurance funds, the
convenience and needs of the community and competitive factors. Except in
certain circumstances, the OTS is prohibited from approving any acquisition that
would result in a multiple savings and loan holding company controlling savings
associations in more than one state.
New Federal Legislation
The following is intended only as a summary of certain portions of the
1996 Act that may have a direct or indirect effect on the business and
operations of the Bank and the Company (as a savings and loan holding company)
and does not purport to be a complete analysis of the 1996 Act.
The 1996 Act modified or eliminated certain previously applicable
regulatory requirements and procedures. Bank holding companies that acquire a
controlling interest in a federally chartered thrift or a savings and loan
holding company may now do so without OTS approval. However, Federal Reserve
approval, with comments from the OTS, will be required before such a transaction
may occur. Capital requirements for individual branches of national banks and
state member banks has been eliminated as has the approval requirement for
automated teller machines. Also, national banks and state member banks, if they
are considered well capitalized and well managed, no longer need regulatory
approval to invest in bank premises or in the stock
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<PAGE>
of a corporation holding bank premises. In addition, prior regulatory approval
of directors and executive officers has been limited to depository institutions
that do not meet minimum capital requirements or that are required to submit a
capital restoration plan.
The 1996 Act permits extensions of credit to be made to officers,
directors and principal stockholders of a depository institution pursuant to a
benefit or compensation program if the program is widely available to employees
of the institution and does not give preference to any officer, director,
principal stockholder or any related party over other employees of the
institution.
Under the 1996 Act, prior notice is no longer required for closure of an
automated teller machine. In addition, prior notice is no longer required for
the relocation or consolidation of one or more branches if the relocation or
consolidation occurs within the same immediate neighborhood and does not
substantially affect the nature of the business or the customers served.
The 1996 Act grants the OTS the authority to make, by regulation,
exceptions to the prohibitions against tying arrangements if such exceptions are
not contrary to existing law and are consistent with exceptions granted by the
Federal Reserve. It also raises the regulatory threshold to place a small bank
in an 18 month examination cycle (instead of the normal 12 month cycle) to
$250,000,000 in assets. The exemption threshold regarding disclosure under the
Home Mortgage Disclosure Act also has been raised and the threshold amount must
be adjusted annually for inflation.
The 1996 Act repeals the requirement that a depository institution's
independent auditor must attest to the institution's compliance with certain
laws and regulations. Similarly, the prior requirement that all members of a
depository institution's audit committee be comprised of outside directors may
now be waived by the appropriate regulatory authority.
The 1996 Act provides certain incentives for creditors to engage in
self-testing to determine compliance with the Equal Credit Opportunity Act and
the Fair Housing Act. A creditor who performs self testing will be able to keep
such results confidential provided that the creditor meets certain conditions.
The results of such self-testing may not be used in a proceeding or civil action
in which violations of the Equal Credit Opportunity Act and/or the Fair Housing
Act are alleged.
Under the 1996 Act, savings associations may now make credit card loans
and educational loans without any limitation regarding the percentage of such
loans to total assets. The amount of commercial loans a savings association may
make has been raised to 20% of total assets although amounts in excess of 10% of
total assets may only be used for small business loans.
Federal Home Loan Bank System
The Bank will be a member of the FHLB System, which consists of twelve
regional FHLBs. Each FHLB provides a central credit facility primarily for
member savings associations. The Bank will be required to acquire and hold
shares of capital stock in the FHLB of Atlanta in an amount equal to at least 1%
of the aggregate principal amount of its unpaid residential mortgage loans and
similar obligations at the beginning of each year or 1/20 of its advances
(borrowings) from the FHLB of Atlanta, whichever is greater.
The FHLBs are required to provide funds for the resolution of insolvent
thrifts and to contribute funds for affordable housing programs. These
requirements could reduce the amount of dividends that the FHLBs pay to their
members and also could result in the FHLBs imposing a higher rate of interest on
advances to their members. The Bank's net interest income would be reduced if
the FHLB reduces the amount of dividends it pays to its members or if the
interest rate on FHLB advances were to increase. Further, there can be no
assurance that any legislation relating to the FHLBs will not cause a decrease
in the value of the FHLB stock to be held by the Bank.
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<PAGE>
Federal Reserve System
Federal Reserve regulations require that savings associations maintain
non-interest-earning reserves against their transaction accounts (primarily NOW
and regular checking accounts). The Federal Reserve regulations generally
require that reserves be maintained against aggregate transaction accounts as
follows: for accounts aggregating $52.0 million or less (subject to adjustment
by the Federal Reserve) the reserve requirement is 3%; and for accounts greater
than $52.0 million, the reserve requirement is $1.6 million plus 10% (subject to
adjustment by the Federal Reserve between 8% and 14%) against that portion of
total transaction accounts in excess of $52.0 million. The first $4.3 million of
otherwise reservable balances (subject to adjustments by the Federal Reserve)
are exempted from the reserve requirements. Because required reserves must be
maintained in the form of either vault cash, a non-interest-bearing account at a
Federal Reserve Bank or a pass-through account as defined by the Federal
Reserve, the effect of this reserve requirement will be to reduce the Bank's
interest-earning assets.
Savings associations have the authority to borrow from the Federal
Reserve "discount windows," but Federal Reserve regulations require institutions
to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.
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<PAGE>
MANAGEMENT
The following table sets forth the respective names, residential or
business addresses, position with the Company and/or the Bank of the Organizers
and the Additional Directors and the number of shares of Common Stock which it
is anticipated that such persons, directly or indirectly, together with their
immediate families, will purchase (including shares which may be issued to them
in full or partial satisfaction of organizational loans made by them to the
Company) in the Offering. The table also provides the anticipated purchases of
Common Stock in the Offering of all officers and directors of the Company as a
group. The Organizers and the Additional Directors may purchase additional
shares in the Offering if necessary to permit the Company to satisfy the
conditions of the Offering, and they may purchase additional shares even if the
Company has satisfied the conditions of the Offering. Any shares purchased by
the Organizers and the Additional Directors in excess of their original
commitment will be purchased for investment and not with a view to the resale of
such shares.
[See Following Page]
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<PAGE>
<TABLE>
<CAPTION>
Anticipated Common Stock Purchases(1)
-------------------------------------
Positions with
the Company and/or Anticipated Minimum Maximum
Name (Age) the Bank(2) Number (3)(4) Offering (5) Offering (6)
- ---------- ----------- ------------- ------------ ------------
<S> <C>
Garbis Baklayan (50) Director 10,050(4) 4.19% 3.35%
7900 Belair Road
Baltimore, MD 21236
Nicholas J. Belitsos, M.D. (46) Director 10,000(4) 4.17% 3.33%
20 East Eager Street
Baltimore, MD 21202
Henry A. Berliner, Jr. (62) Director 1,500 0.63% 0.50%
2444 Holly Ave., Suite 201
Annapolis, MD 21401
King V. Cheek (59) Director 8,220(4) 3.43% 2.74%
711 S. Central Ave.
Baltimore, MD 21202
Cynthia B. Conklin (43) Director 2,550 1.06% 0.85%
230 E. Montgomery Street
Baltimore, MD 21230
Patricia D'Alessandro (52) Vice President (7), 250(4) 0.10% 0.08%
3621 E. Lombard Street President(8)
Baltimore, MD 21224
William A. Fogle, Jr. (61) Director 1,200(4) 0.50% 0.40%
RRI Box 192
Glen Rock, PA 17327
Constantine Frank (42) Director 10,000(4) 4.17% 3.33%
14721 Manor Road
Phoenix, MD 21131
J. Clarence Jameson, III (66) Director 20,050(4) 8.35% 6.68%
515 E. Joppa Road (Chairman of the Board),
Towson, MD 21286 President (7),
Vice President (8)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Anticipated Common Stock Purchases(1)
-------------------------------------
Positions with
the Company and/or Anticipated Minimum Maximum
Name (Age) the Bank(2) Number (3)(4) Offering (5) Offering (6)
- ---------- ----------- ------------- ------------ ------------
<S> <C>
Kemp Jayadeva (46) Director 7,500(4) 3.13% 2.50%
3713 Michelle Way
Baltimore, MD 21208
Norman H. Katz (70) Director 2,500(4) 1.04% 0.83%
3420 Lynne Haven Drive
Baltimore, MD 21244
Shawki N. Malek, M.D. (53) Director 10,050(4) 4.19% 3.35%
120 Sister Pierre Drive
Suite 408
Towson, MD 21204
Michael W. Mekalian (54) Director 20,050(4) 8.35%(11) 6.68%(11)
1911 York Road
Timonium, MD 21093
Mark D. Noar, M.D. (44) Director 10,000(4) 4.17% 3.33%
7402 York Road, Suite 100
Towson, MD 21204
Larry D. Ohler (57) Director , Treasurer (7,8) 2,500 1.04% 0.83%
9570 Berger Road
Columbia, MD 21046
Kenneth D. Pezzulla (67) Director , Secretary (7,8) 2,500(4) 1.04% 0.83%
401 Washington Ave.
Suite 301
Towson, MD 21204-4804
George E. Rayme, Jr. (54) Director 20,050(4) 8.35%(11) 6.68%(11)
1911 York Road
Timonium, MD 21093
Ramon F. Roig, Jr., M.D. (64) Director 4,050(4) 1.69% 1.35%
15 Aigburth Road
Towson, MD 21204
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Anticipated Common Stock Purchases(1)
-------------------------------------
Positions with
the Company and/or Anticipated Minimum Maximum
Name (Age) the Bank(2) Number (3)(4) Offering (5) Offering (6)
- ---------- ----------- ------------- ------------ ------------
<S> <C>
Russell A. Rourke (65) Director 2,500(4) 1.04% 0.83%
15 Maryland Avenue
Annapolis, MD 21401
Melanie R. Sabelhaus (48) Director 5,000 2.08% 1.67%
1406 Shoemaker Road
Baltimore, MD 21209
Baldev Singh (60) Director 10,000 4.17% 3.33%
7401 Assateague Drive
Jessup, MD 20794
Officers and Directors as a
Group(9) 140,520(10) 58.55% 46.84%
</TABLE>
(1) Although it is anticipated that the Organizers and the Additional
Directors, together with members of their immediate families, will
purchase the number of shares (including shares which may be issued to
them in full or partial satisfaction of organizational loans made by
them to the Company) indicated, neither the Organizers nor the
Additional Directors nor any other subscriber will be obligated to
purchase shares.
(2) Subject to regulatory approval, all of the Organizers, except Ms.
D'Alessandro, will serve as directors of the Company and the Bank with
Mr. Jameson serving as Chairman of the Board of the Company and the
Bank. As soon as the Bank commences its operations, subject to
regulatory approval, the Organizers intend to add the Additional
Directors as directors of the Company and the Bank.
(3) This column includes shares which are expected to be beneficially owned
by the Organizers and the Additional Directors upon the successful
completion of the Offering (including shares as to which beneficial
ownership has been disclaimed.) The Organizers and the Additional
Directors may purchase additional shares in the Offering if necessary to
permit the Company to satisfy the conditions of the Offering, and they
may purchase additional shares even if the Company has satisfied the
conditions of the Offering. Any shares purchased by the Organizers and
the Additional Directors in excess of their original commitment will be
purchased for investment and not with a view to the resale of such
shares. The information contained in this column is based upon
information furnished to the Company by the persons named in the table
and the members of the designated group. The nature of beneficial
ownership for shares shown in this column is sole voting and investment
power, except as set forth in the footnote (4) below. All of such
purchases will be at a price of $10.00 per share, the same price at
which shares are being offered to the public.
(4) The listed amounts include shares as to which the named persons are
beneficial owners but not the sole beneficial owners as follows: (i) Mr.
Baklayan: Anticipated to include 10,000 shares held for the benefit of
Mr. Baklayan's IRA, as to which Mr. Baklayan has sole voting and
investment power. (ii) Dr. Belitsos: Anticipated to include 5,000
shares held for the benefit of the Nicholas J. Belitsos, M.D. Profit
Sharing Trust, as to which Dr. Belitsos is the sole trustee and 4,950
shares held jointly with Dr. Belitsos' wife, as to which Dr. Belitsos
will share voting and investment power. (iii) Mr. Cheek: Anticipated to
include 6,000 shares held for the benefit of the Albert C. Cheek Trust,
as to which Mr. Cheek is sole trustee, and 950 shares held jointly with
Mr. Cheek's wife, as to which Mr. Cheek will share voting and investment
power. Also anticipated to include 1,220 shares held for the benefit of
Mr. Cheek's wife's IRA, as to which Mrs. Cheek has sole voting and
investment power. (iv) Ms. Conklin: Anticipated to include 2,500 shares
held for the benefit of the Cynthia B. Conklin Profit Sharing Plan, as
to which Ms. Conklin is the sole trustee. (v) Ms. D'Alessandro:
Anticipated to include 200 shares held jointly with Ms. D'Alessandro's
husband, as to which Ms. D'Alessandro will share voting and investment
power. (vi) Mr. Fogle: Anticipated to include 200 shares held for the
benefit of Mr. Fogle's IRA, as to which Mr. Fogle has sole voting and
investment power. (vii) Mr. Frank: Anticipated to include 9,950 shares
held jointly with Mr. Frank's wife, as to which Mr. Frank will share
voting and investment power. (viii) Mr. Jameson: Anticipated to include
10,000 shares held jointly with Mr. Jameson's wife, as to which Mr.
Jameson will share voting and investment power, and 10,000 shares held
for the benefit of Mr. Jameson's IRA, as to which Mr. Jameson has sole
voting and investment power. (ix) Mr. Jayadeva: Anticipated to include
5,000 shares held for the benefit of the Shobha Jayadeva Pension Plan,
as to which Mr. Jayadeva's wife, Shobha Jayadeva, M.D., is the sole
trustee and 2,450 shares held jointly with Shobha Jayadeva, M.D., as to
which Mr. Jayadeva will share voting and investment power.(x) Mr. Katz:
Anticipated to include 450 shares held jointly with Mr. Katz's wife, as
to which Mr. Katz will share voting
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<PAGE>
and investment power and 2,000 shares held for the benefit of Mr. Katz's
wife's IRA, as to which Mrs. Katz has sole voting and investment power.
(xi) Dr. Malek: Anticipated to include 10,000 shares held for the
benefit of the Shawki N. Malek KEOGH Plan, as to which Dr. Malek has
sole voting and investment power. (xii) Mr. Mekalian: Anticipated to
include 20,000 shares held by Black Star Industries, Inc. Mr. Mekalian,
together with Mr. Rayme, directly or indirectly control the voting and
investment power of Black Star Industries, Inc., as follows: Sixty
percent of the capital stock of Black Star Industries, Inc. is owned by
Mr. Mekalian's wife, Anne Mekalian, or trusts for which Ms. Mekalian is
sole trustee, and as to which Ms. Mekalian has sole voting and
investment power, and forty percent of the capital stock of Black Star
Industries, Inc. is owned by Mr. Rayme. (xiii) Dr. Noar: Anticipated to
include 9,950 shares held jointly with Dr. Noar's wife, as to which Dr.
Noar will share voting and investment power. (xiv) Mr. Pezzulla:
Anticipated to include 1,750 shares held for the benefit of Mr.
Pezzulla's IRA, as to which Mr. Pezzulla has sole voting and investment
power and 700 shares held jointly with Mr. Pezzulla's wife, as to which
Mr. Pezzulla will share voting and investment power. (xv) Mr. Rayme:
Anticipated to include 20,000 shares held by Black Star Industries, Inc.
See discussion above regarding Mr. Mekalian. (xvi) Dr. Roig: Anticipated
to include 2,000 shares held for the benefit of Dr. Roig's IRA, as to
which Dr. Roig has sole voting and investment power and 2,000 shares
held for the benefit of Dr. Roig's wife's IRA, as to which Mrs. Roig has
sole voting and investment power. (xvii) Mr. Rourke: Anticipated to
include 2,450 shares held jointly with Mr. Rourke's wife, as to which
Mr. Rourke will share voting and investment power.
(5) Indicates percentage of outstanding shares of Common Stock that would be
beneficially owned immediately after the Offering assuming that the
anticipated number of shares of Common Stock are purchased by the
Organizers and the Additional Directors and the Company accepts
subscriptions for the Minimum Number of Shares.
(6) Indicates percentage of outstanding shares of Common Stock that would be
owned immediately after the Offering assuming that the anticipated
number of shares of Common Stock are purchased by the Organizers and the
Additional Directors and the Company accepts subscriptions for the
Maximum Number of Shares.
(7) Subject to regulatory approval, the officers of the Company will be
President - J. Clarence Jameson, III; Executive Vice President -
Patricia D'Alessandro; Secretary - Kenneth D. Pezzulla, Esq.; and
Treasurer - Larry D. Ohler.
(8) Subject to regulatory approval, the officers of the Bank will be
Patricia D'Alessandro - President; J. Clarence Jameson, III - Vice
President; Secretary - Kenneth D. Pezzulla, Esq.; and Treasurer - Larry
D. Ohler.
(9) The Organizers and the Additional Directors may be deemed "control
persons" or "promoters" of the Company as those terms are defined in
Section 405 of the Securities Act of 1933, as amended.
(10) Includes 50 shares attributable to Mr. Mekalian, 50 shares attributable
to Mr. Rayme and 20,000 shares attributable to Mr. Mekalian and Mr.
Rayme through Black Star Industries, Inc. See Footnote (4) above.
(11) See Footnote (10) above.
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<PAGE>
None of the Organizers or Additional Directors are related. Biographical
information concerning the Organizers and the Additional Directors is set forth
below.
GARBIS BAKLAYAN will, subject to regulatory approval, be added by the Organizers
as a director of the Company and the Bank. Mr. Baklayan is President and Chief
Executive Officer of Gary's Sportswear and Athletic Shoes, a shoe and sportswear
company, and has served in that capacity since 1978.
NICHOLAS J. BELITSOS, M.D. will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Dr. Belitsos currently
practices internal medicine and gastroenterology in Baltimore, Maryland and is
President of Nicholas J. Belitsos, M.D., P.A. He has served in that capacity
for the past ten years. He is also the Director of the Digestive Disease Center
at Saint Joseph's Medical Center and is an Assistant Professor of Medicine and
Lecturer in Pathology at The Johns Hopkins Hospital.
HENRY A. BERLINER, JR. will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Mr. Berliner is currently
"of counsel" to Berliner, Corcoran & Rowe, a law firm, and has served in such
capacity since 1992. Mr. Berliner also is President and a principal of National
Mortgage Corporation, a mortgage brokerage firm, and has served in such capacity
since 1993. He is the Senior Vice President and general counsel of National
Consulting Group, Inc., a consulting company to the insurance industry, and has
served in such capacity since July 1996. He also is the President of National
Asset Management Co., an asset management firm, and has held such position since
1993. Mr. Berliner was President of Second National Federal Savings Bank
("Second National") from 1984 to 1992 and was a director of Second National from
1972 to 1992. In 1992, the Office of Thrift Supervision appointed the Resolution
Trust Corporation as receiver for Second National. In December 1996, Mr.
Berliner and certain other former officers and directors of Second National
(together with Mr. Berliner, the "Settling Individuals") entered into a
Settlement and Release Agreement with the FDIC (successor to the Resolution
Trust Corporation), pursuant to which, among other things, the FDIC released the
Settling Individuals, upon satisfaction of certain conditions, from any actions
the FDIC may have against the Settling Individuals related to their duties as
officers or directors of Second National. Mr. Berliner has advised the Company
that the conditions to such release have been satisfied. From 1981 to 1984, Mr.
Berliner was a director, executive committee member and chairman of the loan
committee of the National Bank of Commerce.
KING V. CHEEK will be a director of the Company and the Bank. Mr. Cheek
currently is a Senior Adviser to the President of the New York Institute of
Technology, and has served in that capacity since February 1997. Mr. Cheek also
serves as a marketing representative for BCI Contractors, Inc., a construction
company, and has served in that capacity since February 1997. From January 1996
until January 1997, Mr. Cheek served as an Assistant Vice President and director
of marketing for BCI Contractors, Inc. Mr. Cheek was Vice President of Academic
Affairs at the New York Institute of Technology from September 1992 to January
1996 and was Vice President of Institutional Advancement from 1991 to September
1992. Mr. Cheek was a director of Union Trust Bancorp from 1971 to 1974 and is
currently a director of BCI Contractors, Inc.
CYNTHIA B. CONKLIN will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Ms. Conklin currently is
a licensed realtor with O'Connor Piper & Flynn, a real estate sales company, and
has served in that capacity for over eleven years.
PATRICIA D'ALESSANDRO will serve as Executive Vice President of the Company and
will serve as President of the Bank. Ms. D'Alessandro currently is a Vice
President of Rushmore Trust and Savings, FSB ("Rushmore") and has served in such
capacity for over six years. Ms. D'Alessandro was employed from 1962 to 1974 and
from 1984 to 1989 by Chesapeake Federal Savings and Loan Association, during
which time Ms. D'Alessandro served in a variety of capacities, including
assistant secretary of the association and manager of loan servicing.
WILLIAM A. FOGLE, JR. will be a director of the Company and the Bank. Mr. Fogle
currently is a licensed realtor with Coldwell Banker Grempler Realty, Inc., a
real estate sales company, and has served in that capacity since January 1997.
He was an Assistant Vice President of Marketing and Sales of BCI Contractors,
Inc., a construction company, from February 1995 to December 31, 1996. Mr.
Fogle was Secretary of the Maryland Department of Licensing and Regulation from
1987 to February
65
<PAGE>
1995. Mr. Fogle was chairman of the credit committee and a member of the audit
committee of the Municipal Employees Credit Union from 1982 to 1987.
CONSTANTINE FRANK will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Since 1972, Mr. Frank has
been employed by Nick Frank Vending, Inc., a vending company servicing customers
in the Baltimore area. Mr. Frank will become President of Nick Frank Vending,
Inc. on July 1, 1997.
J. CLARENCE JAMESON, III will serve as President of the Company and Vice
President of the Bank and he will serve as Chairman of the Board of Directors of
both the Company and the Bank. Mr. Jameson currently is the President and a
principal of Jameson and Associates, P.A., a public accounting firm, and has
served in that capacity for over 13 years. From February 1994 to June 1995, Mr.
Jameson was Chairman of the Board of Maryland Bank Corp., the savings and loan
holding company of MarylandsBank, FSB. Mr. Jameson also was a director of
MarylandsBank, FSB from February 1994 to June 1995. Mr. Jameson also was an
organizer of the Bank of Maryland and its holding company, Bank Maryland Corp.,
and he served as Chairman of the Board of both entities from 1985 to 1990.
KEMP JAYADEVA will be a director of the Company and the Proposed Bank. Mr.
Jayadeva currently is the President and sole stockholder of Allied Physician
Services, Inc., a computer services firm, and has served in that capacity for
over nine years. Mr. Jayadeva also is a licensed engineer and a real estate
salesperson.
NORMAN H. KATZ will be a director of the Company and the Bank. Mr. Katz is an
attorney is solo practice in the Baltimore metropolitan area and has been a sole
practitioner for over 13 years. Mr. Katz was the assistant director of the
Division of Parole and Probation for the State of Maryland from 1955 to 1978.
SHAWKI N. MALEK, M. D. will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Dr. Malek is in private
practice specializing in adult and pediatric gastroenterology with offices in
Towson, Maryland and has served in that capacity since 1985. He has held
teaching appointments at the University of Maryland School of Medicine and the
University of Damascus, Syria.
MICHAEL W. MEKALIAN will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Mr. Mekalian is the Chief
Executive Officer of Blackstar Industries, Inc., a national manufacturer of
specialty products for the construction industry, and has served in that
capacity since its inception in November 1996. From 1979 until November 1996,
Mr. Mekalian was President of Management Administrative Services, Inc., a
provider of business and financial consulting services.
MARK D. NOAR, M.D., will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Dr. Noar currently is a
gastroenterologist in Baltimore, Maryland and is the Chief Executive Officer of
Endoscopic Microsurgery Associates, P.A. He has served in that capacity for the
past eight years.
LARRY D. OHLER will serve as Treasurer of the Company and the Bank and will be a
director of the Company and the Bank. Mr. Ohler currently is the Chief Financial
Officer of PATS, Inc., a manufacturing and engineering company, and has served
in such capacity for over 11 years. He is also a certified public accountant
and is Vice President of Columbia Leasing Company, Vice President of BMW
Enterprises, Inc. and a general partner in PLEDGE, a Maryland partnership.
KENNETH D. PEZZULLA will serve as Secretary of the Company and the Bank and will
be a director of the Company and the Bank. Mr. Pezzulla currently is a member
of Pezzulla and Pezzulla, LLC, a Towson law firm, and has served in that
capacity since 1995. Mr. Pezzulla had a solo legal practice from 1975 to 1995.
Mr. Pezzulla has been a director of Rushmore since 1989 and was a director of
its predecessor, LaCorona Building and Loan Association, from 1963 to 1989. Mr.
Pezzulla was President of LaCorona Building and Loan Association from 1985 to
1988.
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GEORGE E. RAYME, JR. will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Mr. Rayme is President of
Black Star Industries, Inc., a national manufacturer of specialty products for
the construction industry, and has served in that capacity since its inception
in November 1996. From October 1994 to November 1996, Mr. Rayme was Vice
President of Sales and Marketing for Burns Russell, Inc., a licensor of
manufacturing processes for the building materials industry and a chemical sales
company. From October 1991 to September 1994, Mr. Rayme was General Manager of
Valley Lighting Co., a retail and commercial lighting and design company.
RAMON F. ROIG, JR., M.D. will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Dr. Roig currently
practices in internal medicine and gastroenterology in Baltimore, Maryland and
is President of Ramon F. Roig, M.D., P.A. He has served in that capacity since
1974. He is also General Manager of Endoscopy Associates, LLC and is the
Medical Director of the Endoscopy Associates Center at the Saint Joseph
Professional Building.
RUSSELL A. ROURKE will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Mr. Rourke currently is
the President of the EPP Company, a private real estate development company, and
has served in that capacity for over 24 years. Mr. Rourke was Secretary of the
Air Force during the Reagan administration and was Assistant Secretary of
Defense for Legislative Affairs from 1981-1985. Mr. Rourke was a Special
Assistant to President Gerald R. Ford from 1974-1977. Mr. Rourke retired from
the Marine Corps Reserves in 1985 with the rank of Colonel. He is a former
member of the Board of Visitors of the United States Naval Academy and is a
member of the Board of Directors of the Maryland State Fair.
MELANIE R. SABELHAUS will, subject to regulatory approval, be added by the
Organizers as a director of the Company and the Bank. Ms. Sabelhaus currently is
the President and majority owner of Exclusive Interim Properties, Limited, a
company which provides relocation services to executives on temporary assignment
in the Baltimore, Washington, D.C. and Virginia areas. She has served in that
capacity for over ten years. Prior to her association with Exclusive Interim
Properties, Limited, Ms. Sabelhaus was a marketing and branch manager for IBM
for 17 years. She is a director of the World Trade Center Institute, a member of
the steering committee for the University of Maryland's Dinghman Center School
for Entrepreneurs and a member of the Greater Baltimore Committee, the Downtown
Partnership, the Howard County Chamber of Commerce, BWI Partnership and the
Baltimore Area Concierge Association.
BALDEV SINGH will, subject to regulatory approval, be added by the Organizers as
a director of the Company and the Bank. Mr. Singh currently is the President of
BGK Truckers Inn, Inc., a Maryland based developer and operator of truck stops,
gas stations and convenience stores, and has served in that capacity since 1991.
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At the first annual meeting of the stockholders of the Company, the
directors of the Company will be divided into three classes, with each class
containing one-third of the total number of directors, as near as is possible,
so that, after a phase-in period, each director will serve for a term ending on
the date of the third annual meeting of stockholders following the annual
meeting at which such director was elected. Pursuant to the Bylaws of the
Company, the term of office of one of the three classes of directors expires
each year. See "DESCRIPTION OF CAPITAL STOCK - Certain Antitakeover Effects."
The officers of the Company will be elected annually by the Board of Directors
following the annual meeting of stockholders and will serve for terms of one
year and until their successors are duly elected and qualified except where a
longer term is expressly provided in an employment contract duly authorized and
approved by the Board of Directors of the Company.
Advisory Directors
The Organizers have established an advisory board of directors (the
"Advisory Board of Directors") for the Bank, which is comprised primarily of
professionals and business persons (the "Advisory Directors"), who will
provide advice to the Board of Directors of the Bank and who will promote the
interests of the Bank. An advisory board of directors is not required by any
Maryland or federal law or regulation and Advisory Directors are not subject to
regulatory approval or supervision. The Advisory Directors will serve at the
pleasure of the Board of Directors of the Bank.
Remuneration of Directors and Officers
At the present time, the Company does not intend to have any employees
other than its officers, who will serve without compensation.
As of the date of this Prospectus, the Bank has arranged for the
employment of Patricia D'Alessandro as its President. Ms. D'Alessandro will be
paid $45,000 annually in connection with her duties as President of the Bank.
Ms. D'Alessandro will not be a party to any employment agreement with the Bank
or the Company and she could resign or be terminated at any time and for any
reason. The loss of the services of Ms. D'Alessandro for any reason could have a
material adverse effect on the operations of the Bank and the Company. The
Bank's other officers will serve without compensation.
During its first year of operation, it is not anticipated that any
officer or employee of the Bank will earn more than $100,000.
In consideration of services performed on behalf of the Company and the
Bank in preparing the necessary bank regulatory applications and negotiating the
terms of and performing the necessary investigations related to the Acquisition,
upon the closing of the Offering, Organizers Jameson and Pezzulla each will be
paid $25,000 from the proceeds of the Offering, and Jameson and Associates,
P.A., and Pezzulla and Pezzulla, LLC, each will be paid $12,500 from the
proceeds of the Offering. See "USE OF PROCEEDS."
The Organizers do not intend for the Company to pay directors' fees
until such time as the Company is profitable. The Bank intends to pay directors'
fees of $50.00 for each regular meeting attended. However, the Company and the
Bank reserve the right to pay directors' fees and/or to increase or decrease the
fees that will be paid.
Stock Option Plan
After the Offering, the Company expects (subject to stockholder approval
or ratification, if required) to adopt a stock option plan or plans which will
permit the Company to grant options to officers, directors, key employees,
advisors and/or consultants of the Company and the Bank. It is anticipated that
the aggregate number of shares of Common Stock to be issued pursuant to any such
plan or plans would be limited to 12,000 shares, or five percent of the
outstanding shares assuming the sale of the Minimum Number of Shares in the
Offering. At this time, the Organizers have not considered any of the terms of
such plan or plans, including, but not limited to, the basis for determining the
exercise price of any shares issuable upon exercise of an option, which price
may or may not be equal to the fair market value of the Common Stock on the date
of the grant of the option.
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Interest of Management and Others in Certain Transactions
In order to assure that expenses related to the Acquisition and the
Offering and organizational expenses of the Company and the Bank are paid, the
Organizers, the Additional Directors and the Advisory Directors (collectively,
the "Lenders") have loaned an aggregate of $652,000 (the "Loan Account") to the
Company for the benefit of the Company and the Bank (the "Organizational
Loans"). The Organizational Loans are only repayable from the proceeds of the
Offering or from unexpended funds loaned to the Company, and the Lenders may
choose to receive repayment in full or in part through their receipt in the
Offering of shares of Common Stock valued at $10.00 per share. The
Organizational Loans bear interest as follows: (a) all money expended from the
Loan Account after April 1, 1997 bears interest accruing at the rate of 10% per
annum, with interest being allocated proportionately among the Lenders and (b)
all money deposited into the Loan Account but not expended by the Company bears
no interest.
The Company and the Bank expect to engage in transactions in the
ordinary course of business with Organizers, directors, and officers of the
Company and the Bank and their affiliates on substantially the same terms as
those prevailing at the time for comparable transactions with unrelated parties.
Such transactions are not expected to present any special unfavorable features
to the Company or the Bank. However, the Bank will not make loans to its
officers, directors or their affiliates, although any current Rushmore Loans
between Rushmore and the Bank's officers, director or their affiliates will be
purchased by the Bank. An overdraft checking account established by the Bank
will not be considered a loan for these purposes.
It is anticipated that the following related entities will provide
services to the Company and/or the Bank:
Jameson and Associates, P.A., will provide tax and other accounting
services to the Company and the Bank. J. Clarence Jameson, III, President of the
Company, Vice President of the Bank and Chairman of the Board of the Company and
the Bank, is the President and a principal of Jameson and Associates, P.A.
Pezzulla and Pezzulla, LLC, will provide legal services to the Company
and the Bank. Kenneth D. Pezzulla, Secretary of the Company and the Bank and a
director of the Company and the Bank, is a member of Pezzulla and Pezzulla, LLC.
Mr. Pezzulla currently serves as a director of Rushmore and he will resign from
that position upon consummation of the Acquisition. Mr. Pezzulla also currently
provides legal services to the Baltimore Branch.
National Mortgage Corporation will provide mortgage services to the Bank
which services may include consulting services and the purchase and/or sale of
mortgages. Henry A. Berliner, Jr., who, subject to regulatory approval, will be
added as a director of the Company and the Bank, is the President and a
principal of National Mortgage Corporation.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of five million
(5,000,000) shares of Common Stock, $0.01 par value, and five million
(5,000,000) shares of preferred stock, $0.01 par value. The Company has no
shares issued or outstanding as of the date of this Prospectus. The following
summary of certain terms of the Common Stock and preferred stock does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Company's Charter and Bylaws, copies of which are filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
In general, stockholders or subscribers for stock of the Company have no
personal liability for the debts and obligations of the Company solely as the
result of their status as stockholders or subscribers, except to the extent that
the subscription price or other agreed consideration for the stock has not been
paid. However, pursuant to Section 2-312(b) of the Maryland General Corporation
Law (the "MGCL"), a director of the Company held liable pursuant to Section
2-312(a) of the MGCL (relating to unlawful distributions) has a right of
contribution from each stockholder who knowingly accepts an unlawful
distribution, and pursuant to Section 3-419 of the MGCL, the dissolution of the
Company will not relieve the stockholders of the Company from any liability
imposed on them by law.
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Common Stock
The Company is authorized to issue five million (5,000,000) shares of
Common Stock, par value $0.01 per share. Upon the successful completion of the
Offering, up to 300,000 shares of Common Stock will be issued and outstanding.
All shares of Common Stock offered hereby will be duly authorized and will, upon
payment therefor as contemplated hereby, be fully paid and nonassessable.
Subject to all the rights of holders of any other class or series of stock,
holders of shares of Common Stock will be entitled to receive dividends on such
stock, if, as and when authorized and declared by the Board of Directors of the
Company from funds legally available therefor and to share ratably in the net
assets of the Company upon the voluntary or involuntary liquidation, dissolution
or winding up of the Company. The Company does not plan to declare any dividends
in the immediate future. See "DIVIDEND POLICY."
Except as otherwise required by law or except as provided with respect
to any other class or series of stock, each outstanding share of Common Stock
entitles the holder to vote for the election of directors and on all other
matters requiring stockholder action, each share being entitled to one vote.
There is no cumulative voting in the election of directors, which means that the
holders of a majority of the outstanding shares of Common Stock can elect all of
the directors then standing for election and the holders of the remaining shares
will not be able to elect any directors.
Holders of shares of Common Stock have no conversion, sinking fund,
redemption rights or preemptive rights to subscribe for any securities of the
Company.
The Charter of the Company grants to the Board of Directors the right to
classify or reclassify any unissued shares of Common Stock from time to time by
setting or changing the designations, preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications and
terms or conditions of redemption. Accordingly, the Board of Directors could
authorize the issuance of additional shares of Common Stock with terms and
conditions which could have the effect of discouraging a takeover or other
transaction which the holders of some, or a majority, of shares of Common Stock
might believe to be otherwise in their best interests or in which the holders of
some, or a majority, of shares of Common Stock might receive a premium for their
shares of Common Stock over the then market price of such shares. As of the date
hereof, the Board of Directors has no plans to classify or reclassify any
unissued shares of Common Stock.
There currently is no market for the shares of Common Stock. Although
the Company has filed a registration statement with the SEC to register the
issuance of the Common Stock in the Offering under the Securities Act of 1933,
as amended, and the Company anticipates that it will seek the agreement of one
or more broker-dealers to act as a market maker in the Common Stock, there can
be no assurance that a trading market will develop for the Common Stock in the
future. See "RISK FACTORS - No Market for Issuer's Securities."
Preferred Stock
The Company is authorized to issue five million (5,000,000) shares of
preferred stock, par value $0.01 per share. Shares of preferred stock may be
issued from time to time by the Board of Directors in one or more series. Prior
to issuance of shares of each series, the Board of Directors is required by the
MGCL to fix for each such series the designation, preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms or conditions of redemption. The Board of Directors
could authorize the issuance of shares of preferred stock with terms and
conditions which could have the effect of discouraging a takeover or other
transaction which the holders of some, or a majority, of shares of Common Stock
might believe to be otherwise in their best interests or in which the holders of
some, or a majority, of shares of Common Stock might receive a premium for their
shares of Common Stock over the then market price of such shares. As of the date
hereof, no shares of preferred stock are outstanding and the Company has no
present plans to issue any preferred stock.
Certain Antitakeover Effects
The provisions of the Charter, the Bylaws and the MGCL summarized in the
following paragraphs may be deemed to have antitakeover effects and may delay,
defer or prevent a tender offer or takeover attempt which the holders of some,
or a
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majority, of shares of Common Stock might believe to be otherwise in their best
interests or in which the holders of some, or a majority, of shares of Common
Stock might receive a premium for their shares of Common Stock over the then
market price of such shares. In addition, certain of the provisions could make
removal of management more difficult.
Authorized Shares of Capital Stock. As discussed above, the Company's
Board of Directors may classify or reclassify any unissued shares of Common
Stock from time to time by setting or changing the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms or conditions of redemption. In addition, the Company's
Board of Directors may issue shares of preferred stock in one or more series,
provided, however, that prior to issuing any such shares, the Board of Directors
of the Company is required by the MGCL to fix for each such series the
designation, preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption.
The possible classification or reclassification of any unissued shares
of Common Stock after the Offering, or the possible issuance of shares of
preferred stock, could affect the voting and other rights of stockholders of
Common Stock. Among other things, Common Stock issued by the Company after the
Offering and preferred stock could rank prior to the Common Stock to be issued
in the Offering as to dividend rights, liquidation preferences, or both, could
have full or limited voting rights (including multiple voting rights) and could,
with respect to the preferred stock, be convertible into shares of Common Stock.
Accordingly, the Board of Directors of the Company could authorize the issuance
of additional shares of Common Stock and/or preferred stock with terms and
conditions that could have the effect of discouraging or preventing an
acquisition of control of the Company or a tender offer for all of the Company's
stock which the holders of some, or a majority, of shares of the Common Stock
might believe to be otherwise in their best interests or in which the holders of
some, or a majority, of shares of the Common Stock might receive a premium for
their shares of Common Stock over the then market price of such shares. As
stated above, the Company has no present plans or understandings regarding the
classification or reclassification of any unissued shares of Common Stock after
the Offering or the issuance of any preferred stock.
Classified Board of Directors. The Company's Bylaws provide that the
number of directors of the Company shall be nine, which number may be increased
or decreased by the Board of Directors but shall not be less than three unless
the number of stockholders is less than three, in which case the number of
directors shall not be less than the number of stockholders. Any vacancy will be
filled at any regular meeting or at any special meeting by a majority of the
remaining directors. Pursuant to the terms of the Bylaws, at the first annual
meeting of the stockholders, the directors shall be divided into three classes -
Class A, Class B and Class C - each class to consist of an equal number of
Directors, or as nearly equal a number as possible. Each Director shall serve
for a term ending on the date of the third annual meeting following the annual
meeting at which such Director was elected; provided, however, that the Class A
Directors first chosen shall hold office for one year or until the first annual
meeting following their election, the Class B Directors first chosen shall hold
office for two years or until the second annual meeting following their election
and the Class C Directors first chosen shall hold office for three years or
until the third annual meeting following their election.
Management of the Company believes that it is desirable to insure
continuity and stability of the Company's leadership and policy, thereby
enabling the Company and the Bank to carry out their long range plans for their
benefit and that of their stockholders, and that a classified board may assist
in achieving such continuity and stability. Such a classified Board, along with
the Bylaw provision that provides that directors of the Company may only be
removed for cause, would moderate the pace of any change of control of the
Company since a person or entity acquiring a majority stock interest in the
Company would have to wait for at least two consecutive annual meetings,
covering a period of two years, in order to elect a majority of the Company's
Board of Directors. The inability to change the composition of the Board of
Directors immediately even if such change and composition were determined by the
stockholders of the Company to be beneficial to them may tend to discourage a
tender offer or takeover bid for the Company's stock.
Absence of Cumulative Voting. Cumulative voting entitles each
stockholder to cast a number of votes in the election of directors equal to the
number of such stockholder's shares of Common Stock multiplied by the number of
directors to be elected, and to distribute such votes among one or more of the
nominees to be elected. The Company's Charter does not provide for cumulative
voting by stockholders in the election of the Company's directors. The absence
of cumulative voting effectively
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means that the holders of a majority of the shares voted at a meeting of
stockholders may, if they so choose, elect all directors of the Company to be
elected at that meeting, thus precluding minority stockholder representation on
the Company's Board of Directors.
Removal of Directors. The Company's Bylaws provide that directors of the
Company may only be removed for cause. This provision will, under most
circumstances, preclude a person or entity from acquiring control of the
Company's Board of Directors through the removal of existing directors and the
election of his or its nominees to fill the newly created vacancies.
Certain Provisions of Maryland Law. In addition to the provisions of the
Company's Charter and Bylaws, certain provisions of the MGCL may also have an
antitakeover effect, such as the Maryland Business Combination Act and the
Maryland Control Share Act. These acts could have the effect of discouraging
offers to acquire the Company and of increasing the difficulty of consummating
any such offer.
The Maryland Business Combination Act, which is codified in Sections
3-601 to -604 of the MGCL (the "Business Combination Act"), among other things,
prohibits the Company from engaging in certain business combinations (including
a merger or share exchange) with a person who is the beneficial owner of 10% or
more of the Company's outstanding voting stock or any affiliate of such person,
or with a person who is an affiliate or associate of the Company and at any time
within the two year period immediately prior to the date in question was the
beneficial owner of 10% or more of the voting power of the then outstanding
voting stock of the Company (an "Interested Stockholder"), during the five year
period following the date such person became an Interested Stockholder. This
restriction does not apply if, among other things (i) the Board of Directors has
approved or exempted from the Business Combination Act, a business combination
prior to the Interested Stockholder becoming an Interested Stockholder; (ii) a
charter amendment is adopted by a vote of at least 80% of the votes entitled to
be cast by outstanding shares of voting stock of the Company, and two-thirds of
the votes entitled to be cast by persons (if any) who are not Interested
Stockholders of the Company or affiliates or associates of Interested
Stockholders, expressly electing not to be governed by the provisions of the
Business Combination Act; or (iii) the Company has fewer than 100 beneficial
owners of stock. Also, in addition to any vote otherwise required by Maryland
law or the Company's Charter, a business combination that is not prohibited by
the Business Combination Act must be recommended by the Board of Directors and
approved by the affirmative vote of at least 80% of the votes entitled to be
cast by outstanding shares of voting stock of the Company and two-thirds of the
votes entitled to be cast by holders of voting stock other than voting stock
held by the Interested Stockholder, unless certain fair price provisions, as
provided for in the statute, are met.
Under the Maryland Control Share Act, which is codified in Sections
3-701 to -709 of the MGCL (the "Control Share Act"), the voting rights of
"control shares" acquired in a "control share acquisition" are eliminated unless
such acquisition is exempt or is approved by at least two-thirds of all of the
votes (other than shares held by the person making the "control share
acquisition," an officer of the Company and an employee who is also a director
of the Company) entitled to be cast at a meeting called in accordance with
specified procedures. A "control share acquisition" is the direct or indirect
acquisition by any person of ownership or control of "control shares," which are
shares of stock that would, if aggregated with all other voting stock owned by
such person, entitle such person to exercise voting power in electing directors
within one of the following ranges of voting power: (i) one-fifth or more but
less than one-third; (ii) one-third or more but less than a majority; or (iii) a
majority of all voting power. Under the Control Share Act, voting power held by
a person solely through revocable proxies would not constitute a control share
acquisition.
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions, including an undertaking to pay
expenses, may compel the Board of Directors of the Company to call a special
meeting of stockholders to be held within 50 days of demand to consider the
voting rights of the shares. If no request for a meeting is made, the Company
may itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the Control
Share Act, then, subject to certain conditions and limitations, the Company may
redeem any or all of the control shares (except those for which voting rights
have previously been approved) for fair value determined, without regard to
voting rights, as of the date of the last control share acquisition or of any
meeting of stockholders at which the voting
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rights of such shares are considered and not approved. If voting rights for
control shares are approved at a stockholders meeting and the acquiror becomes
entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights.
Among other things, the Control Share Act does not apply to shares
acquired in a merger, consolidation or share exchange if the Company is a party
to the consolidation, merger or share exchange or to acquisitions approved or
exempted by the Company's Charter or Bylaws. In addition, the Control Share Act
will not apply if the Company has fewer than 100 beneficial owners of stock.
Restrictions on Transferability
Upon completion of the Offering, the Company will have a minimum of
240,000 and a maximum of 300,000 shares of Common Stock outstanding. The shares
sold in the Offering will be freely tradeable, without restriction or
registration under the Securities Act, except for shares purchased by
"affiliates" of the Company.
An affiliate is defined in Rule 144 of the Securities Act as a person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with the issuer. Rule 405 under the
Securities Act defines the term "control" to mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of the person whether through the ownership of voting securities, by
contract or otherwise. Directors and executive officers of the Company and the
Bank will likely be deemed to be affiliates. The shares held by affiliates may
be sold without registration only in accordance with the provisions of Rule 144
or another exemption from registration.
In general, under Rule 144, an affiliate of the Company or a person
holding restricted shares may sell, within any three-month period, a number of
shares no greater than 1% of the then outstanding shares of the Common Stock or
the average weekly trading volume of the Common Stock during the four calendar
weeks preceding the sale, whichever is greater. Rule 144 also requires that the
securities must be sold in "brokers" transactions, as defined in the Securities
Act, and the person selling the securities may not solicit orders or make any
payment in connection with the offer or sale of securities to any person other
than the broker who executes the order to sell the securities. This requirement
may make the sale of the Common Stock by affiliates of the Company pursuant to
Rule 144 difficult if no trading market develops in the Common Stock.
DESCRIPTION OF WARRANTS
General
Upon the successful completion of the Offering, the closing of the
Acquisition and the Bank's commencement of banking operations, the Company will
issue to each stockholder of the Company, for no consideration, a warrant to
purchase one share of Common Stock for each share of Common Stock that the
stockholder purchased in the Offering, subject to adjustment for certain events
(the "Warrants"). The Warrants will be exercisable at a price of $10.00 per
share (the "Exercise Price") beginning any time after December 31, 1998 until
their expiration at 5:00 p.m. EST on June 30, 2007. A copy of the Warrant as
approved by the Board of Directors of the Company is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.
No Rights as Stockholders
The holders of the Warrants ("Warrantholders") will not be entitled to
vote, receive dividends or exercise any of the rights of holders of shares of
Common Stock for any purpose until such Warrants have been duly exercised and
payment of the Exercise Price has been made.
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Right to Exercise Warrants
The issuance of the Warrants will not be subject to the registration
requirements of the Securities Act or the registration requirements of the
securities act of any state. The shares of Common Stock reserved for issuance
upon exercise of the Warrants have not been registered under the Securities Act.
The Warrants may only be exercised upon the issuance to the Company of an
opinion of counsel satisfactory to counsel to the Company and/or for submission
to the Company of such evidence as may be satisfactory to counsel to the
Company, in each such case, to the effect that any such exercise shall not be in
violation of the Securities Act and any applicable state securities laws.
Without an opinion of counsel and/or such evidence as may be satisfactory to
counsel to the Company, a Warrantholder will not be able to exercise his or its
rights under the Warrants. The Company is under no obligation to register the
Warrants and/or the Common Stock reserved for issuance upon exercise of the
Warrants so as to enable a Warrantholder to exercise his or its rights under the
Warrants.
Subject to the above paragraph, upon presentation and surrender of the
Warrant, with a duly executed purchase form, at the principal office of the
Company or at such other place as the Company may designate, together with a
check payable to the order of the Company in the amount of the Exercise Price
times the number of shares being purchased, the Company will deliver to the
Warrantholder, as promptly as practicable, certificates representing the shares
of Common Stock being purchased. The Warrants may be exercised in whole or in
part.
Transfer and Exchange
A Warrantholder will not be permitted to sell, pledge, hypothecate,
donate, assign or otherwise transfer a Warrant except by operation of law.
Fractional Interests
The Company will not be required to issue any fraction of a share of
Common Stock upon the exercise of a Warrant. In lieu of issuing a fraction of a
share remaining after exercise of a Warrant, the Company will make a cash
payment for any fraction of a share equal to the same fraction of the Exercise
Price of the Warrant.
Determination of Exercise Price
The Exercise Price of the Warrants has been determined by the Company in
its sole discretion. There is no assurance that the price of the shares of the
Common Stock will ever rise to a level where exercise of the Warrants would be
warranted.
Adjustment to Exercise Price and Number of Shares Purchasable
The Exercise Price of the Warrants and the number of shares of Common
Stock purchasable upon exercise of the Warrants are subject to adjustment to
protect the Warrantholders against dilution in certain events, including, if the
Company: (i) pays a dividend in shares of its Common Stock; (ii) subdivides
outstanding shares of its Common Stock into a greater number of shares; (iii)
combines outstanding shares of its Common Stock into a smaller number of shares;
(iv) reorganizes or reclassifies any of the Common Stock of the Company; (v)
consolidates or merges with another entity (other than a merger with a
subsidiary in which merger the Company is the continuing corporation and which
does not result in any reclassification or change of the shares issuable upon
exercise of the Warrants); (v) participates in a share exchange as the
corporation the stock of which is to be acquired; or (vi) sells or leases all or
substantially all of its assets.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Ober, Kaler, Grimes & Shriver, a Professional
Corporation, 120 East Baltimore Street, Baltimore, Maryland 21202-1643.
74
<PAGE>
EXPERTS
The audited financial statements of the Company included in this
Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein upon authority of said firm as experts in giving said report. The audited
financial statements of the Baltimore Branch of Rushmore Trust and Savings, FSB,
included in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein upon authority of said firm as experts in
giving said report.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Charter and the Company's Bylaws provide, in relevant
part, that the "the Corporation shall indemnify and advance expenses to a
director or officer of the Corporation in connection with a proceeding to the
fullest extent permitted by and in accordance with" the MGCL.
The MGCL permits a corporation to indemnify its directors and officers,
among others, against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by them in connection with any proceeding to which
they may be made a party by reason of their service in those or other
capacities, unless it is established that (a) the act or omission of the
director or officer was material to the matter giving rise to such proceeding
and (i) was committed in bad faith or (ii) was the result of active and
deliberate dishonesty; (b) the director or officer actually received an improper
personal benefit in money, property or services; or (c) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe
that the action or omission was unlawful. The Company will maintain directors
and officers liability insurance.
The MGCL permits the charter of a Maryland corporation to include a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages, except to the extent that
(a) the person actually received an improper benefit or profit in money,
property or services; or (b) a judgment or other final adjudication is entered
in a proceeding based on a finding that the person's action, or failure to act,
was the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding. The Company's Charter contains a
provision providing for elimination of the liability of its directors or
officers to the Company or its stockholders for money damages for any breach of
any duty owed by such directors or officers to the fullest extent permitted by
Maryland law.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions or otherwise, the Company has been
advised by the Securities and Exchange Commission that such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
75
<PAGE>
AMERICASBANK CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AmericasBank Corp.
Report of Independent Public Accountants...................................................................... F-2
Balance Sheets as of December 31, 1996, and March 31, 1997 (unaudited)........................................ F-3
Statements of Operations for the period from June 4, 1996 (Inception) to
December 31, 1996, and for the three months ended March 31, 1997 (unaudited)......................... F-4
Statements of Cash Flows for the period from June 4, 1996 (Inception) to
December 31, 1996, and for the three months ended March 31, 1997 (unaudited)............................... F-5
Notes to Financial Statements................................................................................. F-6
Baltimore Branch of Rushmore Trust and Savings, FSB
Report of Independent Public Accountants...................................................................... F-9
Statements of Net Assets as of December 31, 1996, and March 31, 1997 (unaudited).............................. F-10
Statements of Certain Revenues and Certain Expenses Charged to the Baltimore
Branch for the years ended December 31, 1995 and 1996, and for the three
months ended March 31, 1996 and 1997 (unaudited).............................................................. F-11
Statements of Cash Flows for the years ended December 31, 1995 and 1996, and
for the three months ended March 31, 1996 and 1997 (unaudited)............................................. F-12
Notes to Financial Statements................................................................................. F-13
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Organizers of
AmericasBank Corp.:
We have audited the accompanying balance sheet of AmericasBank Corp. (a Maryland
corporation), as of December 31, 1996, and the related statements of operations
and cash flows for the period from June 4, 1996 (inception) to December 31,
1996. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of AmericasBank Corp. as of December
31, 1996, and the results of its operations and its cash flows for the period
from June 4, 1996 (inception) to December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Baltimore, Maryland,
May 15, 1997
F-2
<PAGE>
AMERICASBANK CORP.
BALANCE SHEETS
AS OF DECEMBER 31, 1996, AND MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ -----------
(Audited) (Unaudited)
<S> <C>
ASSETS
Cash $ 298,000 $ 528,000
Nonrefundable deposit - purchase of deposits and branch
facility 20,000 20,000
Deferred offering costs 57,000 65,000
Organizational costs 135,000 135,000
Other assets 25,000 40,000
-------------- --------------
Total assets $ 535,000 $ 788,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses $ 159,000 $ 182,000
Advances from insiders 374,000 602,000
-------------- --------------
Total liabilities 533,000 784,000
-------------- --------------
CONTINGENCIES (Note 1)
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.01 per share, 5,000,000 shares
authorized; 0 shares issued and outstanding - -
Common stock, par value $0.01 per share, 5,000,000 shares
authorized; 0 shares issued and outstanding - -
Additional paid-in capital - -
Retained earnings 2,000 4,000
-------------- --------------
Total stockholders' equity 2,000 4,000
-------------- --------------
Total liabilities and stockholders' equity $ 535,000 $ 788,000
============== ==============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
AMERICASBANK CORP.
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM JUNE 4, 1996 (INCEPTION) TO DECEMBER 31, 1996
AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
Period From
June 4, 1996 Three Months
(Inception) to Ended
December 31, March 31,
1996 1997
---------------- ------------
(Audited) (Unaudited)
Interest income $ 2,000 $ 2,000
Provision for income taxes - -
-------------- --------------
Net income $ 2,000 $ 2,000
============== ==============
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
AMERICASBANK CORP.
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM JUNE 4, 1996 (INCEPTION) TO DECEMBER 31, 1996
AND FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Period From June Three Months
4, 1996 Ended
(Inception) to
December 31, March 31,
1996 1997
--------------- --------------
(Audited) (Unaudited)
<S> <C>
OPERATING ACTIVITIES:
Net income $ 2,000 $ 2,000
-------------- --------------
INVESTING ACTIVITIES:
Cash paid for nonrefundable deposit (20,000) -
Cash paid for organization costs and
deferred offering costs (58,000) -
-------------- -------------
Net cash used for investing activities (78,000) -
FINANCING ACTIVITIES:
Advances from insiders 374,000 228,000
-------------- --------------
INCREASE IN CASH 298,000 230,000
CASH, beginning of period - 298,000
-------------- --------------
CASH, end of period $ 298,000 $ 528,000
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
AMERICASBANK CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION:
AmericasBank Corp. (the Company) was incorporated under the laws of the State of
Maryland on June 4, 1996, primarily to hold all the capital stock of a proposed
new federal stock savings bank with the name AmericasBank (the Proposed Bank).
As of March 31, 1997, the Company has not been capitalized and is not required
to be capitalized to be a corporation under Maryland law. The Company will be
capitalized as a result of the contemplated initial public offering discussed in
Note 2. The Proposed Bank will be formed by the Company's purchase of
approximately $2,125,000 worth of the Proposed Bank's capital stock. This money
will be raised through an initial public offering of the Company's
common stock (the "Offering"). Upon satisfaction of the conditions of the
Offering, the Proposed Bank will purchase certain assets from and will
assume certain deposit liabilities related to the Baltimore, Maryland, branch
(the "Baltimore Branch") of Rushmore Trust and Savings, FSB ("Rushmore"). In
addition, the Bank will purchase certain loans that were originated by
Rushmore at its Montgomery County, Maryland, branch. The Proposed Bank will
operate as a community-oriented bank concentrating on housing, consumer loan
products and deposit services from its headquarters in Baltimore, Maryland,
and anticipates that it will open for business in the third quarter of 1997.
Qualifying deposits in the Proposed Bank will be insured by the Federal Deposit
Insurance Corporation.
At the date of these financial statements, the Company's operations have been
limited to obtaining regulatory approval and earning interest on excess funds.
The Proposed Bank will begin operations once the Proposed Bank's transactions
with Rushmore are completed.
As the Proposed Bank is a start-up operation, there can be no assurance that the
Proposed Bank can attract sufficient depositors or issue sufficient quality
loans to operate at a profit. There is also no assurance that the Company will
be able to raise sufficient capital to satisfy the conditions of the Offering.
If the Proposed Bank is not successful in completing the transactions with
Rushmore, the Company may liquidate and would not realize its intangible assets.
The Company is subject to other risks and uncertainties, including interest rate
risk.
2. SIGNIFICANT ACCOUNTING POLICIES:
Nonrefundable Deposit - Purchase of Deposits and Branch Facility
A nonrefundable deposit of $20,000 has been paid as a good faith deposit for the
transaction with Rushmore. The deposit will be applied as part of the purchase
price of the transaction.
Organizational Costs
Direct costs incurred to incorporate and charter the Company and the Proposed
Bank are recorded as organization costs. When the Proposed Bank commences
operations, organization costs will be amortized over a five-year period using
the straight-line method.
F-6
<PAGE>
Deferred Offering Costs
Offering expenses related to the Offering are recorded as deferred offering
costs. These costs will be charged to stockholders' equity upon completion of
the Offering.
Other Assets
Other assets represent the legal costs incurred in connection with the
transactions with Rushmore (see Note 4). These costs will be amortized over
fifteen years.
Advances from Insiders
Certain insiders of the Company have loaned money to the Company for Offering
costs, organizational costs and cost associated with the transaction with
Rushmore. Such persons will be reimbursed out of the proceeds of the Offering or
from the unexpended portion of such loan proceeds.
Income Taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The Company has not provided
for a tax provision for the three months ended March 31, 1997, as the Company is
anticipating a loss for the year and anticipates a 100% valuation allowance on
the tax benefit generated from the loss.
Interim Financial Statements
The financial statements for the three months ended March 31, 1997, are
unaudited, but in the opinion of management, such financial statements have been
presented on the same basis as the audited financial statements and include all
adjustments, consisting only of normal recurring adjustments necessary for a
fair presentation of the financial position, results of operations and cash
flows for these periods. The results of operations presented in the accompanying
financial statements are not necessarily representative of operations for an
entire year.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities in the financial statements
and the disclosures of contingent assets and liabilities. While actual results
could differ from those estimates, management believes that actual results will
not be materially different from amounts provided in the accompanying financial
statements.
Contemplated Initial Public Offering
The Company intends to issue between 240,000 and 300,000 shares of common stock
at $10 per share. The Organizers and certain persons who it is anticipated will
be added as directors of the Company intend to purchase at least 140,520 shares
of common stock to be sold in the Offering. Each purchaser of shares in the
Offering will receive a warrant to purchase one share of common stock for each
share purchased in the Offering. Subject to compliance with applicable
securities laws, the warrants will be exercisable at a price of $10 per share at
any time after December 31, 1998, and will expire on June 30, 2007.
F-7
<PAGE>
3. RELATED PARTY TRANSACTIONS:
Jameson & Associates, P.A. will provide tax and accounting services to the
Company. An organizer of the Company and the Proposed Bank is a principal of
Jameson & Associates, P.A.
Pezzulla and Pezzulla, LLC will provide legal services to the Company and the
Proposed Bank. An organizer of the Company and the Proposed Bank is a principal
of Pezzulla and Pezzulla, LLC.
Jameson & Associates, P.A. and Pezzula and Pezzula, LLC each will receive
$12,500 for their accounting and legal services, respectively, and organizers J.
Clarence Jameson III and Kenneth D. Pezzula each will receive $25,000 as a
consulting fee for services performed on behalf of the Company and the Bank in
preparing the necessary bank regulatory applications and in negotiating the
terms of and performing the necessary investigations related to the transactions
with Rushmore. As of December 31, 1996, and March 31, 1997, these amounts had
been accrued for and none of these fees had been paid.
4. TRANSACTIONS WITH RUSHMORE:
The Proposed Bank entered into agreements with Rushmore to acquire certain
assets and to assume certain deposit liabilities primarily related to Rushmore's
Baltimore, Maryland, Branch office (the "Baltimore Branch"). The parties have
agreed that if the transactions have not been consummated by June 30, 1997, the
Proposed Bank, beginning on July 1, 1997, and continuing on the first day of
each month thereafter until the transactions have been consummated, shall pay
Rushmore one or more additional nonrefundable deposits of $20,000 each. Upon the
consummation of the transactions, the additional deposits will be added to the
amount of cash to be received by the Proposed Bank from Rushmore. In the event
the transactions are not consummated for any reason other than the ability of
Rushmore to consummate the transactions, the Proposed Bank shall forfeit all
deposits to Rushmore.
The Company will acquire all of Rushmore's outstanding loans as of the
settlement, originated at the Baltimore Branch and approximately $1,160,000 of
Rushmore's loans originated at Rushmore's Montgomery County, Maryland, branch
office, as well as certain fixtures, furnishings, equipment, furniture and a
building. The purchase price will be approximately $250,000, plus the net book
value of the loans, less the book value of the deposits. The Company also will
pay Rushmore $50,000 for a noncompetition agreement lasting for a period of
three years. The Company will receive net cash of approximately $800,000 from
Rushmore, subject to terms of the purchase and assumption agreements.
The unaudited pro forma summary results of operations for the year ended
December 31, 1996, assuming the transactions with Rushmore had occurred in the
beginning of the fiscal year, is as follows:
Net interest income $ 427,000
Late charges and other fees 29,000
Operating expenses, excluding depreciation and amortization 541,000
Depreciation and amortization 92,000
------------
Net loss $ (177,000)
============
F-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Organizers of AmericasBank Corp.:
We have audited the accompanying statement of net assets of The Baltimore Branch
(the Branch) of Rushmore Trust and Savings, FSB (a Maryland corporation), as of
December 31, 1996, and the related statements of certain revenues and certain
costs charged to the Branch for the years ended December 31, 1995 and 1996.
These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
These statements have been prepared pursuant to the Branch Purchase and
Assumption Agreement, as amended, and the Loan Purchase and Assumption
Agreement, as amended, described in Notes 1 and 7 of the financial statements
and, thus, are not intended to be a complete presentation of Rushmore Trust and
Savings, FSB or the Branch's financial position, results of operations or cash
flows on a stand-alone basis in accordance with generally accepted accounting
standards.
In our opinion, the statements referred to above present fairly, in all material
respects, the net assets, as defined, of The Baltimore Branch of Rushmore Trust
and Savings, FSB as of December 31, 1996, and certain revenues and certain
expenses charged to the Baltimore Branch activity and cash flows for the years
ended December 31, 1995 and 1996, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Baltimore, Maryland,
May 15, 1997
F-9
<PAGE>
THE BALTIMORE BRANCH OF
RUSHMORE TRUST AND SAVINGS, FSB
STATEMENTS OF NET ASSETS
AS OF DECEMBER 31, 1996, AND MARCH 31, 1997 (UNAUDITED)
December 31, March 31,
1996 1997
------------ -----------
(Audited) (Unaudited)
ASSETS:
Loans receivable, net $ 5,749,000 $ 5,751,000
Accrued interest receivable 50,000 48,000
Due from Rushmore 2,310,000 2,317,000
Real estate owned, net 66,000 10,000
Property and equipment, net 15,000 13,000
-------------- --------------
TOTAL ASSETS $ 8,190,000 $ 8,139,000
============== ==============
LIABILITIES:
Deposits $ 8,190,000 $ 8,138,000
Accrued interest on deposits - 1,000
-------------- --------------
Total liabilities 8,190,000 8,139,000
-------------- --------------
NET ASSETS $ - $ -
============== ==============
The accompanying notes are an integral part of these statements.
F-10
<PAGE>
THE BALTIMORE BRANCH OF
RUSHMORE TRUST AND SAVINGS, FSB
STATEMENTS OF CERTAIN REVENUES AND CERTAIN EXPENSES
CHARGED TO THE BALTIMORE BRANCH
<TABLE>
<CAPTION>
Twelve Months Ended Three Months Ended
---------------------------------- ----------------------------------
December 31, December 31, March 31, March 31,
1995 1996 1996 1997
---------------- -------------- --------------- --------------
(Audited) (Audited) (Unaudited) (Unaudited)
<S> <C>
INTEREST INCOME ON LOANS $ 745,000 $ 643,000 $ 173,000 $ 146,000
INTEREST EXPENSE ON DEPOSITS 421,000 352,000 86,000 91,000
-------------- -------------- -------------- --------------
Net interest income 324,000 291,000 87,000 55,000
PROVISION FOR LOAN LOSS RESERVE - - - -
-------------- -------------- -------------- -------------
Net interest income after
provision for loan losses 324,000 291,000 87,000 55,000
-------------- -------------- -------------- --------------
LATE CHARGES AND OTHER FEES 43,000 29,000 5,000 5,000
-------------- -------------- -------------- --------------
EXPENSES CHARGED TO THE
BALTIMORE BRANCH
Salaries and benefits 93,000 106,000 27,000 30,000
Collection and foreclosure 13,000 25,000 1,000 10,000
Electric and telephone 6,000 8,000 2,000 2,000
Depreciation 8,000 6,000 2,000 2,000
Deposit insurance premiums 22,000 23,000 6,000 2,000
-------------- -------------- -------------- --------------
Total expenses charged to the
Baltimore Branch 142,000 168,000 38,000 46,000
-------------- -------------- -------------- --------------
EXCESS OF CERTAIN REVENUES OVER
CERTAIN EXPENSES CHARGED TO
THE BALTIMORE BRANCH (excludes
certain charges to the Baltimore
Branch) 225,000 152,000 54,000 14,000
-------------- -------------- -------------- --------------
TRANSFER TO RUSHMORE 225,000 152,000 54,000 14,000
-------------- -------------- -------------- --------------
NET OF CERTAIN REVENUES OVER
CERTAIN EXPENSES $ - $ - $ - $ -
============== ============== ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-11
<PAGE>
THE BALTIMORE BRANCH OF
RUSHMORE TRUST AND SAVINGS, FSB
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
AND THE PERIOD ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Twelve Months Ended Three Months Ended
--------------------------------- -------------------------------
December 31, December 31, March 31, March 31,
1995 1996 1996 1997
---------------- ------------ ----------- -------------
(Audited) (Audited) (Unaudited) (Unaudited)
<S> <C>
OPERATING ACTIVITIES:
Net of certain revenues over certain
expenses $ - $ - $ - $ -
Adjustments to reconcile net of certain
revenues over certain expenses-
Depreciation 8,000 6,000 2,000 2,000
(Increase) decrease in accrued
interest receivable (3,000) 26,000 - 2,000
(Increase) decrease in due from
Rushmore (3,266,000) (214,000) 1,062,000 (7,000)
Decrease in deferred loan
origination fees (5,000) (5,000) (5,000) (5,000)
-------------- -------------- -------------- --------------
Net cash (used by) provided by
operating activities (3,266,000) (187,000) 1,059,000 (8,000)
-------------- -------------- -------------- --------------
INVESTING ACTIVITIES:
Increase in loans receivable 311,000 1,329,000 231,000 59,000
Purchase of property and equipment - (1,000) - -
-------------- -------------- -------------- -------------
Net cash provided by investing
activities 311,000 1,328,000 231,000 59,000
-------------- -------------- -------------- --------------
FINANCING ACTIVITIES:
Increase (decrease) in deposits and
accrued interest 2,955,000 (1,141,000) (1,290,000) (51,000)
-------------- -------------- -------------- --------------
INCREASE IN CASH $ - $ - $ - $ -
============== ============== ============== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-12
<PAGE>
THE BALTIMORE BRANCH OF
RUSHMORE TRUST AND SAVINGS, FSB
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. GENERAL:
The accompanying financial statements includes certain assets, liabilities and
operating activities of The Baltimore Branch of Rushmore Trust and Savings, FSB
(the "Baltimore Branch"). The accompanying financial statements of the Baltimore
Branch have been prepared in accordance with generally accepted accounting
principles. Certain assets, liabilities, revenues and expenses not accounted for
at the Baltimore Branch level have been excluded. The Baltimore Branch is
principally engaged in the business of investing in loans to commercial
enterprises and individuals employing deposits attracted from the general
public.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements.
Actual results could significantly differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
Rushmore Trust and Savings, FSB (Rushmore) has historically accounted for the
Baltimore Branch as a department without separately accounting for certain
individual assets, liabilities, revenues or expenses related to the Baltimore
Branch. Therefore, certain costs incurred by Rushmore that benefit the Baltimore
Branch have not been included in the accompanying financial statements. The
accompanying financial statements represent the assets and liabilities that
Rushmore directly attributes to the Baltimore Branch. Certain prepaid assets,
accruals and accounts payable that would be expected to be included in the
statement of net assets are not included as they are netted against the amount
due from Rushmore.
The accompanying financial statements have been prepared assuming that any net
asset balance of the Baltimore Branch is transferred to Rushmore, and any net
asset deficit is funded by Rushmore. Because of this assumption, excess funds of
the Baltimore Branch are considered invested by Rushmore and the Baltimore
Branch is not allocated interest income from the excess funds.
The revenue of the Baltimore Branch includes interest on loans, and fees and
charges to borrowers and depositors. The Baltimore Branch expenses include
salaries and related benefits for those employees employed at the Baltimore
Branch, depreciation of the Baltimore Branch assets, utilities cost of the
Baltimore Branch, deposit insurance premiums, and collection and foreclosure
cost on loans. Expenses do not include other costs incurred by Rushmore that
benefit the Baltimore Branch or indirect costs which benefit the Baltimore
Branch. Rushmore also does not allocate a tax
F-13
<PAGE>
provision to the excess earnings included in the accompanying statements of
certain revenues and certain expenses charged to the Baltimore Branch.
As the accompanying financial statements do not include certain interest income
that was earned on excess Baltimore Branch funds invested by Rushmore because
Rushmore does not allocate the interest income to the Baltimore Branch and do
not include certain expenses that benefit the Baltimore Branch which Rushmore
has not charged to the Baltimore Branch, these financial statements are not
representative of the Baltimore Branch's operation if they had operated on a
stand-alone basis or if Rushmore would have charged these costs to the Baltimore
Branch. If the proposed sale of the Baltimore Branch is completed, the results
shown in the accompanying financial statements may not be representative of
future operations of the Baltimore Branch.
Loans Receivable and Allowance for Loan Losses
Loans receivable are stated at unpaid principal balances, less the allowance for
loan losses and net deferred origination fees. Interest on loans is accrued
based on the outstanding principal amount. An allowance for uncollected interest
is provided on any loan that is contractually delinquent more than 90 days and
on any other loan when the collectibility of the loan is in doubt. Such
allowance is netted against accrued interest receivable. Any such interest
ultimately collected is recorded as interest income in the period of recovery.
Management periodically reviews and evaluates the loan portfolio to determine
the adequacy of the allowance for loan losses. This evaluation is based on the
risk characteristics of the loan portfolio and considers such factors as past
loan loss experience, the financial condition of the borrower, current economic
conditions, net realizable value of the collateral and other relevant factors.
The allowance is increased by provisions for loan losses charged to operations
and is reduced by charge-offs and increased by net recoveries.
Effective January 1, 1995, the Baltimore Branch adopted Statement of Financial
Accounting Standard No. 114, "Accounting by Creditors for Impairment of a Loan"
(SFAS 114). SFAS 114, which was amended by SFAS 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosures," requires that
impaired loans be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate. As a practical
expedient, impairment may be measured based on the loan's observable market
price or the fair value of the collateral if the loan is collateral-dependent.
When the measure of the impaired loan is less than the recorded investment in
the loan, the impairment is recorded as a provision for loan loss in the
statement of operations and allowance for loan losses in the statement of
financial condition.
In the ordinary course of business the Baltimore Branch has entered into an
off-balance sheet financial instrument, which consists of commitments to extend
credit.
Real estate owned is recorded at fair value less estimated costs to sell at the
date of acquisition. Costs related to holding real estate owned are charged to
operations. The carrying value of the real estate owned is periodically
evaluated subsequent to acquisition, and the value of real estate owned is
dependent, to a great extent, on economic, operating and other conditions that
may be beyond the Baltimore Branch's control.
F-14
<PAGE>
Fair Value of Financial Instruments
As of December 31, 1996, and March 31, 1997, financial instruments consisted of
loans receivable and deposits, for which the carrying value of deposits
approximates fair value. As of December 31, 1996, and March 31, 1997, the fair
value of loans receivable were not readily determinable, however, the Baltimore
Branch has entered into an agreement to sell the loans at $50,000 above the
carrying value.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation expense is computed on the straight-line method over
the following estimated useful lives:
Building 15-40 years
Furniture and equipment 5-10 years
Loan Origination Fees
Net loan origination fees are deferred and recognized as an adjustment to yield
using the straight-line method over the lives of the loans. Amortization using
the straight-line method does not differ materially from amounts computed using
the interest method as required by generally accepted accounting principles.
Sale of the Baltimore Branch
Rushmore has entered into agreements to sell and assign all loans, fixed assets,
deposits and certain intangible assets of the Baltimore Branch, subject to
certain approvals. The sale also requires Rushmore to provide to the purchaser
certain non-Baltimore Branch loans (see Note 7).
Interim Financial Statements
The financial statements as of March 31, 1997, and for the three months ended
March 31, 1996 and 1997, are unaudited, but in the opinion of management, such
financial statements have been presented on the same basis as the audited
financial statements and include all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the net assets and
certain revenue and certain expenses charged to the Baltimore Branch for these
periods. The operating activity presented in the accompanying financial
statements are not necessarily representative of operations for an entire year
or on a stand-alone basis.
3. LOANS RECEIVABLE:
Commercial real estate loans are collateralized primarily by real estate,
equipment and receivables, and the loan-to-value ratios generally do not exceed
70% at origination. Residential real estate mortgage loans are collateralized by
the related property, and the loan-to-value ratios generally do not exceed
75-80% at origination. The Baltimore Branch also grants loans secured by savings
accounts and unsecured loans to qualified borrowers meeting the underwriting
standards established by the Board of Directors of Rushmore.
F-15
<PAGE>
As of December 31, 1996, and March 31, 1997, loans receivable consisted of:
December 31, March 31,
1996 1997
------------ -----------
(Audited) (Unaudited)
Real estate first mortgage loans:
Residential $ 4,932,000 $ 4,932,000
Commercial 652,000 646,000
Real estate second mortgage loans 12,000 12,000
Loans secured by savings accounts 235,000 229,000
Unsecured consumer loans 18,000 27,000
-------------- --------------
Total 5,849,000 5,846,000
Less: Allowance for loan losses 50,000 50,000
Loan origination fees 50,000 45,000
-------------- --------------
Loans receivable, net $ 5,749,000 $ 5,751,000
============== ==============
The commercial mortgage loans are primarily concentrated in loans secured by
restaurants and taverns located in the central Maryland area. The Baltimore
Branch borrowers' ability to honor their contracts is, to a significant extent,
dependent upon the regional real estate environment, which has been depressed
for several years.
As of December 31, 1996, the Baltimore Branch's total investment in impaired
loans was $16,000, of which a valuation allowance calculated under SFAS No. 114
was $4,000.
Interest payments received on impaired loans are recorded as interest income
unless collection of the remaining recorded investment is doubtful, at which
time payments received are recorded as reductions of principal. The Baltimore
Branch recognized interest income on impaired loans of approximately $2,000 for
the year ended December 31, 1996.
Changes in the allowance for loan losses, for the year ended December 31, 1996,
and March 31, 1997, were as follows:
December 31, March 31,
1996 1997
------------ -----------
(Audited) (Unaudited)
BALANCE, beginning of year $ 90,000 $ 50,000
Provision for loan losses - -
Charge-offs (40,000) -
-------------- -------------
BALANCE, end of year $ 50,000 $ 50,000
============== ==============
As of December 31, 1996, there were no loans for which the Baltimore Branch had
discontinued accruing interest.
F-16
<PAGE>
4. PROPERTY AND EQUIPMENT:
As of December 31, 1996, and March 31, 1997, property and equipment consists of:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ -----------
(Audited) (Unaudited)
<S> <C>
Land $ 1,000 $ 1,000
Furniture and equipment 76,000 76,000
Buildings and leasehold improvements 47,000 47,000
-------------- --------------
Total 124,000 124,000
Less: Accumulated depreciation and amortization 109,000 111,000
-------------- --------------
Property and equipment, net $ 15,000 $ 13,000
============== ==============
</TABLE>
5. DEPOSITS:
Deposits as of December 31, 1996, and March 31, 1997, are summarized as follows:
December 31, March 31,
1996 1997
------------ -----------
(Audited) (Unaudited)
Passbook deposits $ 1,699,000 $ 1,653,000
Money market accounts 5,186,000 5,134,000
NOW noninterest-bearing 236,000 253,000
------------- -------------
7,121,000 7,040,000
------------- -------------
Certificates of deposit 572,000 572,000
IRA and KEOGH deposits 497,000 526,000
------------- -------------
1,069,000 1,098,000
------------- -------------
Total $ 8,190,000 $ 8,138,000
============= =============
As of December 31, 1996, the majority of the deposits will reprice within twelve
months from year-end, except for approximately $266,000 of the deposits which
will reprice within one to five years from year-end.
As of December 31, 1996, there were no certificates of deposit greater than
$100,000.
6. RELATED PARTY TRANSACTIONS:
Kenneth Pezzula of Pezzula and Pezzula, LLC is a retired Senior Vice President
of the Baltimore Branch, serves on the Board of Directors of Rushmore Trust and
Savings, FSB and provides certain legal services for the Baltimore Branch. As of
December 31, 1996, he had an outstanding loan balance with the Baltimore Branch
of approximately $2,000. For the period ended December 31, 1996, the Baltimore
Branch had incurred legal fees related to collection and foreclosure processing
performed by Pezzula and Pezzula which approximated $19,000.
F-17
<PAGE>
7. SALE OF THE BALTIMORE BRANCH:
On May 31, 1996, Rushmore entered into a Branch Purchase and Assumption
Agreement, as amended, and a Loan Purchase and Assumption Agreement, as amended
(collectively, the Agreements), with AmericasBank (the Proposed Bank) for the
sale of certain assets and assignment of certain deposit liabilities primarily
related to Rushmore's Baltimore, Maryland, branch. It is contemplated that the
sale will close after the completion of an initial public stock offering by the
Proposed Bank's holding company, AmericasBank Corp. The Agreements also provide
that Rushmore will sell to the Proposed Bank approximately $1,160,000 of loans
originated at Rushmore's Montgomery County, Maryland, branch.
F-18
<PAGE>
EXHIBIT A
SUBSCRIPTION AGREEMENT
This Subscription Agreement is entered into in connection with the offer
and sale (the "Offering") of up to 300,000 shares (the "Shares") of Common
Stock, par value $0.01 per share, of AmericasBank Corp., a corporation
incorporated under the laws of the State of Maryland (the "Company"), for a
purchase price of $10.00 per share.
WITNESSETH:
1. Purchase of Shares. The undersigned agrees to purchase the number of
Shares set forth below and tenders the amount required to purchase such number
of Shares by check, bank draft or money order drawn to the order of "The First
National Bank of Maryland, Escrow Agent for AmericasBank Corp."
2. Acknowledgments. The undersigned acknowledges and agrees that:
(a) The Company has established a minimum subscription of 250 shares
($2,500) and a maximum subscription of 20,050 shares ($200,500). However, the
Company reserves the right to waive these limits without notifying any
subscriber.
(b) The undersigned has received a copy of the Company's Prospectus
dated ______, 1997 (the "Prospectus"). By executing this Subscription Agreement,
the undersigned acknowledges and agrees to all of the terms and conditions of
the Offering as described in the Prospectus. This Subscription Agreement is not
binding until accepted by the Company. The Company reserves the right to accept
or reject, in whole or in part and in its sole discretion, any Subscription
Agreement. The Company shall notify the subscriber by mail of its acceptance or
rejection, in whole or in part, of this Subscription Agreement.
(c) Following acceptance by the Company, subscriptions are binding on
subscribers and may not be revoked by subscribers except with the consent of the
Company.
(d) The Company reserves the right to cancel accepted Subscription
Agreements at any time and for any reason until the satisfaction of the
conditions of the Offering.
(e) The Company may, in its sole discretion, allocate shares among
subscribers in the event of an oversubscription for the Shares.
3. Representations and Warranties. The undersigned represents and warrants
that he:
(a) Is aware that no federal or state agency has made any finding or
determination as to the fairness for public investment in, or any recommendation
or endorsement of, the Shares.
(b) Understands that the Company has no financial or operating history
and that the Shares, as an investment, involve a high degree of risk, as
described in the Prospectus.
(c) Is aware that (i) there is no market for the Shares and that there
can be no assurance that a market will develop and (ii) it may not be possible
to liquidate his investment in the Shares readily.
(d) Has adequate means of providing for his current needs and possible
personal contingencies and has no need for liquidity in this investment.
(e) Has carefully read the entire Prospectus, particularly the "Risk
Factors" section therein, and has had the opportunity to ask questions and
receive answers with regard thereto.
76
<PAGE>
(f) Is a resident of Maryland, Pennsylvania or the District of Columbia.
THE SHARES OF COMMON STOCK BEING OFFERED BY THE PROSPECTUS ARE NOT SAVINGS
ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE SAVINGS ASSOCIATION INSURANCE FUND, THE BANK
INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY.
The Shares purchased by the undersigned shall be registered as specified
below. If Shares are to be issued in more than one name, please specify whether
ownership is to be as tenants in common, joint tenants with right of
survivorship, community property, etc. If Shares are to be held in joint
ownership, all joint owners should sign this Subscription Agreement. If Shares
are to be issued in the name of one person for the benefit of another, please
indicate whether registration should be as trustee or custodian for such other
person.
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on the date set forth below.
<TABLE>
<S> <C>
Date: _____________________________, ____ ______________________________________________
Signature of Subscriber
Number of Shares Subscribed for: _________ ______________________________________________
(at $10 per Share) Signature of Subscriber
Total Subscription Price: $_______________ ______________________________________________
Print Name(s) in which Shares are to be
Registered
Address of Subscriber:
__________________________________________ ______________________________________________
Street Address Social Security/Taxpayer Identification Number
__________________________________________ ______________________________________________
City, State and Zip Code Telephone Number and Area Code
__________________________________________ ______________________________________________
Street Address Social Security/Taxpayer Identification Number
__________________________________________ ______________________________________________
City, State and Zip Code Telephone Number and Area Code
ACCEPTANCE
</TABLE>
The foregoing subscription is hereby acknowledged and accepted as to
_____________ shares.
Date: __________________, 1997.
AMERICASBANK CORP.
By:___________________________
J. Clarence Jameson, III, President
77
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company. This Prospec tus does not constitute an offer to sell
or the solicitation of an offer to buy any securities other than the securities
to which it relates or any offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create an implication that there has been no
change in the affairs of the Company since the date hereof or that the informa
tion contained herein is correct as of any time subsequent to its date.
TABLE OF CONTENTS
Page
Additional Information................................................
Reports to Stockholders...............................................
Prospectus Summary....................................................
Risk Factors..........................................................
Terms of the Offering; Plan of
Distribution.......................................................
Use of Proceeds.......................................................
Capitalization........................................................
Dividend Policy.......................................................
Organization of the Company and the Bank .............................
The Acquisition.......................................................
Unaudited Pro Forma Financial Information.............................
Business of the Company...............................................
Business of the Bank..................................................
Regulation............................................................
Management............................................................
Description of Capital Stock..........................................
Description of Warrants...............................................
Legal Matters.........................................................
Experts...............................................................
Indemnification of Officers and
Directors.........................................................
Financial Statements..................................................
Subscription Agreement................................................
Through and including , 1997, all dealers effecting
transactions in the Common Stock, whether or not participating in this
distribution, may be required to deliver a Prospectus. This is in addition to
the obligation of dealers to deliver a Prospectus when acting as underwriters
and with respect to their unsold allotment of subscriptions
AMERICASBANK CORP.
Common Stock
($0.01 par value per share)
240,000 Shares (Minimum)
300,000 Shares (Maximum)
------------------------------------
PROSPECTUS
------------------------------------
AmericasBank Corp.
515 East Joppa Road
Towson, Maryland 21086
Phone: (410) 825-5580
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 1. Indemnification of Directors and Officers.
Article Seventh of the Company's Charter and Article Eighth of the
Company's Bylaws provide that directors and officers of the Company are to be
indemnified by the Company to the fullest extent permitted under Maryland law.
Section 2-418 of the Maryland General Corporation Law sets forth circumstances
under which directors, officers, employees and agents may be insured or
indemnified against liability which they may incur in their capacities as such.
The text of Section 2-418 is reproduced below:
Section 2-418. Indemnification of directors, officers, employees and
agents.
(a) Definitions. - In this section the following words have the
meanings indicated.
(1) "Director" means any person who is or was a director of a
corporation and any person who, while a director of a corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan.
(2) "Corporation" includes any domestic or foreign predecessor
entity of a corporation in a merger, consolidation, or other transaction in
which the predecessor's existence ceased upon consummation of the transaction.
(3) "Expenses" include attorney's fees.
(4) "Official capacity" means the following:
(i) When used with respect to a director, the office
of director in the corporation; and
(ii) When used with respect to a person other than a
director as contemplated in subsection (j), the elective or
appointive office in the corporation held by the officer, or
the employment or agency relationship undertaken by the
employee or agent in behalf of the corporation.
(iii) "Official capacity" does not include service for
any other foreign or domestic corporation or any partnership,
joint venture, trust, other enterprise, or employee benefit
plan.
(5) "Party" includes a person who was, is, or is threatened to
be made a named defendant or respondent in a proceeding.
II.1
<PAGE>
(6) "Proceeding" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, or
investigative.
(b) Permitted indemnification of director. - (1) A corporation may
indemnify any director made a party to any proceeding by reason of service in
that capacity unless it is established that:
(i) The act or omission of the director was material
to the matter giving rise to the proceeding; and
1. Was committed in bad faith; or
2. Was the result of active and deliberate
dishonesty; or
(ii) The director actually received an improper
personal benefit in money, property, or services; or
(iii) In the case of any criminal proceeding, the
director had reasonable cause to believe that the act or
omission was unlawful.
(2) (i) Indemnification may be against judgments,
penalties, fines, settlements, and reasonable expenses
actually incurred by the director in connection with the
proceeding.
(ii) However, if the proceeding was one by or in the
right of the corporation, indemnification may not be made in
respect of any proceeding in which the director shall have
been adjudged to be liable to the corporation.
(3) (i) The termination of any proceeding by judgment, order,
or settlement does not create a presumption that the director
did not meet the requisite standard of conduct set forth in
this subsection.
(ii) The termination of any proceeding by conviction,
or a plea of nolo contendere or its equivalent, or an entry of
an order of probation prior to judgment, creates a rebuttable
presumption that the director did not meet that standard of
conduct.
(c) No indemnification of director liable for improper personal
benefit. - A director may not be indemnified under subsection (b) of this
section in respect of any proceeding charging improper personal benefit to the
director, whether or not involving action in the director's official capacity,
in which the director was adjudged to be liable on the basis that personal
benefit was improperly received.
(d) Required indemnification against expenses incurred in successful
defense. - Unless limited by the charter:
II.2
<PAGE>
(1) A director who has been successful, on the merits or
otherwise, in the defense of any proceeding referred to in subsection (b) of
this section shall be indemnified against reasonable expenses incurred by the
director in connection with the proceeding.
(2) A court of appropriate jurisdiction, upon application of a
director and such notice as the court shall require, may order indemnification
in the following circumstances:
(i) If it determines a director is entitled to
reimbursement under paragraph (1) of this subsection, the
court shall order indemnification, in which case the director
shall be entitled to recover the expenses of securing such
reimbursement; or
(ii) If it determines that the director is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not the director has met
the standards of conduct set forth in subsection (b) of this
section or has been adjudged liable under the circumstances
described in subsection (c) of this section, the court may
order such indemnification as the court shall deem proper.
However, indemnification with respect to any proceeding by or
in the right of the corporation or in which liability shall
have been adjudged in the circumstances described in
subsection (c) shall be limited to expenses.
(3) A court of appropriate jurisdiction may be the same court
in which the proceeding involving the director's liability took place.
(e) Determination that indemnification is proper. -- (1)
Indemnification under subsection (b) of this section may not be made by the
corporation unless authorized for a specific proceeding after a determination
has been made that indemnification of the director is permissible in the
circumstances because the director has met the standard of conduct set forth in
subsection (b) of this section.
(2) Such determination shall be made:
(i) By the board of directors by a majority vote of a
quorum consisting of directors not, at the time, parties to
the proceeding, or, if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting
solely of two or more directors not, at the time, parties to
such proceeding and who were duly designated to act in the
matter by a majority vote of the full board in which the
designated directors who are parties may participate;
(ii) By special legal counsel selected by the board of
directors or a committee of the board by vote as set forth in
subparagraph (i) of this paragraph, or, if the requisite
quorum of the full board cannot be obtained
II.3
<PAGE>
therefor and the committee cannot be established, by a
majority vote of the full board in which directors who are
parties may participate; or
(iii) By the stockholders.
(3) Authorization of indemnification and determination as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible. However, if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination as to reasonableness of expenses shall be
made in the manner specified in subparagraph (ii) of paragraph (2) of this
subsection for selection of such counsel.
(4) Shares held by directors who are parties to the proceeding
may not be voted on the subject matter under this subsection.
(f) Payment of expenses in advance of final disposition of action. --
(1) Reasonable expenses incurred by a director who is a party to a proceeding
may be paid or reimbursed by the corporation in advance of the final disposition
of the proceeding upon receipt by the corporation of:
(i) A written affirmation by the director of the
director's good faith belief that the standard of conduct
necessary for indemnification by the corporation as authorized
in this section has been met; and
(ii) A written undertaking by or on behalf of the
director to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
(2) The undertaking required by subparagraph (ii) of paragraph
(1) of this subsection shall be an unlimited general obligation of the director
but need not be secured and may be accepted without reference to financial
ability to make the repayment.
(3) Payments under this subsection shall be made as provided
by the charter, bylaws, or contract or as specified in subsection (e) of this
section.
(g) Validity of indemnification provision. -- The indemnification and
advancement of expenses provided or authorized by this section may not be deemed
exclusive of any other rights, by indemnification or otherwise, to which a
director may be entitled under the charter, the bylaws, a resolution of
stockholders or directors, an agreement or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office.
(h) Reimbursement of director's expenses incurred while appearing as
witness. -- This section does not limit the corporation's power to pay or
reimburse expenses incurred by a director in connection with an appearance as a
witness in a proceeding at a time when the director has not been made a named
defendant or respondent in the proceeding.
II.4
<PAGE>
(i) Director's service to employee benefit plan.
-- For purposes of this section:
(1) The corporation shall be deemed to have
requested a director to serve an employee benefit plan where
the performance of the director's duties to the corporation
also imposes duties on, or otherwise involves services by, the
director to the plan or participants or beneficiaries of the
plan;
(2) Excise taxes assessed on a director with
respect to an employee benefit plan pursuant to applicable law
shall be deemed fines; and
(3) Action taken or omitted by the director
with respect to an employee benefit plan in the performance of
the director's duties for a purpose reasonably believed by the
director to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the corporation.
(j) Officer, employee or agent. -- Unless limited by the charter:
(1) An officer of the corporation shall be indemnified as and
to the extent provided in subsection (d) of this section for a director and
shall be entitled, to the same extent as a director, to seek indemnification
pursuant to the provisions of subsection (d);
(2) A corporation may indemnify and advance expenses to an
officer, employee, or agent of the corporation to the same extent that it may
indemnify directors under this section; and
(3) A corporation, in addition, may indemnify and advance
expenses to an officer, employee, or agent who is not a director to such further
extent, consistent with law, as may be provided by its charter, bylaws, general
or specific action of its board of directors, or contract.
(k) Insurance or similar protection. -- (1) A corporation may purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the corporation, or who, while a director,
officer, employee, or agent of the corporation, is or was serving at the request
of the corporation as a director, officer, partner, trustee, employee, or agent
of another foreign or domestic corporation, partnership, joint venture, trust,
other enterprise, or employee benefit plan against any liability asserted
against and incurred by such person in any such capacity or arising out of such
person's position, whether or not the corporation would have the power to
indemnify against liability under the provisions of this section.
(2) A corporation may provide similar protection, including a
trust fund, letter of credit, or surety bond, not inconsistent with this
section.
(3) The insurance or similar protection may be provided by a
subsidiary or an affiliate of the corporation.
II.5
<PAGE>
(l) Report of indemnification to stockholders. -- Any indemnification
of, or advance of expenses to, a director in accordance with this section, if
arising out of a proceeding by or in the right of the corporation, shall be
reported in writing to the stockholders with the notice of the next
stockholder's meeting or prior to the meeting.
Item 2. Other Expenses of Issuance and Distribution.
Legal fees $*
Blue Sky filing fees *
Printing *
SEC filing fee 909
EDGAR filing expenses *
Accounting *
Miscellaneous *
Total $*
* To be filed by amendment.
Item 3. Undertakings.
The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the
"Securities Act");
(ii) reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information set forth in the Registration
Statement;
(iii) include any additional or changed material
information on the plan of distribution.
(2) For purposes of determining any liability under the
Securities of Act, treat each post-effective amendment as a new registration
statement of the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
II.6
<PAGE>
(4) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has 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
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant 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 Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 4. Unregistered Securities Issued or Sold Within One Year.
Not applicable.
Item 5. Index to Exhibits.
See Exhibit Index on page II-10.
Item 6. Description of Exhibits.
See Exhibit Index on page II-10.
II.7
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that is has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-1 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Baltimore, State of Maryland on June 9, 1997.
AMERICASBANK CORP.
By: /s/ J. Clarence Jameson, III
___________________________________
J. CLARENCE JAMESON, III, President
& Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of J. Clarence Jameson, III and
Kenneth D. Pezzulla as his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each of said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing necessary or
advisable to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitutes, may lawfully do or
cause to be done by virtue thereof. This power of attorney may be executed in
counterparts.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on the dates stated.
Title Date
----- ----
/s/ King V. Cheek June 9, 1997
________________________
KING V. CHEEK Director
/s/ William A. Fogle June 9, 1997
________________________
WILLIAM A. FOGLE Director
II.8
<PAGE>
/s/ J. Clarence Jameson June 9, 1997
________________________
J. CLARENCE JAMESON President
(Principal Executive Officer)
& Chairman of the Board of
Directors
/s/ Kemp Jayadeva June 9, 1997
________________________
KEMP JAYADEVA Director
/s/ Norman H. Katz June 9, 1997
________________________
NORMAN H. KATZ Director
/s/ Larry D. Ohler June 9, 1997
________________________
LARRY D. OHLER Treasurer
(Principal Financial Officer &
Principal Accounting Officer)
and Director
/s/ Kenneth D. Pezzulla June 9, 1997
________________________
KENNETH D. PEZZULLA Director
II.9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Document Page Number
- ----------- ----------------------- -----------
<S> <C>
2A Articles of Amendment and Restatement of the
Registrant*
2B Bylaws of the Registrant*
4 Form of Subscription Agreement (included as Exhibit
A to Prospectus)
6A Form of Founder Loan Agreement by and among the
Registrant, the organizers of the Registrant and certain
other parties regarding organizational loans to the
Registrant
6B Indemnity Agreement by and among the Registrant,
AmericasBank (in organization) and Rushmore Trust
and Savings, FSB
8A(i) Branch Purchase and Assumption Agreement by and
between AmericasBank (in organization) and
Rushmore Trust and Savings, FSB
8A(ii) Modification to Branch Purchase and Assumption
Agreement by and between AmericasBank (in
organization) and Rushmore Trust and Savings, FSB
8B(i) Loan Purchase and Assumption Agreement by and
between AmericasBank (in organization) and
Rushmore Trust and Savings, FSB
8B(ii) Modification to Purchase and Assumption Agreement
by and between AmericasBank (in organization) and
Rushmore Trust and Savings, FSB
9 Escrow Agreement between the Registrant and The
First National Bank of Maryland*
10A(i) Consent of Ober, Kaler, Grimes & Shriver, a
Professional Corporation (consent is contained in that
firm's opinion filed as Exhibit (11))*
10A(ii) Consent of Arthur Andersen LLP
10A(iii) Consent of persons to be appointed as Directors*
</TABLE>
II.10
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Document Page Number
- ----------- ----------------------- -----------
<S> <C>
11 Opinion of Ober, Kaler, Grimes & Shriver, a
Professional Corporation, regarding the legality of the
securities covered by the Registration Statement*
12 Form of Warrant*
</TABLE>
* To be filed by amendment.
II.11
EXHIBIT 6A
FORM OF FOUNDER LOAN AGREEMENT
THIS FOUNDER LOAN AGREEMENT (this "Agreement") is entered into by and
among each of the individuals executing this Agreement(each a "Lender" and
collectively, the "Lenders") and AMERICASBANK CORP., a Maryland corporation (the
"Company").
WHEREAS, on June 4, 1996, the Company was incorporated under the laws
of the State of Maryland primarily to own all of the outstanding capital stock
of a de novo federal stock savings bank to be named AmericasBank (the "Bank");
and
WHEREAS, on June 5, 1996, certain of the Lenders (the "Organizers")
filed an application with the Office of Thrift Supervision ("OTS") to charter
the Bank as a federal stock savings bank; and
WHEREAS, on April 15, 1997, the OTS conditionally approved the
application to charter the Bank as a federal stock savings bank; and
WHEREAS, on June 5, 1996, the Organizers filed an application with the
OTS for the Company to become a savings and loan holding company of the Bank;
and
WHEREAS, on April 15, 1997, the OTS approved the Company's application
to become a savings and loan holding company of the Bank; and
WHEREAS, on May 31, 1996, the Bank entered into agreements, as amended,
with Rushmore Trust and Savings, FSB ("Rushmore"), for the purchase and
assumption of certain of Rushmore's assets and liabilities; and
WHEREAS, the Company intends to offer to the public (the "Offering")
shares of its common stock (the "Common Stock") pursuant to a registration
statement filed with the Securities and Exchange Commission (the "SEC"); and
WHEREAS, subject to regulatory approval, each Organizer will serve as
either an officer or director of the Company and the Bank; and
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<PAGE>
WHEREAS, the Organizers anticipate that each Lender who is not an
Organizer will be added as a director of the Company and the Bank or will be
appointed as an advisory director of the Bank; and
WHEREAS, in furtherance of the transactions described above (the
"Transactions"), each Lender desires to lend funds or has loaned funds to the
Company on a non-recourse basis to pay for the expenses incurred or to be
incurred in connection with the Transactions, in the amount set opposite such
Lender's name on the signature page of this Agreement; and
WHEREAS, the Lenders understand that if the necessary regulatory
approvals are not obtained and/or if the transaction with Rushmore is not
consummated for any reason and/or if the Bank does not commence banking
operations for any reasons and/or if the Company does not sell at least 240,000
shares of Common Stock in the Offering, the Lenders may not receive the
repayment of any of the funds loaned by them to the Company; and
WHEREAS, the Lenders and the Company intend by this Agreement to
delineate their respective rights and obligations with respect to their loans to
the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. THE LOANS; REPAYMENT OR OTHER SATISFACTION. In accordance with this
Agreement, each Lender has loaned or hereby agrees to loan to the Company on a
non-recourse basis the amount set forth opposite his name on the signature page
of this Agreement. The loans shall bear interest as follows:
(a) All money expended from the Loan Account (as defined in
paragraph 2 below) after April 1, 1997 shall bear interest accruing at the rate
of 10% per annum. Interest shall be allocated among the Lenders based on a pro
rata allocation of the loans made by all of the Lenders.
(b) Money deposited into the Loan Account but not expended by
the Company shall not bear interest.
Each Lender agrees that the Company is obligated to repay such loans only from
the proceeds of the Offering, or, at the Lender's
2
<PAGE>
option, to accept the issuance of shares of Common Stock in the Offering in
satisfaction of such loan. The Lenders further agree that if the Offering has
not been successfully completed for any reason by December 31, 1997, the Company
shall be dissolved and liquidated and each of the Lenders shall: (i) receive, on
a pro rata basis based upon the loans made by all of the Lenders, a portion of
any of the Company's remaining assets (after the satisfaction of all liabilities
to all other creditors); and (ii) accept such distribution in full satisfaction
of any amounts due from the Company to the Lenders pursuant to this Agreement.
2. DEPOSIT AND EXPENDITURE OF FUNDS. All funds collected from the
Lenders pursuant to this Agreement (the "Lenders' Funds") have been or will be
deposited into an account (the "Loan Account") established with The First
National Bank of Maryland. The proper officers of the Company may withdraw funds
from the Loan Account, such funds to be used to pay normal and customary
expenses relating to the Transactions, including, but not limited to, the
following: (a) expenses arising from or relating to the organization,
capitalization and operation of the Company or the Bank; (b) expenses arising
from or relating to the Offering or the transaction with Rushmore; (c)
accounting, legal and due diligence expenses relating to or in connection with
the Transactions; and (d) other expenses arising from or directly relating to
the Transactions. The Lenders hereby acknowledge that the Company will make
withdrawals from the Loan Account, and, accordingly, if the Offering is not
successfully completed, the Lenders will not receive a repayment of 100% of the
Lenders' Funds, and may not receive the return of any of the Lenders' Funds.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Lender hereby
represents and warrants to, and acknowledges to and agrees with, the Company,
the Bank and each other Lender as follows:
(a) Each Lender recognizes that the Bank is a de novo bank to
be organized in the future and has no financial or operating history, that the
organization and operation of the Company and the Bank entails significant
risks, including, without limitation, that the organization of the Company and
the Bank is subject to regulatory approvals and that there are no assurances
that such approvals will be obtained and that the Offering may never be
commenced, and that even if commenced, it may be unsuccessful and not raise
sufficient funds to repay the
3
<PAGE>
indebtedness arising from the funds loaned by the Lenders to the Company
pursuant to this Agreement.
(b) Within five days after receipt of a request from the
Company, each Lender hereby agrees to provide such information and to execute
and deliver such documents as may be reasonably necessary to comply with any and
all laws and ordinances to which the Company or the Bank is subject.
4. TERMINATION OF PRIOR AGREEMENTS. In the event that any Lender has
entered into any other agreement with the Company or the Bank which is in any
way related to the Transactions, such agreement is hereby terminated and of no
further force or effect.
5. INDEMNIFICATION. Each Lender agrees to indemnify and hold harmless
the Company, the Bank and each of the other Lenders and all of their respective
agents and representatives who are associated with the Transactions and all of
the officers and directors of the Company and the proposed officers and
directors of the Bank against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any false representations or warranty or breach or failure by the
Lender to comply with any covenant or agreement made by the Lender in this
Agreement.
6. IRREVOCABILITY; BINDING EFFECT. Each Lender hereby acknowledges and
agrees that: (a) the Lender is not entitled to cancel, terminate or revoke this
Agreement; and (b) this Agreement shall survive the death or disability of the
Lender and shall be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives and
assigns.
7. MODIFICATION. Neither this Agreement nor any provisions hereof shall
be waived, modified, discharged or terminated except by an instrument in writing
signed by the party against whom any such waiver, modification, discharge or
termination is sought.
8. NOTICES. Any notice, demand or other communication which any party
hereto may be required, or may elect, to give to any other party hereunder shall
be sufficiently given if: (a)
4
<PAGE>
deposited, postage prepaid, in a United States mail box, stamped registered or
certified mail, return receipt requested, addressed to (i) a Lender at his
address as on file with the Company or (ii) the Company at 515 East Joppa Road,
Towson, Maryland 21086 and; or (b) delivered personally at such address.
9. COUNTERPARTS. This Agreement may be executed through the use of one
or more counterparts, and each counterpart shall, for all purposes, constitute
one agreement binding on all parties, notwithstanding that all parties are not
signatories to the same counterpart.
10. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties with respect to the subject matter hereof and there are no
representations, covenants or other agreements except as stated or referred to
herein.
11. SEVERABILITY. Each provision of this Agreement is intended to be
severable from every other provision, and the invalidity or illegality of any
portion hereof shall not affect the validity or legality of the remainder
hereof.
12. ASSIGNABILITY. This Agreement is not transferable or assignable by
any of the undersigned.
13. HEADINGS. All headings in this Agreement are included herein for
convenience of reference only, and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
14. GOVERNING LAW, JURISDICTION AND VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of Maryland
applied to residents of that state executing contracts wholly to be performed in
that state. Each Lender irrevocably agrees that, subject to the Company's sole
and absolute election, any action or proceeding in any way, manner or respect
arising out of this Agreement or any amendment, instrument, document or
agreement delivered or which may in the future be delivered in connection
herewith shall be litigated only in the courts having situs within the City of
Baltimore, the State of Maryland, and each Lender hereby consents and submits to
the jurisdiction of any local, state or federal court located within such city
and state. Each Lender hereby waives any right he may
5
<PAGE>
have to transfer or change the venue of any litigation brought against the
Lender by the Company.
15. CERTIFICATE OF NON-FOREIGN STATUS. Each Lender declares that, to
the best of his knowledge and belief, the following statements are true, correct
and complete: (a) that unless an Internal Revenue Service Form 4224 has been
completed, the Lender is not a foreign person for purposes of U.S. income
taxation (i.e., he is not a nonresident alien, nor executing this document as an
officer of a foreign corporation, as a partner in a foreign partnership, or as a
fiduciary of a foreign employee benefit plan, foreign trust or foreign estate)
and (b) that the Lender agrees to inform the Company promptly if each of the
Lender becomes a nonresident alien.
16. ADDITIONAL LENDERS. Notwithstanding anything to the contrary
contained in this Agreement, the Company may add additional Lenders (an
"Additional Lender") to this Agreement without obtaining the consent of the
other Lenders executing this Agreement, and to the extent the Lenders make any
representations, warranties or agreements to each other pursuant to this
Agreement, such representations, warranties or agreements shall also be deemed
made to the Additional Lenders.
IN WITNESS WHEREOF, the Lenders and the Company have executed and
delivered this Agreement under their respective seals as of the date indicated
under the parties' signature.
Amount of Loan:
___________________________ _____________________________________
Name of Lender:
Date:
AMERICASBANK CORP.
___________________________ By: _________________________________
J. Clarence Jameson, II
President
Date:
6
EXHIBIT 6B
INDEMNITY AGREEMENT
This Indemnity Agreement ("Agreement") is entered into as of this ____
day of ________, 1997 among AmericasBank Corp., Towson, Maryland
("Corporation"), a Maryland corporation and the proposed holding company of
AmericasBank (in formation), Towson Maryland ("AmericasBank"), AmericasBank, and
Rushmore Trust and Savings, FSB, Bethesda, Maryland ("Indemnified Party").
W I T N E S S E T H:
WHEREAS, Corporation and AmericasBank have requested from Indemnified
Party certain financial and other information with respect to Indemnified Party
("Information") for inclusion in the registration statement (the "Registration
Statement") to be filed by Corporation under the Securities Act of 1933, as
amended ("Securities Act");
WHEREAS, Indemnified Party desires indemnification for it and its
officers, directors, agents, servants, employees and each person, if any, who
controls Indemnified Party within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act") (collectively, the "Indemnified Party's Agents"), from any
claims and liabilities that may arise from the provision of the Information.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises contained herein, the undersigned hereby agree as follows:
1. Indemnification of Indemnified Party and Indemnified Party's Agents.
Corporation and AmericasBank, jointly and severally, shall indemnify Indemnified
Party and Indemnified Party's Agents against, and agrees to hold Indemnified
Party and Indemnified Party's Agents harmless from and reimburse Indemnified
Party and Indemnified Party's Agents for, any and all damage, loss, liability,
cost and expense, including without limitation attorneys' fees, (collectively,
"Damages") incurred, suffered or paid by Indemnified Party or Indemnified
Party's Agents under the Securities Act, state "blue sky" laws or otherwise, by
reason of the use of Information provided by Indemnified Party to Corporation
1
<PAGE>
and AmericasBank in the Registration Statement; provided, however, that
Corporation and AmericasBank shall not be subject to any such obligations or
covenants to the extent any of the Damages arise as a result of, or are related
to, a material breach by Indemnified Party of any of its representations,
warranties or covenants contained in the Branch Agreement, the Branch
Modification Agreement, the Loan Agreement or the Loan Modification Agreement
(as such terms are defined below). Indemnified Party's right to indemnity
hereunder is not limited by any claims or rights that it may have against
AmericasBank under either the Branch Purchase and Assumption Agreement dated May
31, 1996 ("Branch Agreement"), and the related Modification Agreement dated
_______________, 1997 ("Branch Modification Agreement"), or the Loan Purchase
and Assumption Agreement dated May 31, 1996 ("Loan Agreement"), and the related
Modification Agreement dated ___________, 1997 ("Loan Modification Agreement"),
all between AmericasBank and Indemnified Party. Similarly, nothing in this
Agreement shall limit any claims or rights that either Corporation or
AmericasBank may have against Indemnified Party under the Branch Agreement, the
Branch Modification Agreement, the Loan Agreement or the Loan Modification
Agreement. Notwithstanding anything to the contrary contained in this Agreement,
Corporation and AmericasBank shall have no obligation to indemnify, hold
harmless or reimburse Indemnified Party or Indemnified Party's Agents pursuant
to this Agreement in the event the Damages arise as a result of, or are related
to, an intentional or reckless misrepresentation contained in this Information.
2. Notice; Mitigation.
(a) Whenever any claim shall arise for indemnification
hereunder, Indemnified Party shall notify AmericasBank within 30 days after
Indemnified Party has actual knowledge of the facts constituting the basis for
such claim. Indemnified Party shall also so notify AmericasBank within 15 days
after commencement of any legal proceedings with respect to such claim. The
omission to provide such notification to AmericasBank shall not relieve
AmericasBank from any liability that it may have to Indemnified Party to the
extent AmericasBank is not prejudiced as a result of such omission.
(b) To the extent reasonably practicable, Indemnified Party
shall mitigate any Damages incurred or suffered by it for which indemnification
is claimed hereunder. Any expenditures,
2
<PAGE>
costs and expenses in connection with such mitigation shall be considered
additional Damages and shall be subject to indemnification pursuant to this
Agreement.
3. Defense.
(a) If the facts giving rise to any indemnification hereunder
shall involve any actual or threatened claim, proceeding or demand by any person
other than a party hereto or its successors assigns (a "third party") against
Indemnified Party or any possible claim by Indemnified Party against any third
party, then AmericasBank shall be entitled, upon its election, by written notice
given to Indemnified Party within 30 days after the date on which notice of the
claim or demand is given to AmericasBank (without prejudice to the right of
Indemnified Party to participate at its expense through counsel of its own
choosing), to assume the defense or prosecution of such claim, proceeding or
demand resulting therefrom at its expense through counsel of its own choosing.
If AmericasBank assumes the defense or prosecution of any claim, proceeding or
demand, it shall take all steps reasonably necessary in the defense, prosecution
or settlement thereof. AmericasBank shall not, in the defense or prosecution of
such claim, proceeding or demand, except with the written consent of Indemnified
Party, consent to the entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving to Indemnified
Party by the third party of an unconditional release from all liability in
respect of such claim or litigation. Indemnified Party shall cooperate in the
defense of prosecution of such action or proceeding.
(b) If AmericasBank shall not assume the defense or
prosecution of any such claim proceeding or demand, Indemnified Party may defend
against or prosecute such action, proceeding or demand in such manner as it may
deem appropriate and may settle such claim, proceeding or demand, after giving
written notice thereof to AmericasBank, on such terms as Indemnified Party may
deem appropriate.
(c) AmericasBank shall indemnify Indemnified Party against and
hold it harmless from any and all Damages resulting from or arising out of any
such settlement or any judgment in connection with any such claim proceeding or
demand.
3
<PAGE>
(d) If by reason of the claim, proceeding or demand of such
third party, a mortgage, lien, pledge, charge, claim, security interest,
attachment, garnishment, execution of encumbrance or any kind ("Lien") is placed
upon any of the property or assets of Indemnified Party, then AmericasBank, if
it desires to exercise its right to defend or prosecute such claim, proceeding
or demand, shall furnish a satisfactory indemnity bond to obtain the prompt
release of such Lien.
4. Payment. Each amount determined to be payable by AmericasBank
hereunder shall be paid, in cash, to Indemnified Party within 30 days after the
date on which AmericasBank receives written notice of the amount of such
indemnity, as finally determined in accordance with the terms hereof. Each such
notice shall contain a reasonably detailed itemization of the damages, expenses,
costs and liabilities comprising the indemnity, certified to be true and correct
by the Indemnified Party or its legal representative.
5. Representations and Warranties of Corporation and AmericasBank.
Corporation and AmericasBank, jointly and severally, expressly represents and
warrants as follows:
(a) The execution, delivery and performance of this Agreement
by Corporation and AmericasBank, and the consummation of the transactions
contemplated hereby, are within the corporate power of Corporation and
AmericasBank, have been duly authorized by all necessary corporate action on the
part of Corporation, AmericasBank or its organizers, will not contravene or
violate any applicable law or regulation, and will not contravene or constitute
a default under any mortgage, indenture, agreement, judgment, injunction, order,
decree or other instrument binding on Corporation, AmericasBank or its
organizers.
(b) This Agreement has been duly executed and delivered by
Corporation and AmericasBank and, assuming the due authorization, execution and
delivery hereof by Rushmore, constitutes a legal, valid and binding obligation
of Corporation and AmericasBank, enforceable in accordance with its terms.
6. Remedies. Indemnified Party shall have and may exercise all of the
rights, powers, privileges and remedies (collectively, "Remedies") contained in
this Agreement. No delay by or omission of Indemnified Party to exercise any
such Remedies shall impair any
4
<PAGE>
remedy or be a waiver of any event of default hereunder, and any single or
partial exercise of any such Remedies shall not preclude other or further
exercise thereof, and no waiver of any such Remedies shall be valid unless in
writing signed by Indemnified Party and then only to the extent specifically set
forth.
7. Termination. This Agreement may be terminated only by the prior
written agreement of the parties hereto.
8. Miscellaneous.
(a) This Agreement shall become effective when executed by
AmericasBank and delivered to Indemnified Party, shall be binding upon
Corporation, AmericasBank and their successors and assigns, and shall inure to
the benefit of Indemnified Party and its successors and assigns.
(b) Any notice herein required or permitted to be given shall
be given in writing by mailing the same by certified or registered mail, postage
prepaid, or by telegraph, charges prepaid, addressed (i) if to Indemnified
Party, as follows, Rushmore Trust and Savings, FSB, 4918 Fairmont Avenue,
Bethesda, Maryland 20814, Attention: Daniel L. O'Connor, III, (ii) if to
Corporation or AmericasBank, as follows: J. Clarence Jameson, III, 515 East
Joppa Road, Towson, Maryland 21286. Indemnified Party and AmericasBank and any
of their respective successors in interest may change the address for service
upon it by written notice to Indemnified Party and to each successor in interest
who has served note of its interest upon the other parties hereto.
(c) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
(d) This agreement shall be construed and interpreted in
accordance with and governed and enforced in all respects by the laws of the
State of Maryland.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
AMERICASBANK CORP.
By: /s/ J. Clarence Jameson, III
____________________________________
J. CLARENCE JAMESON, III
Duly Authorized Representative
AMERICASBANK (in formation)
By: /s/ J. Clarence Jameson, III
____________________________________
J. CLARENCE JAMESON, III
Duly Authorized Representative
RUSHMORE TRUST AND SAVINGS, FSB
By: /s/ Daniel L. O'Connor, III
____________________________________
DANIEL L. O'CONNOR, III
Duly Authorized Representative
6
EXHIBIT 8A(i)
BRANCH PURCHASE AND ASSUMPTION AGREEMENT
This PURCHASE AND ASSUMPTION AGREEMENT (this "Agreement") dated as of
May 31, 1996 by and between Rushmore Trust and Savings, FSB, Bethesda, Maryland
("Rushmore") and AmericasBank (in organization), Towson, Maryland
("AmericasBank").
AmericasBank desires to purchase certain assets and assume certain
liabilities associated with Rushmore's branch banking office located at 3621
East Lombard Street, Baltimore, Maryland 21224, (the "Baltimore Branch") subject
to the terms and conditions and based upon Rushmore's representations,
warranties, and agreements hereinafter expressed.
Rushmore desires to sell to AmericasBank certain assets and to have
AmericasBank assume certain liabilities associated with the Baltimore Branch,
subject to the terms and conditions and based upon AmericasBank's
representations, warranties, and agreements hereinafter expressed.
In consideration of the mutual covenants and agreements herein
contained and the mutual benefits to be derived herefrom, the parties hereto do
hereby agree as follows:
1. Effective Date and Closing. The transactions provided for herein
shall be on the last day of the month provided it is a business day; if not,
then the preceding day which is a day of business and which shall not be less
than 30 nor more than 45 days following the day on which AmericasBank receives
the approval of the Office of Thrift Supervision (the "OTS") and the Federal
Deposit Insurance Corporation (the "FDIC") to consummate the transactions
provided for herein (the "Effective Date"). The closing of the transactions
provided for herein (the "Closing") shall be at the close of business on the
Effective Date, at which time title to and possession of the assets to be sold
hereunder will be transferred from Rushmore to AmericasBank in accordance with
the procedures set forth in Section 7 hereof.
2. Events Preceding Effectiveness. On or before the Effective Date, the
following shall have occurred:
1
<PAGE>
(a) A majority of each of the Executive Committee of the Board
of Directors or the Board of Directors of AmericasBank and a disinterested
majority of the Board of Directors of Rushmore shall have approved this
Agreement and the transactions provided for herein; and
(b) the OTS and the FDIC shall have approved this Agreement
and transactions provided for herein.
3. Assets to be Purchased and Liabilities to be Assumed. The following
assets shall be purchased and liabilities shall be assumed hereunder:
3.1 Assets to be Purchased. Rushmore shall sell to
AmericasBank and Americas Bank shall purchase from Rushmore each of the
following assets of Rushmore (the "Assets")
(a) fee simple interest in the real estate, together
with the buildings and improvements constituting the Baltimore Branch location,
which is more particularly described in a Deed attached as Exhibit I hereto
(the "Real Estate");
(b) all fixtures, furnishings, equipment and
furniture (other than Rushmore's signs), security monitoring equipment, teller
equipment, and other tangible property now existing at the Baltimore Branch,
subject to reasonable wear and tear (but not subject to any obligation to make
any extraordinary repairs beyond ordinary and routine maintenance) from the date
of execution of this Agreement to the Closing, more particularly described in
Exhibit II hereto (the "Furnishings");
(c) cash in an amount equal to the face value, plus
accrued interest, (i) of all the deposits in all retail and commercial checking
accounts, statement savings accounts, Insured Investment Accounts, and
individual retirement accounts listed on the books of the Baltimore Branch as of
the close of business on the Effective Date (collectively, the "Accounts"), and
(ii) of all the certificates of deposit listed on the books of the Baltimore
Branch as of the close of business on the Effective Date (the "Certificates")
(the Accounts and the Certificates being referred to collectively as the "Total
Accounts");
2
<PAGE>
(d) the covenant by Rushmore not to compete with
AmericasBank described in Section 5 (the "Covenant Not to Compete");
(e) the Loans secured by deposits, including accrued
interest.
3.2 Liabilities Assumed. Subject to the provisions of Section
6.2 hereinafter set forth, AmericasBank shall assume no tax or other liabilities
of Rushmore in connection with the purchase of the Assets or otherwise, except
that AmericasBank shall assume each of the following liabilities of Rushmore
without recourse and will indemnify and hold Rushmore harmless from and against
any liability, cost, or expense incurred by Rushmore as a result of
AmericasBank's failure to perform its obligations with respect to any of the
following assumed liabilities (collectively, the "Liabilities"):
(a) the liabilities for payment to the depositors
or order of the Total Accounts and written contractual or statutory obligations
associated with the Total Accounts.
4. Employment Matters. With respect to the Employees:
4.1 Solicitation for Employment. AmericasBank shall offer
employment with AmericasBank to the present Baltimore Branch officers and
employees listed on Exhibit III hereto (the "Officers and Employees") subject to
their continued satisfactory performance of their duties. AmericasBank may
immediately contact and solicit the Officers and Employees for employment.
4.2 Employee Benefits. Officers and Employees who accept
employment with AmericasBank shall receive their current salaries at Rushmore
and shall participate in all other employee benefit plans of AmericasBank.
5. Covenant Not to Compete. Neither Rushmore nor any company affiliated
with Rushmore shall (a) maintain retail banking facilities, including offices
from which checking accounts, savings accounts or certificates or deposit are
offered by Rushmore or any company affiliated with Rushmore to the general
public or operate automated teller machines wholly-owned by Rushmore within five
miles of the Baltimore Branch (the "Covenant Area") for a period of three years
from the date of Closing, or (b) knowingly solicit any
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customers or potential customers of the Baltimore Branch located within the
Covenant Area for banking services described in clause(a). However, this Section
5 shall not prohibit (i) Rushmore or any affiliate from being acquired by a
company that has, or has an affiliate with, a banking office in the Covenant
Area or (ii) Rushmore or any affiliate from acquiring and operating a company
that itself or through an affiliate has an office in the Covenant Area where
that office is an incidental part of a larger acquisition by Rushmore or an
affiliate.
6. Purchase Price, Adjustment, and Payment. The purchase price for the
Assets shall be the sum of the separately bargained for amounts shown in Section
6.1 plus or minus, as the case may be, the adjustments described in Section 6.2
(the "Purchase Price") in accordance with the Closing Statement attached hereto
as Exhibit IV.
6.1 Purchase Price of Assets. At Closing, AmericasBank shall
pay to Rushmore the following purchase price for the Assets, less credits for a
deposit of $20,000.00 paid at the time of signing of this Agreement.
(a) Real Estate and Furnishings: $25,000.00.
(b) Purchase for Total Accounts: 3.5% of the
aggregate balance of the Total Accounts at Closing ("Closing Balance").
(c) AmericasBank shall have the right to allocate
the Purchase Price for the Assets sold hereunder.
(d) the amount of loans secured by the deposits
including accrued interest.
6.2 Adjustments. The Purchase Price shall be adjusted as
follows:
(a) all taxes, utilities, and other public or
governmental charges or assessments relating to the Real Estate which are or may
be payable on an annual basis (including assessments, liens or encumbrances for
sewer, water, drainage or other public improvements completed or commenced on or
prior to the date hereof, or subsequent thereto) shall be prorated as of the
close of business on the Effective Date.
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(b) it is specifically understood and agreed that
the second floor of the Real Estate is leased to a Tenant on a month-to-month
basis for the sum of Three Hundred Dollars ($300.00) per month. Accordingly, all
rent will be adjusted and apportioned as of the Effective Date.
6.3 Payment of the Purchase Price. In settlement of the
Purchase Price:
(a) Rushmore shall transfer all of the non-cash
Assets to AmericasBank;
(b) AmericasBank shall assume the Liabilities
without recourse.
7. Closing Events. At the Closing:
7.1 Real Estate. Rushmore shall deliver to AmericasBank a Deed
for the Real Estate conveying to AmericasBank good and marketable fee simple
title to the Real Estate without any material exception reasonably objectionable
to AmericasBank, containing covenants of special warranty and further
assurances, free and clear of all material liens and encumbrances, except for
recorded easements and covenants and restrictions of record and except for any
matters which may be observed by inspection or disclosed by survey of the Real
Estate or customarily excepted in a title insurance policy.
7.2 Furnishings. Rushmore shall deliver to AmericasBank a Bill
of Sale for the Furnishings; such Bill of Sale shall grant and convey unto
AmericasBank all of Rushmore's right, title, and interest in the Furnishings,
free and clear of all material liens and encumbrances.
7.3 Total Accounts. Rushmore shall deliver as of the Effective
Date to AmericasBank a revised list of the Total Accounts as of the Effective
Date, and the parties shall execute an Agreement of Assignment and Assumption of
Total Accounts in the form of Exhibit V.
7.4 Transfer of Funds. AmericasBank and Rushmore shall execute
a memorandum of settlement detailing the transfers of funds which occur in
connection with the transactions contemplated by this Agreement, identifying
specifically the Certificates and the
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Accounts being transferred. In the event that after Closing the memorandum of
settlement proves to be inaccurate, the parties will promptly make appropriate
adjustments and accounting, including, but not limited to, any adjustments in
order to reflect the amount of accrued interest on the Total Accounts on the
Effective Date.
7.5 Transfer Amounts to AmericasBank. The net cash transfer
amount due to AmericasBank from Rushmore shall be made in immediately available
funds to the account of AmericasBank maintained at Legg Mason-Wood Walker, Inc.,
at Closing.
8. Representations and Warranties of Rushmore. Rushmore hereby
represents and warrants to AmericasBank as follows:
8.1 Organization and Standing of Rushmore. Rushmore is an
organized and validly existing federal savings bank, in good standing, under the
laws of the United States of America, has the corporate power and authority to
conduct its business as it is now being conducted.
8.2 Absence of Certain Changes or Events. Except as heretofore
disclosed in writing to AmericasBank since April 1, 1996, there has not been any
change in the Baltimore Branch's assets to be purchased or liabilities to be
assumed, other than changes in the ordinary course of business which have not
been materially adverse.
8.3 No Conflict with Other Documents. Neither the execution
and delivery of this Agreement nor the carrying out of the transactions
contemplated hereunder will result in any material violation, termination, or
modification of, or be in conflict with, any terms of any contract or other
instrument to which Rushmore is a party, or of any material judgment, decree, or
order applicable to Rushmore, or result in the creation of any material lien,
charge, or encumbrance upon the property or assets of Rushmore being sold
hereunder.
8.4 Title of Assets: Absence of Liens and Encumbrances.
Rushmore is the true owner of and has good title to the assets free and clear of
all pledges, liens, encumbrances, and adverse claims of any kind or character,
but subject to exceptions described in Section 7.1. Rushmore is duly authorized
to transfer and assign the Assets to AmericasBank subject to receipt of
regulatory approval, and the Furnishings shall be in the same condition on the
Effective
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Date as they are on the date hereof, excepting reasonable wear and tear.
8.5 Compliance with Laws. None of the Total Accounts is in
violation of any federal, state, or local laws, regulations, and rulings
applicable thereto, specifically including the Federal Deposit Insurance Act and
any regulations and rulings issued pursuant thereto.
8.6 Litigation, etc. Except as heretofore disclosed in writing
to AmericasBank, there is no litigation, proceeding, or investigation pending
or, to the knowledge of Rushmore, threatened against it with respect to the
operation of the Baltimore Branch which would result in any material adverse
change in the business or financial condition of the Baltimore Branch or any
material liability on the part of Rushmore which questions the validity of this
Agreement or of any action taken or to be taken pursuant hereto or in connection
herewith.
8.7 Authority. The execution, delivery, and performance of
this Agreement by Rushmore have been duly and validly authorized by its Board of
Directors, subject only to the requisite approval by appropriate governmental
regulatory authorities.
8.8 List of Total Accounts. The list of the Total Accounts and
the characteristics of the Total Accounts contained in Exhibit VII hereto is a
complete and accurate list as of the date hereof in all material respects, and
at Closing Rushmore will deliver a complete and accurate list as of the
Effective Date.
8.9 Deposit Data. Data and information provided to
AmericasBank by Rushmore regarding the Total Accounts which were used by
AmericasBank in determining the purchase price shown in Sections 6. l(c) and (d)
accurately reflects the characteristics of the Total Accounts and historical
experience with such deposits in all material respects.
9. Representations and Warranties of AmericasBank. AmericasBank hereby
represents and warrants to Rushmore as follows:
9.1 Organization and Standing of AmericasBank. At the time of
Closing, AmericasBank will be a duly organized and validly existing federal
savings bank, will be in good standing under the
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laws of the United States of America, will have the corporate power and
authority to conduct its business to be conducted.
9.2 No Conflict with Other Documents. Neither the execution
and delivery of this Agreement nor the carrying out of the transactions
contemplated hereunder will result in any violation, termination, or
modification of or be in conflict with, any terms of any contract or other
instrument to which AmericasBank is a party, or of any judgment, decree, or
order applicable to AmericasBank.
9.3 Authority. The execution, delivery, and performance of
this Agreement by AmericasBank have been duly and validly authorized by its
Board of Directors or the Executive Committee of its Board of Directors, or the
Founders Group, subject only to approval by appropriate governmental regulatory
authorities.
9.4 Litigation, etc. At the time of Closing, there will be no
litigation, proceeding, or investigation pending or, to the knowledge of
AmericasBank, threatened against it which might result in any material adverse
change in the business or financial condition of AmericasBank or any material
liability on the part of AmericasBank which questions the validity of this
Agreement or of any action taken or to be taken pursuant hereto or in connection
herewith.
9.5 Deposit. At the Time of the signing of this Agreement, the
Founders Group shall have opened and maintained on behalf of AmericasBank a
$20,000.00 deposit at Rushmore.
9.6 Deposit Insurance. The deposits of AmericasBank are
insured by the Savings Association Insurance Fund to the fullest extent
permitted by law.
10. Covenants of Rushmore. Except as otherwise consented to in writing
by AmericasBank after the date of this Agreement, Rushmore covenants to and
agrees with AmericasBank as follows:
10.1 Information. Rushmore will give to AmericasBank and to
its officers, accountants, counsel, and other representatives full access during
Rushmore's normal business hours upon reasonable notice throughout the period
prior to the Effective Date to all of Rushmore's properties, books, contracts,
customer records (consistent with applicable law), commitments, reports of
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examination (consistent with applicable law), and records which relate to
operation of the Baltimore Branch. Rushmore will furnish AmericasBank during
such period with all such information concerning the Baltimore Branch as
AmericasBank may reasonably request, including information for use in necessary
filings to be made with appropriate governmental regulatory authorities.
AmericasBank shall observe its duty of confidentiality regarding such
information as set forth in Section 11.2.
10.2 Conduct of Rushmore's Business. Pending the Effective
Date, (a) Rushmore will operate the Baltimore Branch only in the ordinary
course; (b) no increase shall be made in any salary or wages (excluding
regularly-scheduled salary increases), and no establishment or increase shall be
made in any bonus, pension, option, incentive or deferred compensation,
retirement, death, profit-sharing, or similar benefits of any of the Officers
and Employees of the Baltimore Branch (excluding bank-wide changes); and (c)
Rushmore shall not knowingly place upon or knowingly permit any material lien or
encumbrance upon any of the Assets. Pending the Effective Date, Rushmore shall
(d) use its best efforts to preserve the Assets subject to normal wear and tear
and to keep available the services of the Officers and Employees; (e) continue
in effect the present method of conducting business at the Baltimore Branch
(excluding bank-wide changes) except as otherwise consented to by AmericasBank,
and (f) consult with AmericasBank as to making decisions or actions in matters
relating to the Baltimore Branch other than those in the ordinary course of
operations.
10.3 Destruction by Fire or Other Casualty; Condemnation.
Rushmore shall obtain replacement insurance to cover the building and its
contents. In the event the Baltimore Branch is damaged or destroyed by fire or
other casualty prior to the Effective Date, Rushmore will immediately sell the
Real Estate to AmericasBank pursuant to Section 6.1(a) at which time Rushmore
shall assign to AmericasBank the insurance proceeds ("Real Estate Closing"), and
subsequent to the Real Estate Closing, transfer to AmericasBank the Total
Accounts pursuant to this Agreement. AmericasBank will reconstruct the Baltimore
Branch so that it is in reasonably the same condition as it was prior to the
fire or other casualty. Prior to Closing, AmericasBank will lease the Baltimore
Branch to Rushmore on a month to month basis for a monthly rent not to exceed
$400 per month. In the event that the Baltimore Branch or any portion thereof is
condemned, AmericasBank shall succeed to
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Rushmore's interest in any condemnation award received and proceed to Closing.
10.4 Installation of Equipment. Subject to obtaining any
required consents, and after issuance of a new thrift charter by the OTS,
Rushmore shall permit AmericasBank to install (without disruption of business
activities) teller equipment and security monitoring systems at the Baltimore
Branch prior to the Effective Date so that the same shall be operational on the
Effective Date, provided that in the event the transactions contemplated by this
Agreement are not consummated, AmericasBank shall at its expense remove teller
equipment and the security monitoring system and restore the premises to the
same condition as they were prior to installation of such systems.
10.5 Customer Information. Rushmore shall, upon the execution
of this Agreement, make available to AmericasBank all material information
regarding the Assets (consistent with applicable law), including customer lists,
account numbers and amounts, maturity schedules, and other data necessary to
effect an orderly transfer of the Assets at Closing. AmericasBank shall observe
its duty of confidentiality regarding such information as set forth in Section
11.2. Provided AmericasBank receives the prior written approval of Rushmore as
to the timing and content of any contact prior to the Effective Date with
Rushmore's customers, which approval will not be unreasonably withheld,
AmericasBank may contact the retail or commercial customers of Rushmore whose
Total Accounts are being assumed pursuant to this Agreement no sooner than 30
days prior to closing.
10.6 Exception of Additional Documents. Rushmore will execute
all documents that AmericasBank may reasonably require to evidence Rushmore's
ownership of the Assets.
10.7 Notice to Depositors. Rushmore will contact each person
having a deposit at the Baltimore Branch and will, at least 30 days prior to the
Closing, advise such persons in writing that their deposit will be transferred
and assumed by AmericasBank hereunder unless other arrangements are made by the
depositor; the form of notice provided to the depositors shall be in a form
satisfactory to AmericasBank and shall authorize AmericasBank to receive
information on each of the customer's Accounts prior to the Effective Date
unless the customer objects; and Rushmore will use
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its best efforts to secure the transfer of the maximum amount of deposits to
AmericasBank.
10.8 Press Release. AmericasBank and Rushmore shall jointly
agree on a press release or other media communication relative to the sale and
purchase of the Baltimore Branch.
10.9 Maintenance of Real Estate and Furnishings. Rushmore
shall continue reasonable maintenance of an ordinary and routine nature of the
Real Estate and Furnishings from the date of execution of this Agreement to the
Closing.
11. Covenants of AmericasBank. Except as otherwise consented to in
writing by Rushmore after the date of this Agreement, AmericasBank covenants to
and agrees with Rushmore as follows:
11.1 Performance. Subject to Rushmore's representations and
warranties contained in this Agreement, AmericasBank will accept the Assets and
assume and perform its obligations under this Agreement and the accompanying
Exhibits.
11.2 Protection of Information. AmericasBank will hold all
customer lists and account information provided by Rushmore in confidence except
to the extent that it is required to disclose such information to stockholders,
to the public, or in filings with governmental regulatory authorities. In the
event the sale and purchase of the Assets and assumption of the Liabilities as
provided in this Agreement are not consummated, AmericasBank agrees that it will
return all customer lists and account information provided by Rushmore and all
copies of abstracts thereof made by AmericasBank and shall not in any manner
retain, use, or disclose the customer lists and account provided by Rushmore.
AmericasBank will make available to Rushmore during normal business hours and at
Rushmore's expense copies of all documents provided under Section 7.5 for any
appropriate and non-competitive business reasons.
12. Conditions Precedent to AmericasBank' s Obligations Hereunder.
Unless waived in writing by AmericasBank in its sole discretion, all obligations
of AmericasBank hereunder shall be subject to the fulfillment prior to or at the
Effective Date of the following conditions:
12.1 Representations. Warranties and Covenants. The
representations and warranties of Rushmore herein contained shall
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be true as of the Effective Date, shall be deemed made again at and as of the
Effective Date, and shall be true as so made again; Rushmore shall have
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Date; and AmericasBank shall have received from Rushmore an officers'
certificate in such detail as AmericasBank may reasonably request, dated the
Effective Date and signed by its president or senior executive vice president
and cashier or secretary, to the foregoing effect.
12.2 Events Preceding to the Effective Date. Each of the
events set forth in Section 2 shall have occurred.
12.3 Procedures. AmericasBank and Rushmore shall have agreed
upon the procedures, mechanical processes, and other details necessary to
transfer the Assets and assume the Liabilities in accordance with this Agreement
and the attached Exhibits.
12.4 No Adverse Proceedings or Events. No action or proceeding
against AmericasBank or the consummation of the transactions contemplated by
this Agreement shall have been instituted or threatened or any investigations
undertaken that might result in any such action or proceeding, no order of any
court entered, and no other event shall have occurred or not occurred, on or
before the Effective Date, which, in the opinion of AmericasBank's counsel,
renders it impossible or inadvisable for legal reasons for AmericasBank to
consummate the transactions contemplated by this Agreement.
12.5 Consents, etc. All requisite consents, undertakings,
agreements, exercises, and terminations of any third parties shall have been
obtained either to the satisfaction of AmericasBank or waived by AmericasBank.
13. Conditions Precedent to Rushmore's Obligations Hereunder. Unless
waived in writing by Rushmore in its sole discretion, all obligations of
Rushmore hereunder shall be subject to the fulfillment prior to or at the
Effective Date of the following conditions.
13.1 Representations, Warranties, and Covenants. The
representations and warranties of AmericasBank herein contained shall be true as
of the Effective Date, shall be deemed made again at and as of the Effective
Date, and shall be true as so made
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again. AmericasBank shall have performed all obligations and compiled with all
covenants required by this Agreement to be performed or complied with by it on
or prior to the Effective Date; and shall have received from AmericasBank an
officers' certificate in such detail as Rushmore may reasonably request, dated
the Effective Date and signed by its president and cashier or secretary, to the
foregoing effect.
13.2 Events Preceding the Effective Date. Each of the events
set forth in Section 2 shall have occurred.
13.3 Procedures. AmericasBank and Rushmore shall have agreed
upon the procedures, mechanical processes, and other details necessary to
transfer the Assets and assume the Liabilities in accordance with this Agreement
and the attached exhibits.
13.4 No Adverse Proceedings or Events. No action or proceeding
against Rushmore or the consummation of the transactions contemplated by this
Agreement shall have been instituted or threatened or any investigations
undertaken that might result in any such action or proceeding, no order of any
court entered, and no other event shall have occurred or not occurred, on or
before the Effective Date, which, in the opinion of Rushmore's counsel, renders
it impossible or inadvisable for legal reasons for Rushmore to consummate the
transactions contemplated by this Agreement.
14. Amendment of the Agreement. This Agreement may be amended at any
time provided that any such amendment is in writing and is approved by both of
the parties hereto.
14.1 Termination of Agreement. This Agreement shall terminate
and be of no further force or effect as between the parties hereto, except as to
the provisions of Section 14.5 hereof and liability for breach of any material
covenant, agreement, representation, or warranty occurring or arising prior to
the date of termination, upon the occurrence of any of the following:
(a) Immediately upon the expiration of thirty (30)
days from the date that Rushmore has given notice to AmericasBank of a breach or
default by AmericasBank in the performance of any covenant, agreement,
representation, warranty, duty, or obligation hereunder, provided, however, that
no such termination shall be effective if, within such thirty (30) day period,
AmericasBank shall have substantially corrected and cured, to Rushmore's
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reasonable satisfaction, the grounds for termination as set forth in such notice
of termination or Rushmore shall have waived such default or breach or shall
have extended the time for such cure;
(b) Immediately upon the expiration of thirty (30)
days from the date that AmericasBank has given notice to Rushmore of a breach or
default by Rushmore in the performance of any covenant, agreement,
representation, warranty, duty, or obligation hereunder, provided, however that
no such termination shall be effective if, within such thirty (30) day period.
Rushmore shall have substantially corrected and cured, to AmericasBank's
reasonable satisfaction, the grounds for termination as set forth in such notice
of termination or AmericasBank shall have waived such default or breach or shall
have extended the time for such cure; or
(c) By the Board of Directors of AmericasBank or
Rushmore, or the proper officers of either party acting pursuant to the
authority of their respective Board of Directors, if the Closing has not
occurred upon the latter of four months from the date of this Agreement or the
date of approval by OTS of the issuance of the Charter, but, in any event, no
later than October 31, 1996. Provided, however, that Rushmore agrees to grant,
if needed, a reasonable extension of this date, provided, that the approval by
OTS is imminent and AmericasBank has performed all that is required to pursue
its Application for a new charter however, in no event beyond December 31, 1996.
14.2 Immaterial Breach. Notwithstanding anything to the
contrary contained herein, no party hereto shall have the right to terminate
this Agreement on account of its own breach or because of any immaterial breach
by any other party hereto of any covenant, agreement representation, warranty,
duty, or obligation hereunder. Failure to clear an Encumbrance on an asset prior
to Closing shall be an Immaterial Breach under this Section provided that such
Encumbrance does not materially affect the value or use of the Asset.
14.3 Waiver of Right to Terminate. Any party may, at its
election, waive any of its respective rights to terminate this Agreement under
the foregoing provisions of this Section, and the parties shall be deemed to
have waived such rights from and after the Closing Date even though actual
settlement may have been delayed.
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14.4 Effect of Termination. Except as otherwise provided in
this Agreement, in the event of termination of this Agreement, each party shall
be responsible for its own expenses and neither party shall be liable in damages
to the other unless termination results from the breach or default of this
Agreement by one of the parties.
14.5 Break-Up Fee to Rushmore. AmericasBank hereby
acknowledges that, in negotiating and executing this Agreement and in taking the
steps necessary or appropriate to effect the transactions contemplated hereby,
Rushmore has incurred and will incur direct and indirect monetary costs
(including without limitation attorneys' fees and costs, costs of Rushmore
management and employee time and potential damage to Rushmore's business and
franchises as a result of the announcement of this pending transaction) and will
forego discussions with other potential acquirors of the Assets and Liabilities.
To compensate Rushmore for such costs and to induce it to forego such
discussions, if AmericasBank terminates or fails to consummate this Agreement
for any reason other than the ability of Rushmore to consummate the transaction,
then AmericasBank shall forfeit its Twenty Thousand Dollar ($20,000.00) deposit
at Rushmore.
15. Effect on Third parties. Except as otherwise provided by law,
neither the rights of creditors and depositors of Rushmore, nor any liability or
obligation for payment of money, nor any claim or cause of action against
Rushmore shall be in any manner released or impaired by this Agreement or by the
transactions contemplated hereunder, and the rights and obligations of all
creditors and depositors and of all other persons shall remain unimpaired, but
AmericasBank shall succeed to all such obligations and liabilities which are
included among the Liabilities as of the Closing and shall be liable from then
and thereafter to pay, discharge, and perform all such liabilities and
obligations of Rushmore assumed pursuant to this Agreement and in connection
with the transactions contemplated hereunder in the same manner as if
AmericasBank had itself incurred such liabilities or obligations, and
AmericasBank shall succeed to all of the rights, offsets, and defenses of
Rushmore in connection therewith.
16. Expenses. Whether or not the transactions hereunder are consummated
and subject to Section 7.4, each party to this Agreement shall pay its own
expenses relating hereto, including fees and disbursements of its counsel and
accountants. Further,
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AmericasBank shall bear the costs of documentary stamps and recordation fees,
sales taxes, excise taxes, title examination fees, and transfer taxes on the
Real Estate together with the cost of all regulatory filings and filing fees as
they may apply to AmericasBank and the costs of mailings to depositors.
16.1 Disputes as to Calculations. AmericasBank and Rushmore
agree to use their best efforts to agree on the calculation of the Payment
Amount. In the event that the parties should fail to agree on the calculation,
the parties agree to refer the matter in dispute with respect to such
calculation to an independent firm of certified public accountants of national
standing reasonably acceptable to AmericasBank and Rushmore, and AmericasBank
and Rushmore agree to be bound by the determination of such firm with respect to
the disputed matter relating to the calculation of the Payment Amount.
AmericasBank and Rushmore agree to share equally the fees and charges of such
accounting firm for its services in resolving such dispute. If in the resolution
of the dispute it is determined that one party owes an amount to the other
party, the paying party shall also pay interest on such amount from the date it
should have been paid to the date of payment at the same rate as provided in
Section 16.1.
16.2 Check Processing and Reimbursements. For a period of
thirty (30) calendar days after the Closing Date, Rushmore shall continue to
clear checks or drafts drawn on retail and commercial checking accounts,
statement savings accounts and Insured Investment accounts and individual
retirement accounts transferred to AmericasBank pursuant to this Agreement, and
AmericasBank shall reimburse Rushmore for the amount of funds paid on such
checks or drafts, by wire transfer in immediately available funds, as herein
provided. During said thirty (30) calendar day period, Rushmore shall place all
such checks or drafts received for collection on Deposit Accounts into the
possession of a courier (the Federal Express, Purolater, etc.) for delivery to
Electronic Data Services ("EDS") in Herndon, Virginia, by the morning of the
following Business Day. Prior to 3:00 p.m. on the day of such receipt,
AmericasBank shall make payment to Rushmore in the aggregate amount of such
checks or drafts. AmericasBank shall be responsible for determining if each such
check or draft delivered is properly payable. If any such check or draft is not
properly payable, AmericasBank shall dishonor such check or draft and return it
to Rushmore, which shall return such check or draft to the Federal Reserve Bank
with jurisdiction over Rushmore and AmericasBank, for
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credit to Rushmore's account. When Rushmore's account at the Federal Reserve
Bank is so credited, Rushmore shall reimburse AmericasBank for AmericasBank
payment to Rushmore hereunder. In addition, Rushmore shall segregate and notify
AmericasBank by telephone of any check or draft in an amount equal to or
exceeding $2,500. AmericasBank shall inform Rushmore whether any such check or
draft is properly payable, and, if it is, AmericasBank shall make payment to
Rushmore in the amount of such check or draft. If such check or draft is not
properly payable, Rushmore shall dishonor said draft and return it to the
Federal Reserve Bank for credit to Rushmore's account. After the thirty (30)
calendar day period, Rushmore shall not accept any such checks and such checks
shall be returned marked "Account number not properly formatted."
16.3 ACH Transactions. With respect to the direct pay and
automated clearing house transactions requested by customers of the Baltimore
Branch after the Closing Date, AmericasBank agrees to use its best efforts to
notify, within thirty (30) days after Closing, the appropriate Federal Reserve
Bank to redirect such direct pay and automated clearing house transactions from
Rushmore to AmericasBank. Rushmore agrees that for a period of six (6) months
following the Closing Date it will effectuate such requests in the same manner
and with the same diligence as it would have prior to the Closing Date. Rushmore
agrees to provide AmericasBank with the daily detail necessary for AmericasBank
to timely credit or debit the customer's account and to allow AmericasBank to
send Notifications of Changes. Rushmore and AmericasBank agree to a timely net
daily settlement of these transactions. At the end of such period of six (6)
months, Rushmore shall discontinue accepting and forwarding ACH entries and
funds and return them to the originators marked "Account Closed."
16.4 Returned Items. With respect to any items that are
credited to an account being transferred to AmericasBank pursuant hereto that
are returned unpaid ("Returned Item"), AmericasBank shall repay the amount to
Rushmore unless Rushmore has not followed its normal funds availability policy.
16.5 Records and Financial Information. The party having
control of the relevant records and financial information used in connection
with any adjustment provided for in this Section shall certify the accuracy of
such record and financial information if so requested by the other party, and
such request is reasonable.
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17. Notices. All notices, requests, demands and other communications
under or connected with this Agreement shall be in writing, and, (a) if to
AmericasBank, shall be addressed to AmericasBank, Attention: J. Clarence Jameson
III, 515 East Joppa Road, Towson, Maryland, 21286, and, if to Rushmore, shall be
addressed to 4918 Fairmont Avenue, Bethesda, Maryland 20814, Attention: Daniel
L. O'Connor III. Any such notices, requests, demands, and other communications
shall be mailed, postage prepaid, first class mail, or delivered personally and
shall be sufficient and effective when delivered to or received at the address
as specified. Each of the parties may change the address at which it is to
receive communications by like written notice to the other.
17.1 Tax Information and Withholding. All tax information
reporting and filing requirements and all tax withholding requirements with
respect to the Real Property and Liabilities shall be the responsibility of
Rushmore up to the Closing and the responsibility of AmericasBank thereafter.
17.2 Successors and Assigns. All terms and provisions of the
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective transferees, successors, and assigns, provided, however,
that this Agreement and all rights, privileges, duties, and obligations of the
parties hereto may not be assigned or delegated by either party hereto after the
Closing Date without the written consent of the other party to this Agreement
and provided further that in case of any such assignment or delegation, the
party assigning or delegating also shall remain responsible as a party hereto.
17.3 Release. AmericasBank hereby releases and waives any and
all claims that it has or may have against Rushmore with respect to the
condition of the Real Property. AmericasBank acknowledges to Rushmore that it
has had the opportunity under this Agreement to fully inspect the Real Property
and AmericasBank assumes the responsibility and risks of all defects and
conditions, including such defects and conditions, if any, that cannot be
observed by casual inspection.
17.4 Third-Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto.
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17.5 Governing Law. This Agreement is made and entered into in
the State of Maryland, and the laws of that State shall govern the validity and
interpretation hereof and the performance of the parties hereto of their
respective duties and obligations hereunder.
17.6 Partial Invalidity. If any portion of this Agreement
shall be invalid or unenforceable, such unenforceability or invalidity shall not
affect the remainder of the Agreement.
18. Entire Agreement: Effect. This Agreement (including the Exhibits,
list, schedules and documents delivered pursuant hereto, which are made a part
hereof) is intended by the parties to and does constitute the entire agreement
of the parties with respect to the transaction contemplated hereunder. This
Agreement supersedes any and all prior understandings, and it may not be
changed, waived, discharged, or terminated orally, but only in writing by a
party against which enforcement of the change, waiver, discharge or termination
is sought.
19. General. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretations of this Agreement. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors, but shall not be assigned, and shall not create any
rights in third parties, including stockholders or employees of either party
hereto. All representations, warranties, agreements and covenants shall be
deemed to be conditions to the Agreement and shall not survive the Effective
Date, except for Section 16.2 and 16.3.
IN WITNESS WHEREOF, AmericasBank and Rushmore have caused this
Agreement to be duly executed by their respective representatives, thereunto
duly authorized, as of the date first above written.
AMERICASBANK (in formation)
By: /s/ J. Clarence Jameson, III
________________________________
J. CLARENCE JAMESON, III
Duly Authorized Representative
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RUSHMORE TRUST AND SAVINGS, FSB
By: /s/ Daniel L. O'Connor, III
________________________________
DANIEL L. O'CONNOR, III
Duly Authorized Representative
20
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit Section in
Number Title Agreement
------ ----- ----------
<S> <C>
I Deed to Baltimore Branch 3.1(a),7.1
II Furnishings Included in Sale 3.1(b)
III Officers and Employees 4
IV Closing Statement 6
V Agreement of Assignment and Assumption 7.3
of Total Accounts
VI List of Total Accounts 3.1
(a) Retail and commercial checking
accounts
(b) Statement savings accounts
(c) Insured investment accounts
(d) Individual retirement accounts
(e) Certificate of deposit
</TABLE>
The Registrant will furnish supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.
21
EXHIBIT 8A(ii)
MODIFICATION TO BRANCH PURCHASE AND ASSUMPTION AGREEMENT
THIS MODIFICATION TO BRANCH PURCHASE AND ASSUMPTION AGREEMENT, made
this ____ day of January, 1997, by and between Rushmore Trust and Savings, FSB,
("Rushmore") and AmericasBank ("AmericasBank"), Witnesseth:
WHEREAS, by Branch Purchase and Assumption Agreement dated May 31, 1996
("the Branch Purchase Agreement"), Rushmore intends to sell to AmericasBank
certain assets ("the Assets") and AmericasBank intends to purchase the Assets
and assume certain liabilities in connection therewith upon the terms and
conditions therein set forth; and
WHEREAS, the parties hereto are desirous of modifying and clarifying
certain of the terms and conditions set forth in the Branch Purchase Agreement
dated May 31, 1996, as hereinafter set forth.
NOW, THEREFORE, this MODIFICATION TO BRANCH PURCHASE AND ASSUMPTION
AGREEMENT Witnesseth, that for and in consideration of the mutual terms and
conditions hereinafter expressed to be performed, and in further consideration
of the sum of One Dollar and No/100 ($1.00), the adequacy of which and payment
of which are hereby acknowledged, the parties hereto do hereby agree as follows:
1. All of the recitals hereinbefore mentioned are to be construed as a
factual outline of matters concerning sale of the Assets, and some are intended
by the parties hereto to form a substantive part of this Modification Agreement.
2. Section 6.1 Purchase Price of Assets is hereby modified to read as
follows:
At Closing, AmericasBank shall pay to Rushmore the following
purchase price (the "Purchase Price") for the Assets, less credit for a deposit
of $20,000.00 paid at the time of signing of this Agreement:
(a) Real Estate: $50,000.00
(b) Furnishings: $30,000.00
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(c) Covenant Not to Compete $50,000.00
(d) The amount of loans secured by the deposits,
including interest.
(e) Premium associated with Total Accounts;
Total Accounts multiplied by 0.035 minus
$130,000.00 plus $25,000.00.
3. Section 14.1(c) is hereby modified as follows:
(c) By the Board of Directors of AmericasBank or Rushmore, or
the proper officers of either party acting pursuant to the authority of their
respective Board of Directors, if the Closing has not occurred on or before June
30, 1997.
4. All of the remaining terms and conditions of the Branch Purchase
Agreement dated May 31, 1996, shall remain unchanged. The parties hereto
identify this Modification Agreement to the Branch Purchase Agreement to be a
part of the Branch Purchase Agreement, and, in the event of any conflict between
the provisions of the Branch Purchase Agreement and this Modification Agreement,
then this Modification Agreement shall supersede the provisions of the Branch
Purchase Agreement so modified and the language of this Modification Agreement
shall prevail.
IN WITNESS WHEREOF, Rushmore and AmericasBank have caused this
Modification Agreement to be duly executed by their respective representatives
thereunto duly authorized, as of the date first above written.
Rushmore Trust and Savings, FSB
By: /s/ Linda Paisley (SEAL)
____________________________
LINDA PAISLEY
Chief Executive Officer
/s/ J. Clarence Jameson, III
____________________________
J. CLARENCE JAMESON, III
2
EXHIBIT 8B(i)
LOAN PURCHASE AND ASSUMPTION AGREEMENT
This PURCHASE AND ASSUMPTION AGREEMENT (this "Agreement") dated as of
May 31, 1996 by and between Rushmore Trust and Savings, FSB, Bethesda, Maryland
("Rushmore") and AmericasBank (in organization), Towson, Maryland
("AmericasBank").
AmericasBank desires to purchase certain Loans, and assume all
liabilities related thereto, associated with Rushmore's branch banking office
located at 3621 East Lombard Street, Baltimore, Maryland 21224, (the "Baltimore
Branch") subject to the terms and conditions and based upon Rushmore's
representations, warranties, and agreements hereinafter expressed.
Rushmore desires to sell to AmericasBank certain Loans, and to have
AmericasBank assume all liabilities related thereto, associated with the
Baltimore Branch, subject to the terms and conditions and based upon
AmericasBank's representations, warranties, and agreements hereinafter
expressed.
In consideration of the mutual covenants and agreements herein
contained and the mutual benefits to be derived herefrom, the parties hereto do
hereby agree as follows:
1. Effective Date and Closing. The closing of the transactions provided
for herein (the "Closing") shall be at the close of business on the effective
date of the sale of Rushmore's Baltimore Branch and the assumption of the
liabilities by AmericasBank, at which time title to and possession of the Loans
to be sold hereunder will be transferred from Rushmore to AmericasBank in
accordance with the procedures set forth in Section 5 hereof ("Effective Date").
2. Events Preceding Effectiveness. On or before the Effective Date, the
following shall have occurred:
(a) a majority of each of the Executive Committee of the Board
of Directors or the Board of Directors of AmericasBank and a disinterested
majority of the Board of Directors of Rushmore shall have approved this
Agreement and the transactions provided for herein; and
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(b) the OTS and the FDIC shall have approved this Agreement
and transactions provided for herein.
(c) the closing of the sale of the Baltimore Branch to
AmericasBank referred to in Section 1 hereof.
3. Loans to be Purchased and Liabilities to be Assumed. The following
Loans shall be purchased and liabilities shall be assumed hereunder:
3.1 Loans to be Purchased. Rushmore shall sell to AmericasBank
and AmericasBank shall purchase from Rushmore each of the following Loans of
Rushmore at the Baltimore Branch (the "Loans").
(a) All loans as selected by Rushmore as of the close
of business on the Effective Date (the "Loans").
3.2 Liabilities Assumed. AmericasBank shall assume all
liabilities, including, but without limitation, all escrow liabilities, and
obligations of Rushmore in connection with the purchase of the Loans or
otherwise.
4. Purchase Price, Adjustments, and Payment. The purchase price for the
Loans shall be the amount shown in Section 4.1 (the "Purchase Price").
4.1 Purchase Price of Loans. At Closing, AmericasBank shall
pay to Rushmore in cash the following purchase price for the Loans:
(a) The unpaid principal balance of the Loans plus
accrued interest, less aggregate escrow balances, plus $50,000.
4.2 Payment of the Purchase Price. In settlement of the
Purchase Price:
(a) Rushmore shall transfer without recourse all of
the loans to AmericasBank;
5. Closing Events. At the Closing:
Loans. Rushmore shall deliver to AmericasBank a revised list
of all the Loans as of the Effective Date, and shall execute
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an Agreement of Assignment of Loans in the form of Exhibit A. Rushmore shall
also deliver to AmericasBank all original Notes evidencing the Loans and all
documentation related to the Loans and shall execute all forms and other
documents as AmericasBank may reasonably require to evidence the transfer or
assignment of the Loans and all related security interests to AmericasBank.
AmericasBank shall pay the cost of recording all forms evidencing the transfer
or assignment of the Loans and all related security interests to AmericasBank.
6. Collections on the Loans. After the Effective Date:
6.1 Right to Collect. AmericasBank shall have the sole right
to make collections with respect to all Loans.
6.2 Notice to Borrowers. Rushmore will execute notices to each
person who is obligated on each Loan that the Loans have been sold, transferred,
and assigned to AmericasBank. All such notices shall be mailed or delivered by
AmericasBank and shall be in a form prepared by AmericasBank and approved by
Rushmore. Rushmore will thereafter promptly turn over to AmericasBank, in the
form received and properly endorsed, all checks, drafts, money orders, or other
instruments of payment that may come into the possession of Rushmore as payment
of the Loans sold hereunder and will execute in the name of Rushmore releases,
discharges, satisfactions, and any and all other documents required to be
executed in connection with such Loans.
6.3 Power of Attorney. Rushmore hereby names, constitutes, and
appoints AmericasBank or any of its officers, agents, employees, or
representatives, its duly authorized attorney and agent with full power and
authority to endorse notes, and/or security instruments, or any other such
documentation relating to the Loans in Rushmore's name, to receive and collect
any and all monies due under such Loans, and to enforce performance of all Loans
and instruments covered thereby.
6.4 Modification of Loans. AmericasBank shall have the right
to release any and all instruments of record or any debtors or guarantors of
such instruments and to supplement or replace such instruments, debtors, or
guarantors with any like or similar instruments, debtors, or guarantors, to
extend or modify periods of time of payment or any other terms or provisions of
such instruments and, generally, to do and perform any and all things
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necessary and incident to collection of the Loans with equal rights, privileges,
and powers which Rushmore has or was entitled to exercise.
7. Representations and Warranties of Rushmore. Rushmore hereby
represents and warrants to AmericasBank as follows:
7.1 Organization and Standing of Rushmore. Rushmore is an
organized and validly existing federal savings bank, in good standing, under the
laws of the United States of America, has the corporate power and authority to
conduct its business as it is now being conducted.
7.2 Absence of Certain Changes or Events. Except as heretofore
disclosed in writing to AmericasBank since May 1, 1996, there has not been any
change in the Loans to be purchased or liabilities to be assumed, other than
changes in the ordinary course of business which have not been materially
adverse.
7.3 No Conflict with Other Documents. Neither the execution
and delivery of this Agreement nor the carrying out of the transactions
contemplated hereunder will result in any material violation, termination, or
modification of, or be in conflict with, any terms of any contract or other
instrument to which Rushmore is a party, or of any material judgment, decree, or
order applicable to Rushmore, or result in the creation of any material lien,
charge, or encumbrance upon the property or Loans being sold hereunder.
7.4 Title to Loans: Absence of Liens and Encumbrances.
Rushmore, to the best of its knowledge, has good title to the Loans free and
clear of all material pledges, liens, encumbrances, and adverse claims of any
kind or character, Rushmore is duly authorized to transfer and assign the Loans
to AmericasBank subject to receipt of regulatory approval.
7.5 Litigation, etc. Except as heretofore disclosed in writing
to AmericasBank, there is no litigation, proceeding, or investigation pending
or, to the knowledge of Rushmore, threatened against it with respect to the
operation of the Baltimore Branch which would result in any material adverse
change in the business or financial condition of the Baltimore Branch or any
material liability on the part of Rushmore.
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7.6 Authority. The execution, delivery, and performance of
this Agreement by Rushmore have been duly and validly authorized by its Board of
Directors, subject only to the requisite approval by appropriate governmental
regulatory authorities.
7.7 Loan Documentation and Related Matters. (a) The list of
the Loans contained in Exhibit A hereto is a complete and accurate list of May
_, 1996 or a later date; (b) to Rushmore's knowledge each obligor had, at the
time of execution thereof, full capacity to contract; (c) to Rushmore's
knowledge, each of the documents is genuine, is a good and valid instrument, and
in all material respects is what it purports to be; (d) Rushmore has paid or
caused to be paid any and all license, franchise, intangible, stamp, or other
tax or fee due and owing prior to the Effective Date to any state where the
Loans originated, or any political subdivision thereof, arising from or growing
out of the acquisition, collection, or holding of any of the Loans; and (e)
neither Rushmore nor to its knowledge any of its agents, officers, employees, or
representatives has been guilty of any civil or criminal fraud with respect to
the creation of any of the Loans or with respect to this transfer, assignment,
and sale to AmericasBank; and (f) to the best of our knowledge the Loans are
enforceable in accordance with their terms and secured by a lien against real
property, that each lien is documented by a valid, recorded, and enforceable
Mortgage or Deed of Trust, and supported by an appraisal accurately reflecting
the value of the security at the time of origination of the Loan.
7.8 Loan Data. Data and information provided to AmericasBank
by Rushmore regarding the Loans which were used by AmericasBank in determining
the purchase price shown in Sections 4.1 accurately reflects the characteristics
of the Loans and historical experience with such Loans in all material respects.
7.9 Loan Reserve. Rushmore's loan reserve is maintained in
accordance with the loan loss reserve policy of Rushmore in effect May _, 1996.
7.10 Additions to Loan Reserve. Rushmore, as an accommodation
to AmericasBank, will make a provision to its loan loss reserve if requested by
AmericasBank immediately prior to Closing and subject to the satisfaction of all
the conditions precedent provided in Section 12. The provision will be the
lesser of 1% of the unpaid balance of the loans or $50,000.
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<PAGE>
8. Representations and Warranties of AmericasBank. AmericasBank hereby
represents and warrants to Rushmore as follows:
8.1 Organization and Standing of AmericasBank. At the time of
Closing, AmericasBank will be a duly organized and validly existing federal
savings bank, will be in good standing under the laws of the United States of
America, will have the corporate power and authority to conduct its business to
be conducted.
8.2 No Conflict with Other Documents. Neither the execution
and delivery of this Agreement nor the carrying out of the transactions
contemplated hereunder will result in any violation, termination, or
modification of or be in conflict with, any terms of any contract or other
instrument to which AmericasBank is a party, or of any judgment, decree, or
order applicable to AmericasBank.
8.3 Authority. The execution, delivery, and performance of
this Agreement by AmericasBank have been duly and validly authorized by its
Board of Directors or the Executive Committee of its Board of Directors, or the
Founders Group, subject only to approval by appropriate governmental regulatory
authorities.
8.4 Litigation, etc. At the time of Closing, there will be no
litigation, proceeding, or investigation pending or, to the knowledge of
AmericasBank, threatened against it which might result in any material adverse
change in the business or financial condition of AmericasBank or any material
liability on the part of AmericasBank which questions the validity of this
Agreement or of any action taken or to be taken pursuant hereto or in connection
herewith.
9. Covenants of Rushmore. Except as otherwise consented to in writing
by AmericasBank after the date of this Agreement, Rushmore covenants to and
agrees with AmericasBank as follows:
9.1 Information. Rushmore will give to AmericasBank and to its
officers, accountants, counsel, and other representatives full access during
Rushmore's normal business hours upon reasonable notice throughout the period
prior to the Effective Date to all of Rushmore's records which relate to the
Loans. Rushmore will furnish AmericasBank during such period with all such
information concerning the Loans as AmericasBank may reasonably request,
including information for use in necessary filings to be made with
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appropriate governmental regulatory authorities. AmericasBank shall observe its
duty of confidentiality regarding such information.
9.2 Conduct of Rushmore's Business. Rushmore shall continue in
effect the present method of conducting business at the Baltimore Branch
(excluding bankwide changes) except as otherwise consented to by AmericasBank.
9.3 Customer Information. Rushmore shall, upon the execution
of this Agreement, make available to AmericasBank all material information
regarding the Loans (consistent with applicable law), account numbers and
amounts, maturity schedules, and other data necessary to effect an orderly
transfer of the Loans at Closing. AmericasBank shall observe its duty of
confidentiality regarding such information. Provided AmericasBank receives the
prior written approval of Rushmore as to the timing and content of any contact
prior to the Effective Date with Rushmore's customers, which approval will not
be unreasonably withheld, AmericasBank may contact the Borrowers of Rushmore
whose Loans are being sold pursuant to this Agreement no sooner than 30 days
prior to closing.
9.4 Execution of Additional Documents. Rushmore will execute
all documents that AmericasBank may reasonably require to evidence Rushmore's
ownership of the Loans.
9.5 Notice to Borrowers. Rushmore will contact each person
having a Loan at the Baltimore Branch and will, at least 30 days prior to the
Closing, advise such persons in writing that their Loan will be transferred and
assumed by AmericasBank hereunder unless other arrangements are made by the
Borrower, the form of the notice provided to the Borrowers shall be in a form
satisfactory to AmericasBank and shall authorize AmericasBank to receive
information on each of the Borrower's Accounts prior to the Effective Date
unless the customer objects.
10. Covenants of AmericasBank. Except as otherwise consented to in
writing by Rushmore after the date of this Agreement, AmericasBank covenants to
and agrees with Rushmore as follows:
10.1 Performance. Subject to Rushmore's representations and
warranties contained in this Agreement, AmericasBank will accept the Loans and
assume and perform its obligations under this Agreement and the accompanying
Exhibits.
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10.2 Protection of Information. AmericasBank will hold all
customer lists and account information provided by Rushmore in confidence except
to the extent that it is required to disclose such information to stockholders,
to the public, or in filings with governmental regulatory authorities. In the
event the sale and purchase of the Loans as provided in this Agreement are not
consummated, AmericasBank agrees that it will return all customer lists and
account information provided by Rushmore and all copies of abstracts thereof
made by AmericasBank and shall not in any manner retain, use, or disclose the
customer lists and accounts provided by Rushmore. AmericasBank will make
available to Rushmore during normal business hours and at Rushmore's expense
copies of all documents relating to the Loans for any appropriate and
noncompetitive business reasons.
11. Conditions Precedent to AmericasBank's Obligations Hereunder.
Unless waived in writing by AmericasBank in its sole discretion, all obligations
of AmericasBank hereunder shall be subject to the fulfillment prior to or at the
Effective Date of the following conditions:
11.1 Representations, Warranties and Covenants. The
representations and warranties of Rushmore herein contained shall be true as of
the Effective Date, shall be deemed made again at and as of the Effective Date,
and shall be true as so made again; Rushmore shall have performed all
obligations and complied with all covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Date; and
AmericasBank shall have received from Rushmore an officers' certificate in such
detail as AmericasBank may reasonably request, dated the Effective Date and
signed by its president or senior executive vice president and cashier or
secretary, to the foregoing effect.
11.2 Events Preceding to the Effective Date. Each of the
events set forth in Section 2 shall have occurred.
11.3 Procedures. AmericasBank and Rushmore shall have agreed
upon the procedures, mechanical processes, and other details necessary to
transfer the Loans in accordance with this Agreement and the attached Exhibits.
11.4 No Adverse Proceedings or Events. No action or
proceeding against AmericasBank of the consummation of the transactions
contemplated by this Agreement shall have been
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instituted or threatened or any investigations undertaken that might result in
any such action or proceeding, no order of any court entered, and no other event
shall have occurred or not occurred, on or before the Effective Date, which, in
the opinion of AmericasBank's counsel, renders it impossible or inadvisable for
legal reasons for AmericasBank to consummate the transactions contemplated by
this Agreement.
11.5 Consents, etc. All requisite consents, undertakings,
agreements, exercises, and terminations of any third parties shall have been
obtained either to the satisfaction of AmericasBank or waived by AmericasBank.
12. Conditions Precedent to Rushmore's Obligations Hereunder. Unless
waived in writing by Rushmore in its sole discretion, all obligations of
Rushmore hereunder shall be subject to the fulfillment prior to or at the
Effective Date of the following conditions.
12.1 Representations, Warranties, and Covenants. The
representations and warranties of AmericasBank herein contained shall be true as
of the Effective Date, shall be deemed made again at and as of the Effective
Date, and shall be true as so made again. AmericasBank shall have performed all
obligations and compiled with all covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Date; and shall
have received from AmericasBank an officers' certificate in such detail as
Rushmore may reasonably request, dated the Effective Date and signed by its
president and cashiers or secretary, to the foregoing effect.
12.2 Events Preceding the Effective Date. Each of the events
set forth in Section 2 shall have occurred.
12.3 Procedures. AmericasBank and Rushmore shall have agreed
upon the procedures, mechanical processes, and other details necessary to
transfer the Loans and assume the Liabilities in accordance with this Agreement
and the attached exhibits.
12.4 No Adverse Proceedings or Events. No action or
proceeding against Rushmore or the consummation of the transactions contemplated
by this Agreement shall have been instituted or threatened or any investigations
undertaken that might result in any such action or proceeding, no order of any
court entered, and
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no other event shall have occurred or not occurred, on or before the Effective
Date, which, in the opinion of Rushmore's counsel, renders it impossible or
inadvisable for legal reasons for Rushmore to consummate the transactions
contemplated by this Agreement.
12.5 Consents, etc. All requisite consents, undertakings,
agreements, exercises, and terminations of any third parties shall have been
obtained either to the satisfaction of Rushmore or waived by Rushmore.
13. Amendment of the Agreement. This Agreement may be amended at any
time provided that any such amendment is in writing and is approved by both of
the parties hereto.
13.1 Termination of Agreement. This Agreement shall terminate
and be of no further force or effect as between the parties hereto, except as to
liability for breach of any material covenant, agreement, representation, or
warranty occurring or arising prior to the date of termination, upon the
occurrence of any of the following:
(a) Immediately upon the expiration of thirty (30)
days from the date that Rushmore has given notice to AmericasBank of a breach or
default by AmericasBank in the performance of any covenant, agreement,
representation, warranty, duty, or obligation hereunder, provided, however, that
no such termination shall be effective if, within such thirty (30) day period,
AmericasBank shall have substantially corrected and cured, to Rushmore's
reasonable satisfaction, the grounds for termination as set forth in such notice
of termination or Rushmore shall have waived such default or breach or shall
have extended the time for such cure;
(b) Immediately upon the expiration of thirty (30)
days from the date that AmericasBank has given notice to Rushmore of a breach or
default by Rushmore in the performance of any covenant, agreement,
representation, warranty, duty, or obligation hereunder, provided, however that
no such termination shall be effective if, within such thirty (30) day period,
Rushmore shall have substantially corrected and cured, to AmericasBank's
reasonable satisfaction, the grounds for termination as set forth in such notice
of termination or AmericasBank shall have waived such default or breach or shall
have extended the time for such cure; or
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(c) By the Board of Directors of AmericasBank or
Rushmore, or the proper officers of either party acting pursuant to the
authority of their respective Board of Directors, if the Closing has not
occurred upon the latter of four months from the date of this Agreement or the
date of approval by OTS of the issuance of the Charter, but, in any event, no
later than October 31, 1996. Provided, however, that Rushmore agrees to grant,
if needed, a reasonable extension of this date, provided, that the approval by
OTS is imminent and AmericasBank has performed all that is required to pursue
its Application for a new charter; provided, however, in no event later than
December 31, 1996.
13.2 Immaterial Breach. Notwithstanding anything to the
contrary contained herein, no party hereto shall have the right to terminate
this Agreement on account of its own breach or because of any immaterial breach
by any other party hereto of any covenant, agreement representation, warranty,
duty, or obligation hereunder. Failure to clear an Encumbrance on an asset prior
to Closing shall be an immaterial breach under this Section provided that such
Encumbrance does not materially impair the value or use of the Asset.
13.3 Waiver of Right to Terminate. Any party may, at its
election, waive any of its respective rights to terminate this Agreement under
the foregoing provisions of this Section, and the parties shall be deemed to
have waived such rights from and after the Closing Date even though actual
settlement may have been delayed.
13.4 Effect of Termination. Except as otherwise provided in
this Agreement, in the event of termination of this Agreement, each party shall
be responsible for its own expenses and neither party shall be liable in damages
to the other unless termination results from the breach or default of this
Agreement by one of the parties.
14. Expenses. Whether or not the transactions hereunder are consummated
each party to this Agreement shall pay its own expenses relating hereto,
including fees and disbursements of its counsel and accountants. Further,
AmericasBank shall bear the costs of all regulatory filings and filing fees as
they may apply to AmericasBank and the costs of mailings to Borrowers.
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15. Notices. All notices, requests, demands and other communications
under or connected with this Agreement shall be in writing, and, (a) if to
AmericasBank, shall be addressed to AmericasBank, Attention: J. Clarence Jameson
III, 515 East Joppa Road, Towson, Maryland, 21286, and, if to Rushmore, shall be
addressed to 4918 Fairmont Avenue, Bethesda, Maryland 20814, Attention: Daniel
L. O'Connor III. Any such notices, requests, demands, and other communications
shall be mailed, postage prepaid, first class mail, or delivered personally and
shall be sufficient and effective when delivered to or received at the address
as specified. Each of the parties may change the address at which it is to
receive communications by like written notice to the other.
15.1 Tax Information and Withholding. All tax information
reporting and filing requirements and all tax withholding requirements with
respect to the Real Property and Liabilities shall be the responsibility of
Rushmore up to the Closing and the responsibility of AmericasBank thereafter.
15.2 Successors and Assigns. Except as otherwise provided by
law, all terms and provisions of the Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective transferees,
successors, and assigns, provided, however, that this Agreement and all rights,
privileges, duties, and obligations of the parties hereto may not be assigned or
delegated by either party hereto after the Closing Date without the written
consent of the other party to this Agreement and provided further that in case
of any such assignment or delegation, the party assigning or delegating also
shall remain responsible as a party hereto.
15.3 Third-Party Beneficiaries. Each party hereto intends
that this Agreement shall not benefit or create any right or cause of action in
or on behalf of any person other than the parties hereto.
15.4 Governing Law. This Agreement is made and entered into in
the State of Maryland, and the laws of that State shall govern the validity and
interpretation hereof and the performance of the parties hereto of their
respective duties and obligations hereunder, unless preempted by the laws of the
United States.
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15.5 Partial Invalidity. If any portion of this Agreement
shall be invalid or unenforceable, such unenforceability or invalidity shall not
affect the remainder of the Agreement.
16. Entire Agreement; Effect. This Agreement (including the Exhibits,
list, schedules and documents delivered pursuant hereto, which are made a part
hereof) is intended by the parties to and does constitute the entire agreement
of the parties with respect to the transaction contemplated hereunder. This
Agreement supersedes any and all prior understandings, and it may not be
changed, waived, discharged, or terminated orally, but only in writing by a
party against which enforcement of the change, waiver, discharge or termination
is sought.
17. General. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretations of this Agreement. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors, but shall not be assigned, and shall not create any
rights in third parties, including stockholders or employees of either party
hereto.
IN WITNESS WHEREOF, AmericasBank and Rushmore have caused this
Agreement to be duly executed by their respective representatives, "hereunto
duly authorized, as of the date first above written.
AMERICASBANK (in formation)
By: /s/ J. Clarence Jameson, III
_________________________________
J. CLARENCE JAMESON, III
Duly Authorized Representative
RUSHMORE TRUST AND SAVINGS, FSB
By: /s/ Daniel L. O'Connor, III
_________________________________
Daniel L. O'Connor, III
Duly Authorized Representative
13
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LIST OF EXHIBITS
Exhibit Section in
Number Title Agreement
A. Agreement of Assignment and
Assumption of Total Accounts
The Registrant will furnish supplementally a copy of any omitted schedule to the
Securities and Exchange Commission upon request.
14
EXHIBIT 8B(ii)
MODIFICATION TO PURCHASE AND ASSUMPTION AGREEMENT
THIS MODIFICATION TO LOAN PURCHASE AND ASSUMPTION AGREEMENT, made this
_____ day of January, 1997, by and between Rushmore Trust and Savings, FSB,
("Rushmore") and AmericasBank, ("AmericasBank"), Witnesseth:
WHEREAS, by Loan Purchase and Assumption Agreement dated May 31, 1996
("the Loan Purchase Agreement"), Rushmore intends to sell to AmericasBank, all
loans as selected by Rushmore ("the Loans") and AmericasBank intends to purchase
the Loans and assume certain liabilities in connection therewith upon the terms
and conditions therein set forth; and
WHEREAS, the parties hereto are desirous of modifying and clarifying
certain of the terms and conditions set forth in the Loan Purchase Agreement
dated May 31, 1996, as hereinafter set forth.
NOW THEREFORE, this MODIFICATION TO LOAN PURCHASE AND ASSUMPTION
AGREEMENT Witnesseth, that for and in consideration of the mutual terms and
conditions hereinafter expressed to be performed, and in further consideration
of the sum of One Dollar ($1.00), the adequacy of which and payment of which are
hereby acknowledged, the parties hereto do hereby agree as follows:
1. All of the recitals hereinbefore mentioned are to be construed as a
factual outline of matters concerning sale of the Loans, and same are intended
by the parties hereto to form a substantive part of this Modification Agreement.
2. Section 3.1 Loans to be Purchased and Liabilities to be Assumed is
hereby modified to read as follows: The following Loans shall be purchased and
liabilities shall be assumed hereunder:
3.1 Loans to be Purchased. Rushmore shall sell to AmericasBank
and AmericasBank shall purchase from Rushmore such loans held by Rushmore
(individually, a "Loan"; collectively, the "Loans") and listed in Exhibit 3.1.
In addition to the Loans, Rushmore shall also transfer cash in the amount of
$50,000.00 (the "Reserve") to AmericasBank as a reserve for the Loans. The Loans
and the Reserve shall be transferred at Closing by Rushmore to
1
<PAGE>
AmericasBank in exchange for payment by AmericasBank to Rushmore of the purchase
price described in Paragraph 4.1 herein. In the event any of the Loans are, in
the normal course of business, repaid or the collateral securing any Loan is
sold at a foreclosure sale, such Loan or Loans shall be deleted from the Loans
to be purchased by AmericasBank. If, at the Closing, the dollar amount of
deposits at the Baltimore Branch that are to be assumed by AmericasBank exceeds
the dollar amount of the Loans to be purchased by AmericasBank, Rushmore shall
fund the difference in cash to AmericasBank. If, at the Closing, the dollar
amount of loans to be purchased by AmericasBank exceeds the dollar amount of
deposits to be assumed by AmericasBank, AmericasBank shall fund the difference
in cash to Rushmore.
3. Section 13.1(c) is hereby modified as follows:
(c) By the Board of Directors of AmericasBank or Rushmore, or
the proper officers of either party acting pursuant to the authority of their
respective Board of Directors, if the Closing has not occurred on or before June
30, 1997.
4. All of the remaining terms and conditions of the Loan Purchase
Agreement dated May 31, 1996, shall remain unchanged. The parties hereto
identify this Modification Agreement to be a part of the Loan Purchase
Agreement, and, in the event of any conflict between the provisions of the Loan
Purchase Agreement and this Modification Agreement, then this Modification
Agreement shall supersede the provisions of the Loan Purchase Agreement so
modified, and the language of this Modification Agreement shall prevail.
2
<PAGE>
IN WITNESS WHEREOF, Rushmore and AmericasBank have caused this
Modification Agreement to be duly executed by their respective representatives
thereunto duly authorized, as of the date first above written.
Rushmore Trust and Savings, FSB
By: /s/ Linda Paisley (SEAL)
________________________________
LINDA PAISLEY
Chief Executive Officer
/s/ J. Clarence Jameson, III
________________________________
J. CLARENCE JAMESON, III
3
Exhibit 10A(ii)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
Registration Statement.
/s/ Arthur Andersen LLP
Baltimore, Maryland,
June 6, 1997
